**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-KSB**


(Mark
      One)




ý
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF
                1934




For
      the
      Fiscal Year Ended December 31, 2006




 ̈
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
                ACT




For
      the
      transition period from __________________ to __________________




Commission
      file number: 333-136468




**GLOBALOPTIONS
                GROUP, INC**(Name
                of Small Business Issuer in Its Charter)Delaware
            
            73-1703260(State
                or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S.
                Employer Identification No.)75
                Rockefeller Plaza, 27thFloor
              New
                York, New York
            
            10019(Address
                of Principal Executive Offices)
            
            (Zip
                Code)





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







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




Securities
      registered under Section 12(b) of the Exchange Act: None





Securities
      registered under Section 12 (g) of the Exchange Act: None


Check
        whether the issuer is not required to file reports pursuant to Section 13
        or
        15(d) of the Exchange Act: o





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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  ̈





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained herein, and no disclosure will be contained, to the
      best of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference to Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB. x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b
      2 of the Exchange Act (Check one):


Yes o No x





State
      issuer's revenues for its most recent fiscal year: $61,924,000




Aggregate
      market value of the voting common stock held by non-affiliates based on the
      weighted average bid and asked price of such common stock on March 7, 2007:
      $24,009,410.





As
      of
      March 28, 2007, there were 2,984,514 shares of the issuer’s common equity
      outstanding.




Transitional
      Small Business Disclosure Format (Check one):  Yes  ̈ No x





**GLOBALOPTIONS
      GROUP, INC. AND SUBSIDIARIES**


**Form
      10-KSB**


**December
      31, 2006**


**TABLE
      OF CONTENTS**





PART
                I
            1FORWARD-LOOKING
                STATEMENTS
            1ITEM
                1. DESCRIPTION OF BUSINESS
            1ITEM
                2. DESCRIPTION OF PROPERTY
            17ITEM
                3. LEGAL PROCEEDINGS
            17ITEM
                4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            18PART
                II
            19ITEM
                5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
                MATTERS
            19ITEM
                6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATION
            20ITEM
                7. FINANCIAL STATEMENTS
            31ITEM
                8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                ANDFINANCIAL
                DISCLOSURE
            31ITEM
                8A. CONTROLS AND PROCEDURES
            31ITEM
                8B. OTHER INFORMATION
            32PART
                III
            33ITEM
                9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND
                CORPORATEGOVERNANCE;
                COMPLIANCE WITH SECTION 16(A)OF THE EXCHANGE ACT
            33ITEM
                10. EXECUTIVE COMPENSATION
            38ITEM
                11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                AND
                 RELATED
                STOCKHOLDER MATTERS
            46ITEM
                12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                INDEPENDENCE
            50ITEM
                13. EXHIBITS
            52ITEM
                14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
            55







PART
      I





INTRODUCTORY
      NOTE





FORWARD-LOOKING
      STATEMENTS




Information
      included or incorporated by reference in this Annual Report on Form 10-KSB
      may
      contain forward-looking statements. This information may involve known and
      unknown risks, uncertainties and other factors which may cause our actual
      results, performance or achievements to be materially different from the future
      results, performance or achievements expressed or implied by any forward-looking
      statements. Forward-looking statements, which involve assumptions and describe
      our future plans, strategies and expectations, are generally identifiable by
      use
      of the words "may," "should," "expect," "anticipate," "estimate," "believe,"
      "intend" or "project" or the negative of these words or other variations on
      these words or comparable terminology.




This
      Annual Report Form 10-KSB contains forward-looking statements, including
      statements regarding, among other things, (a) our projected sales and
      profitability, (b) our growth strategies, (c) anticipated trends in our
      industry, (d) our future financing plans and (e) our anticipated needs for
      working capital. These statements may be found under "Management's Discussion
      and Analysis or Plan of Operations" and "Description of Business," as well
      as in
      this Annual Report generally. Actual events or results may differ materially
      from those discussed in forward-looking statements as a result of various
      factors, including, without limitation, the risks outlined under "Risk Factors"
      and matters described in this Annual Report generally. In light of these risks
      and uncertainties, there can be no assurance that the forward-looking statements
      contained in this Annual Report will in fact occur.





**Item
      1. Description of Business**





**Company
      Overview**




GlobalOptions
      Group, Inc. through its wholly-owned subsidiaries GlobalOptions, Inc. and The
      Bode Technology Group, Inc. (which was acquired on February 28, 2007) is a
      provider of high-end risk mitigation services to Fortune 500 corporations,
      governmental organizations and high-profile individuals throughout the world.
      Our risk mitigation services currently include risk management and security,
      investigations and litigation support, and crisis management and corporate
      governance. These engagements take our staff around the world and are typically
      highly sensitive engagements where we interact with senior leaders in both
      corporations and governments. Our overall mission is to identify, evaluate,
      assess and prevent issues that may threaten people, organizations or strategic
      initiatives for companies and governments around the globe.




Our
      management, staff and advisory boards include security and terrorism experts
      formerly in the military, former intelligence and law enforcement officers,
      professional investigators, and legal and crisis communications specialists.
      We
      provide services to governments, law firms, private clients and
      corporations.




We
      have
      been awarded “approved” status as a vendor of consulting and related services to
      United States government agencies by the U.S. General Services Administration
      (GSA). We are a MOBIS (management, organizational and business improvement
      services) contractor and members of our staff have high-level security
      clearances.


1


**Business
      Services by Segment**




We
      are
      organized into three segments which are as follows:





**Confidential
      Business Resources (“CBR”) - Investigations and Litigation
      Support**




We
      believe that the difference between business success and failure is often
      information. Our investigative team includes highly educated and trained
      investigators who understand the complexities in uncovering factual
      circumstances surrounding sensitive investigations. Our specialists have
      extensive experience providing investigative and business intelligence services
      to law firms, corporations and individuals, both domestically and
      abroad.




Our
      investigators have access to extensive public and proprietary databases and
      are
      experienced in developing case facts through on-site interviews and domestic
      and
      offshore searches. Our investigators provide reports and intelligence for
      clients on everything from country risk, unfair trade practices, new markets,
      political trends, economic forecasts, profiles on competitors and satellite
      reconnaissance.




We
      have
      conducted investigations that impeach witnesses, disprove factual allegations
      and raise alternative theories of cause. We have investigated judicial
      corruption, jury tampering, questionable “expert witnesses,” conspiracies to
      defraud, industrial espionage, potential business investments, recovery of
      assets, defense against class action suits, trademark infringement, political
      opposition research and insurance fraud. Asbestos and product liability cases
      are our specialties and we work with a wide range of clients, especially in
      the
      automotive and related industries.




During
      the year ended December 31, 2006, we completed 14,487
      investigations and litigation support projects with an average revenue of $1,142
      which totaled $16.5 million, accounting for approximately 27% of our revenues.
      In 2005, we completed 2,612 investigations and litigation support projects
      with
      an average of approximately $2,700 and totaling $6.9 million, accounting for
      approximately 77% of our revenues. Investigation projects are typically of
      a
      duration of less than one week and involve assisting corporations with managing
      claims risk and supporting corporations and law firms with investigations and
      litigation support.




**James
      Lee Witt Associates (“JLWA”) - Crisis Management and Corporate
      Governance**




We
      assist
      governments, corporations and individuals in the development and implementation
      of crisis management and emergency response plans. Our staff is attuned to
      regional, national and international political issues and has government and
      media contacts worldwide. We believe that while public relations firms provide
      media expertise, they generally do not offer other critical skills, such as
      our
      ability to put management, security and communication resources on the ground
      in
      an expedited manner.





We
      have
      implemented comprehensive security measures nationally at a major corporation
      targeted by animal rights activists, set up a 24/7 emergency hotline for
      employees of a large retail organization, conducted searches and rescue missions
      for kidnapped persons, and collected critical intelligence about foreign bribery
      efforts that threatened billions of dollars in United States sales.




We
      work
      with clients to establish command procedures, train employees, coordinate rescue
      efforts and keep operations running. Whether dealing with a labor strike,
      security breach, natural disaster, cyber attack, kidnapping, family crisis,
      arrest, stolen intellectual property, or school or workplace violence issue,
      we
      believe we have the resources that can provide expert assistance.




During
      the year ended December 31, 2006, we completed 53 crisis
      management and corporate governance projects with an average revenue of $709,000
      which totaled $37.6 million, accounting for approximately 61% of our revenues.
      In 2005, we completed 5 crisis management and corporate governance projects
      with
      an average size of more than $250,000 which totaled $1.3 million, accounting
      for
      approximately 14% of our revenues.


2


**SafirRosetti
      (“Safir”) - Risk Management and Security**




We
      help
      clients solve problems that fall outside the scope of mainstream management
      resources by providing highly specialized and customized security services.
      We
      provide security assessments, executive protection, anti-terrorism training,
      threat analyses, fraud prevention techniques, special event security, protection
      from stalkers, private travel management and the design, implementation and
      management of total security systems.




We
      have
      performed risk assessments of corporate headquarters, chemical weapon
      stockpiles, nuclear installations and reactors, factories, yachts, private
      aircraft, homes, transportation systems, government facilities, political
      conventions, sports stadiums and sporting events.




During
      the year ended December 31, 2006, we completed 344 risk management and
      security projects with an average revenue of approximately $23,000
      which totaled $7.8 million, accounting for approximately 12.6% of our revenues.
      In 2005, we completed 10 risk management and security projects with an average
      revenue of nearly $80,000 and totaling $798,000, accounting for approximately
      9%
      of our revenues. Representative risk management and security projects have
      included conducting threat and vulnerability assessments of Russian facilities
      containing nuclear materials and conducting site surveys and security
      assessments for a major corporation facing violent threats and
      attacks.





**Major
      Clients**





Revenues
      from our services to a limited number of clients have accounted for a
      substantial percentage of our total revenues. Our three largest clients
      accounted for approximately 51%, 11%, and 4% of revenues for the year ended
      December 31, 2006, of which the 51% and 4% of revenue clients represented
      work performed under government contracts. Our three largest clients also
      accounted for approximately 27%, 11% and 7% of our revenues for the year ended
      December 31, 2005. This concentration of 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 engagements 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.





**Growth
      Strategy**




We
      seek
      to build a significant integrated enterprise risk mitigation company. To realize
      our goal, we are pursuing a set of defined activities to achieve what we hope
      will be a market-leading industry position.




We
      seek
      to leverage our industry relationships in order to identify complementary
      platform targets, raise capital, bring in a highly qualified management team
      and
      build synergies to execute our vision.




We
      believe we have a management team and advisory boards in place that can help
      us
      execute our vision. We currently have a pipeline of acquisition candidate firms
      in the risk mitigation industry for which we are conducting due diligence.
      With
      virtually all the acquisition targets being private concerns, we expect that
      the
      negotiations would generally be with owner-operators that will not only bring
      new services to our Company but, also, highly capable management.




Creating
      a well-known senior advisory board has given our management the experience
      and
      reputation beyond management’s own achievements to gain introductions at high
      levels of government and Fortune 500 companies. We expect the initial platform
      acquisitions to provide additional relationships with companies and individuals.
      We intend to make later product and service acquisitions that will help fill
      in
      product gaps, create more regional  coverage and mass and, in turn, drive
      our organic revenue growth.




Our
      business from our formation through August 2005 consisted of investigation,
      risk
      management and security operations conducted out of our office in Washington,
      D.C.


3


On
      August
      14, 2005, we acquired Confidential Business Resources, Inc. (“CBR”), a
      privately-held nationwide investigations firm based in Nashville, Tennessee.
      CBR’s revenues and net losses for the year ended December 31, 2004 were
      approximately $8.8 million and $990,000, respectively. The aggregate purchase
      price paid for CBR’s assets and business was approximately $5,208,000 subject to
      certain adjustments through August 13, 2006 to the opening balance working
      capital, as such purchase price adjustments were defined in the agreement.
      The
      aggregate purchase price of approximately $5,208,000 consisted of cash in the
      amount of $4,246,000 (net of cash acquired of $26,000) and inclusive of a broker
      fee of $143,000, and a note payable to the seller of $819,000, paid in August
      2006.




On
      March
      10, 2006, we purchased substantially all of the assets and liabilities of James
      Lee Witt Associates (“JLWA”), a privately held crisis and emergency consulting
      management firm based in Washington, D.C. The acquisition was made pursuant
      to a
      certain Asset Purchase Agreement (the “JLWA Agreement”) dated January 13, 2006,
      as amended, between JLWA and us. The aggregate purchase price paid for JLWA’s
      assets and business was $8,403,540, subject to certain future working capital
      purchase price adjustments as defined in the agreement. The aggregate purchase
      price of $8,403,540, consisted of a cash payment at closing of $3,600,000,
      a
      cash payment of $1,857,000 to pay off JLWA’s line of credit balance, the
      issuance of 102,459 shares of our common stock valued at $2,000,000, a 4.6%
      note
      payable to the seller of $400,000 paid March 9, 2007, and a non-interest bearing
      working capital purchase price adjustment obligation estimated at $546,244
      paid
      June 8, 2006. In addition, the JLWA Agreement provides for the sellers to obtain
      up to an additional $15,400,000 upon the attainment of certain revenue goals
      subsequent to the closing of the transaction and the continued employment of
      James Lee Witt, the former president and chief executive officer of JLWA. At
      December 31, 2006, the amount due to the former members of JLWA for the earnout
      liability due under the JLWA Agreement was approximately $5,228,000 and has
      been
      recorded in selling and marketing expenses in the consolidated statement of
      operations included elsewhere in this filing.





On
      May
      12, 2006, we acquired substantially all of the business and assets of Safir
      Rosetti, LLC (“Safir”), a Delaware limited liability company. Safir is a
      security consulting, investigative and intelligence firm headquartered in New
      York City with seven additional offices nationwide. The acquisition was made
      pursuant to a certain Asset Purchase Agreement dated January 27, 2006, as
      amended (the “Safir Agreement”), between Safir and us. The aggregate purchase
      price paid for Safir’s business and assets was $15,315,649, including $6,000,000
      in 8% promissory notes issued by us and paid on June 29, 2006, $1,000,000 in
      4%
      promissory notes of the Company due on May 12, 2007, $6,000,000 in our common
      stock, consisting of 375,000 shares at $16.00 per share, payments to retire
      certain indebtedness of $1,940,649 of Safir in anticipation of the closing,
      which includes as follows: $553,250 on April 3, 2006 and $1,387,399 on April
      28,
      2006 and a finders fee of $375,000 paid to QuanStar Group, LLC, a related party.
      The company shall prepay the obligation under the 4% Escrow Promissory Note
      in
      the amount of 1/3 of the collected amount of the purchased accounts receivable.
      The prepayments under the 4% Escrow Promissory Note were made on July 20, 2006,
      September 21, 2006, November 14, 2006, February 7, 2007 and March 12, 2007
      and the Company paid $442,000, $164,000, $114,000, $50,000 and $40,000 in
      principal on the 4% promissory notes due on May 12, 2007.





On
      May
      12, 2006, we acquired substantially all of the business and certain assets
      of
      Secure Source, Inc. (“Secure Source”), a Delaware corporation. Secure Source is
      an international risk consulting firm with offices in Washington D.C. and
      Dallas, Texas. The acquisition was made pursuant to a certain Asset Purchase
      Agreement dated May 12, 2006, (the “Secure Source Agreement”), between Secure
      Source, Marian E. Nicastro and David W. Nicastro and us. The aggregate purchase
      price paid for Secure Source’s business and assets of $3,212,000 consisted of
      $750,000 in 5% promissory notes due May 12, 2009, $1,462,500 in 3% promissory
      notes paid on June 29, 2006, $500,000 in 5% promissory notes due May 12, 2007
      and $500,000 in our common stock consisting of 26,371 shares at $18.96 per
      share.





On
      August
      10, 2006, we acquired substantially all of the business and assets of Hyperion
      Risk, Inc. ("Hyperion Risk"), a Florida corporation. Hyperion Risk is a security
      consulting, investigative and intelligence firm based in Orlando, Florida.
      The
      acquisition was made pursuant to a certain Asset Purchase Agreement dated August
      10, 2006, (the "Hyperion Risk Agreement"), between Hyperion Risk and us. The
      aggregate purchase price paid for Hyperion Risk’s business and assets was
      $3,782,000, and consisted of $2,022,000 in cash, $1,500,000 in our common stock
      of consisting of 84,081 shares at $17.84 per share, and the payment by us
      of Hyperion Risk's line of credit balance of approximately
      $260,000.


4


On
      January 9, 2007, we acquired substantially all of the business and assets of
      SPZ
      Oakland Corporation, dba On Line Consulting Service, Inc. (“On Line”), a
      California corporation. On Line is a full service security and fire alarm
      consulting and design firm based in Oakland, California. The acquisition was
      made pursuant to a certain Asset Purchase Agreement dated January 9, 2007 (the
      “On Line Agreement”) between On Line and us. The aggregate purchase price paid
      for On Line’s business and assets was $2,658,000 and consisted of $1,308,000 in
      cash and $1,350,000 in our common stock consisting of 84,375 shares at $16.00
      per share and the assumption of certain liabilities. At closing, the Company
      paid $750,000 of the cash portion of the purchase price, and issued promissory
      notes for $417,000 due January 9, 2008, and $141,000 due on January 9, 2009.
      Further, at closing the Company delivered to the seller 46,875 shares of
      GlobalOptions common stock, with 37,500 shares to be held in escrow and
      delivered to the seller, 18,750 shares on January 9, 2008, and 18,750
      shares on January 9, 2009, respectively. The purchase price is subject to
      certain working capital purchase price adjustments.





On
      February 28, 2007, we acquired the common stock of The Bode Technology Group,
      Inc. ("Bode"), a Virginia corporation. 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 (the "Bode Agreement"), between ChoicePoint
      Government Services Inc., ChoicePoint and us. The aggregate purchase price
      paid
      was $12.5 million in cash and is subject to certain purchase price adjustments,
      as defined in the Bode Agreement. On March 8, 2007, Bode was reincorporated
      into
      Delaware.





On
      February 28, 2007, we acquired substantially all of the business and assets
      of
      Facticon, Inc. ("Facticon"), a Pennsylvania corporation. Facticon is a
      surveillance, investigative and intelligence firm based in Chadds Ford,
      Pennsylvania. The acquisition was made pursuant to a certain Asset Purchase
      Agreement, dated February 28, 2007 (the "Facticon Agreement"), between Facticon
      and us. The aggregate purchase price paid was $2,800,000, which consisted of
      $1,400,000 in cash and $1,400,000 in our common stock consisting of 87,500
      shares at $16.00 per share and the assumption of certain liabilities.





**Corporate
      History**





GlobalOptions,
      Inc. (“GlobalOptions”), our wholly-owned subsidiary, was initially formed in
      November 1998 as a limited liability company (“LLC”) in the state of Delaware.
      On January 24, 2002, the LLC was converted into a Delaware
      corporation.





On
      June 24, 2005, we completed a reverse merger transaction, in which
      GlobalOptions Acquisition Corp., a Delaware corporation and our newly-created,
      wholly-owned subsidiary (“GlobalOptions Acquisition”), merged with and into our
      operating company, GlobalOptions. At the time of the reverse merger, our
      corporate name was Creative Solutions with Art, Inc. (“Creative Solutions”).
      Following the reverse merger we changed our name to GlobalOptions Group, Inc.
      (“GlobalOptions Group”). As a result of the reverse merger, GlobalOptions became
      our wholly-owned operating subsidiary, with GlobalOptions’ former security
      holders acquiring a majority of the outstanding shares of our common stock,
      par
      value $.001 per share. The reverse merger was consummated under Delaware law
      and
      pursuant to an Agreement and Plan of Merger, dated June 24, 2005.





On
      December 8, 2006, we completed a “reincorporation merger” whereby we changed our
      state of incorporation from Nevada to Delaware.





**Reverse
      Stock Split**





On
      March
      6, 2007, as approved by Stockholders on December 5, 2006, the Company effected
      a
      1 for 8 reverse stock split. All disclosures of shares and prices per share
      of
      common stock have been restated accordingly, except where noted.





All
      share
      totals and stock, conversion and exercise prices have been proportionally
      adjusted.


5


**Grow
      our initial platform and revenues through acquisitions.**




We
      intend
      to target and acquire what we believe are great companies in the industry with
      proven management teams and a strategic long-term vision. We expect our platform
      acquisitions to be geographically diverse and offer solutions in different
      risk
      mitigation segments to establish scope and synergies across our family of
      companies. We expect all acquisitions to have existing clients, revenue,
      significant channel presence and a high margin core business.





**Use
      synergies across acquired companies to drive internal
      growth.**




We
      intend
      for acquired companies to give us a substantial revenue base, a wide array
      of
      products and services, geographic reach into almost every country in the world
      and experienced operators that will complement our current team. Our objective
      is to sell bundled solutions and services through acquired companies’
channels.




We
      will
      use a shared services approach in administrative areas to try to keep indirect
      costs reasonable and assist us in achieving our profit goals. Areas for
      inclusion in the shared services will be global marketing, human resources,
      finance, information technology, mergers and acquisitions, business integration
      and development, and legal compliance.




**Layer
      on additional targets in emerging high growth areas.**




Ultimately,
      our goal is to build an end-to-end comprehensive risk mitigation business that
      encompasses consulting and investigations, risk mitigation solutions, services
      and related data services. Our goal is to be the leading full service
      investigations firm in all markets where we have a presence.




We
      expect
      additional revenue growth to come from technology acquisitions to further drive
      the data services business and other layered-on acquisitions to further
      diversify revenue across different geographies.





**Acquisition
      Criteria**




With
      acquired assets being central to our strategic vision, we incorporate specific
      criteria when evaluating potential targets for acquisition. The criteria
      are:





·
            predictability
                of value;


·
            ease
                of acquisition or time to
                completion;


·
            ability
                to ensure management oversight;


·
            ease
                of integration or minimal short-term integration
                needs;


·
            alignment
                of target’s goals with our goals;


·
            expansion
                of offerings, skills, brand and
                footprint;


·
            short-term
                and long-term benefit; and


·
            minimal
                capital requirements.




**Risk
      Mitigation Industry and Trends**




The
      security industry has been altered by world events and regulatory changes.
      We
      believe that governments, corporations and private families are now thinking
      about security proactively.





The
      risk
      mitigation market doubled in size from 1990 to 2000 and the market is expected
      to continue its steady growth and triple in size from 2000 to 2010. The
      corporate and government focus on a wide array of bundled risk mitigation
      products and services is expected to drive growth. Kroll Inc. was the giant
      in
      the industry, but since it was acquired by insurance broker Marsh & McLennan
      Cos., we believe it has been unable to engage in certain relationships due
      to
      the conflict of being owned by Marsh & McLennan. After the Kroll Inc.
      acquisition, we believe there is no comprehensive platform provider encompassing
      solutions and services. ChoicePoint Inc. (from whom we purchased Bode) and
      First
      Advantage Corp., the two leading providers of background screening, are
      concentrating their services on consumer data services. Currently, no
      established risk mitigation or consulting and investigations company has taken
      over the industry space formerly occupied by Kroll Inc. There is a significant
      market opportunity for a global leader. We believe that the growth of major
      operators will depend on the continued acquisitions of small expert
      operators.


6


Risk
      mitigation, in the past, has been defined as mitigating corporate risk and
      exposure post-incident. Risk mitigation firms were brought in to assess damage
      once a serious event, loss or breach in security had occurred. Engagements
      were
      typically non-recurring in nature and usually involved a consultant working
      with
      the Company to assist in the reactive initiatives, and some high-level analysis
      to reduce loss once an incident had occurred. Today, risk mitigation encompasses
      an array of products and services focused on not just reacting to critical
      events, but on a proactive basis evaluating, identifying, quantifying and
      managing elements of risk. Risk mitigation has evolved as companies and
      governments are faced with a variety of new, diverse elements of risk including
      terrorism, litigation, fraud, compliance, business continuity, brand protection,
      cyber attacks, industrial espionage and regulatory issues. The evolution of
      the
      industry has been a clear departure from a reactive consultative or
      investigative approach to a proactive effort that not only identifies risk,
      but
      provides clients with useable information that can help them make critical
      business decisions.




Our
      experience in the risk mitigation industry is one that is built on the
      relationship between the client and the risk mitigation firm. The business
      is
      intensely personal because of the highly confidential nature of the engagements
      and the potential damage to brand, reputation, competitive position and overall
      market perception. As a result, the industry is extremely fragmented. As smaller
      firms attempt to expand to meet the needs of global clients, a lack of capital
      resources forces partnering and sub-contractual relationships that hinder their
      ability to control costs and provide continuity of service to a global market.
      A
      risk mitigation firm and its principal employees have a limited geographic
      reach
      and personal network from which to draw engagements. The critical aspect of
      the
      business and fundamental means to drive organic growth is the ability to
      establish and monetize these strategic relationships. The most profitable
      businesses recognized the opportunity to introduce proactive services and
      diversification to evolve the business and create an annuity-based business
      positioned to not only capture the reactive engagements, but to proactively
      sell
      products and solutions to new and existing clients.




**Market
      Opportunity**




According
      to the Lehman Brothers Security Industry Annual Reports for 2005 and 2004,
      the
      risk mitigation market doubled in size from 1990 to 2000. We believe that the
      drivers of increased risk mitigation spending (due to events such as global
      terrorism and the enactment of the Sarbanes-Oxley Act) are likely to continue
      into the foreseeable future. Morgan Keegan & Company estimates 11% growth
      per year in this market through 2010. We believe that segments of risk
      mitigation on both the product and services side are still fragmented and ripe
      for consolidation with no clear market leader or dominant brand.




We
      intend
      to grow through a series of acquisitions that we believe will deliver revenue,
      capabilities, products and services designed to meet the demand for the
      management and assessment of risk. Our vision is to build, through acquisition
      and new product development, a significant risk mitigation solutions business
      and brand in the $14 billion dollar risk mitigation industry.




Because
      of the personal and sensitive nature of risk mitigation and investigative
      engagements, we believe that the ability to provide services and retain clients
      is driven largely by reputation and personal relationships. Under the leadership
      of Harvey W. Schiller, our Chairman and Chief Executive Officer, and Jeffrey
      O.
      Nyweide, our Executive Vice President-Corporate Development and Chief Financial
      Officer our team provides not only vision, management and leadership, but
      relationships with leaders in both corporate and government markets. We believe
      we have the relationships to bring in high-margin, well-known clients, while
      our
      operational experience allows for execution of these sensitive and critical
      engagements. Once these projects are completed, there are a variety of
      annuity-based, long-term products and services that can be combined into a
      comprehensive suite of high-margin solutions to evolve the business into a
      more
      profitable and recurring revenue product-based business.


7


Other
      trends in the industry include the following:




·
            According
                to analysts at Lehman Brothers, the risk mitigation market has grown
                from
                $3.5 billion in 1990 to approximately $14 billion in 2005 and they
                estimate the market will grow to $20 billion by
                2010.





·
            Employment
                of private investigators and detectives is expected to grow 21% to
                35% by
                2008, according to the Security Industry
                Association.




·
            Terrorism,
                corporate scandals and security costs are likely to cause corporations
                and
                governments to focus on risk mitigation and deploy additional resources
                to
                comply with a variety of regulatory and legislative
                mandates.





·
            The
                increase of awareness and frequency of risks facing an individual,
                corporation or government have moved risk mitigation to a strategic
                initiative touching every aspect of an
                organization.





·
            In
                the United States, there are over 7,000 private investigations firms
                and
                96% of firms are single-location companies, according to the Lehman
                Brothers Security Industry Annual Report
                2004.





·
            Traditional
                leaders in the space have been acquired or evolved their business
                model,
                leaving what we believe to be a service gap. For
                example:





o
            Pinkerton
                Consulting & Investigations, Inc. migrated to security officer
                services (acquired by Securitas AB) and United States investigations
                focused on government services;


o
            The
                Wackenhut Corporation migrated to security officer services (acquired
                by
                Group 4 Falck); and


o
            Vance
                International, Inc. migrated to security officer services (acquired
                by SPX
                Corporation).





·
            Large
                regional companies have emerged and are servicing national and global
                accounts through loose partnerships, sub-contracts and revenue-sharing
                relationships. We believe that these structures are inefficient and
                lack
                the continuity and reliable service necessary for a national or global
                delivery model.





Changes
      in world events and regulatory compliance have brought renewed attention to
      the
      security industry. As a result of corporate scandals, increasing litigation
      costs and geo-political events, we believe that risk mitigation has become
      critical for corporations, governments, law firms and individuals. These target
      groups are now focusing on their security arrangements in a proactive manner.
      As
      corporate officers, board members and their attorneys are forced to successfully
      follow regulations and meet required compliance steps, we are available to
      provide the necessary guidance. As private families, celebrities and executives
      focus on their security issues, we are available to assist them.




Ultimately,
      our strategic vision is to build the first truly integrated enterprise risk
      mitigation company by selectively acquiring great companies in the industry
      with
      proven management teams and a strategic long-term vision. We expect platform
      acquisitions to be geographically diverse and offer solutions in different
      risk
      mitigation segments of the market to gain synergies. We expect targets to have
      a
      combination of existing clients, revenue, a significant market presence and/or
      a
      high margin core business that will enhance and expand our share of the risk
      mitigation market. However, no reasonable assurance can be given that any of
      these acquisition targets will actually be acquired by us or that such
      acquisitions, if made, will lead to the desired financial outcomes.




**Emerging
      Markets**




Navigating
      poorly the maze of regulatory compliance in today’s highly charged environment
      can result in potential derailment for a company. As corporate officers and
      board members face substantial fines and imprisonments, the rest of a company’s
      executives also face many hazards. Whether the compliance issue involves the
      Gramm-Leach-Bliley Act (GLBA), the USA Patriot Act, the Federal Information
      Security Act (FISMA), the Health Insurance Portability and Accountability Act
      (HIPAA) or the Sarbanes-Oxley Act of 2002, we believe that the need for industry
      experts to help organizations manage the government requirements is
      significant.




The
      total
      market potential for regulatory compliance is seen as well over $50 billion
      in
      the United States alone, according to the Manakoa Journal (January
      2005).




8





·
            FISMA
                impacts all federal agencies and government
                contractors.


·
            GLBA
                impacts financial institutions and anyone dealing with non-public
                financial information.


·
            HIPAA
                has significant information technology management and privacy
                provisions.


·
            The
                Sarbanes-Oxley Act of 2002 impacts all public companies with major
                reform
                provisions on reporting, controls and corporate
                governance.





**Sales
      and Marketing**




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 hope to provide
      the
      high level of investigative, litigation support, crisis management, risk
      management and protective services demanded by our clients.




Our
      business is intensely personal because of the highly confidential nature of
      the
      engagements and the potential damage to brand, reputation, competitive position
      and overall market perception. The ability to provide services and retain
      clients is driven largely by reputation and personal relationships. Our
      management, staff and advisory boards include security and terrorism experts
      formerly from the military, former intelligence and law enforcement officers,
      professional investigators, and legal and crisis communications specialists
      who
      bring to bear relationships with leaders in both the corporate and government
      markets.





These
      relationships give us the opportunity to bring in high-margin, well-known
      clients, and our operational experience allows us to successfully complete
      these
      sensitive and often critical engagements. The success of this strategy is
      demonstrated by the repeat 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 high-level client personnel
      move to different companies or agencies, they often call upon experienced
      service providers like us in their new environment.




Ultimately,
      our marketing effectiveness will be based upon a successful track record,
      experienced personnel, critical mass and highly regarded reputation, which
      we
      believe will be enhanced and broadened by a well conceived and implemented
      acquisition strategy.




**Procurement
      of Government Contracts**




We
      compete for most of our government contracts by developing strategic contacts
      with the leaders of government agencies. The strategic contacts allow government
      agencies to seek us out for a confidential assignment. The background and
      experience of our management and advisory boards bring instant credibility
      to
      our government efforts. Due to the sensitive nature of our services, most
      government contracts and projects are won as sole source bids, as opposed to
      an
      open RFP (Requests for Proposal) process. We are a MOBIS contractor and are
      “pre-approved” for government work. If a government agency has a project that
      they know we are qualified for based on previous experience, the agency may
      come
      directly to us. These are generally smaller projects (under $100,000), and
      many
      times we are a layer in a series of sub-contractors.





For
      the
      years ended December 31, 2006 and 2005, respectively, government contracts
      represented 57% and 0% of our net revenues, the most significant of which
      represented 94% our net revenues within our JLWA-Crisis Management and Corporate
      Governance segment.





Weekly,
      a
      member of our staff reviews the government RFP’s posted on the website
      FedBizOpps.gov. Based on our experience, our response to an RFP generally
      requires us to select partners and to submit a proposal based on combined
      subject matter expertise. Proposals can be 40 to 100 pages in length and require
      a significant amount of time to prepare. The RFP submission process is quite
      complex, open to all interested providers and tends to generate a low success
      rate.


9


**Sub-Contractors
      and Joint Ventures**




The
      risk
      management industry uses sub-contractors for each project or case on an “as
      needed basis” domestically and may engage in joint ventures internationally
      depending upon case requirements. At March 28, 2007, we employ approximately
      200
      sub-contractors on a regular basis. We intend to actively pursue our acquisition
      strategy to obtain the necessary footprint, products and personnel to reduce
      our
      dependency on sub-contractors, thus increasing gross margins.





**Competition**




Risk
      mitigation providers encompass an array of products and services focused on
      not
      just reacting to critical events, but on a proactive basis evaluating,
      identifying, quantifying and managing elements of risk. Our risk mitigation
      competitors and their areas of emphasis are described according to the following
      key:





(Key:
      A -
      Investigations and Litigation Support; B - Crisis Management and Corporate
      Governance; and C - Risk Management and Security)





·
            Kroll
                Inc. was acquired by insurance broker Marsh & McLennan Cos. in July
                2004. This global risk-consulting and security firm provided risk
                mitigation services that conducted operations through four business
                units:
                security consulting services, background screening, data recovery
                and
                electronic discovery, and corporate restructurings. Kroll Inc.’s
                background screening annual revenues were running at approximately
                $175
                million in early 2004, including mortgage, tenant and pre-employment
                screening. (A)





·
            ChoicePoint
                Inc. (from whom we purchased Bode) is the leading provider of public
                background screening, the leading provider of database information
                to the
                automobile insurance industry and the leading provider of commercial
                pre-employment and drug testing screening. It services about 20%
                of the
                pre-employment screening market.
                (A)





·
            Control
                Risks Group Limited, out of the United Kingdom, has grown fast over
                the
                last two years in response to terrorism and corporate demand for
                security,
                employee fraud and brand protection services. Its annual revenues
                are
                estimated to be in the $50 million to $60 million range. (B,
                C)





·
            First
                Advantage Corp. is a smaller employment background screening company
                that
                has grown rapidly through acquisitions since its formation by merging
                a
                division of First American Corp. with US Search.com Inc. in June
                2003.
                Through acquisitions, First Advantage Corp. has evolved into a $250
                million provider of a wide range of screening and investigative services.
                It is the leading tenant-screening company and has significant businesses
                in pre-employment, insurance, drug testing and investigative services
                for
                insurance fraud. (A)





·
            Hill
                & Associates, a Hong Kong-based company, is a predominantly Far East
                operation in the investigations, intelligence and consulting area.
                Its
                annual revenues are estimated at roughly $20 million. (A,
                C)





·
            Toribos
                GmbH is a Hamburg-based firm with offices in Europe, Africa, the
                Middle
                East, Asia and North and South America that specializes in investigations,
                crisis management and private security. (A, B,
                C)





·
            Olive
                Security (UK) Ltd is a London and Dubai-based firm with a strong
                presence
                in the Middle East that specializes in risk consulting and security
                over a
                variety of platforms. (C)





·
            Other
                competitors include ArmorGroup International plc, national and
                international consulting firms such as FTI Consulting, Inc., Securitas
                AB
                Subsidiary, Pinkerton Consulting & Investigations, Inc., Alvarez &
                Marsal, LLC, AlixPartners LLC, Crossroads LLC and Applied Discovery,
                Inc.
                (A, B, C)




10


**Government
      Regulation**




Due
      to
      our participation in government contracts, we will be subject to audit from
      time
      to time for our compliance with government regulations by various agencies.
      Governmental agencies may also periodically conduct inquiries or investigations
      that may cover a broad range of our activity. Investigator licenses are needed
      domestically, while surveillance as well as investigator licenses are generally
      regulated on a state and local level. We believe that we operate our business
      in
      material compliance with all applicable federal, state and local government
      regulations.




**Employees**




As
      of
      March 28, 2007, we had 383 full-time and 52 part-time employees, including
      employees from the acquisitions of CBR, JLWA, Safir, Secure Source, Hyperion
      Risk, OnLine Consulting, Bode and Facticon. 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.





**Risk
      Factors**





The
      following risk factors should be considered carefully in addition to the other
      information contained in this annual report:




**Risks
      Related to Our Business and Industry**




*We
      are an emerging company and have a history of operating losses and uncertain
      future results of operations.*




We
      were
      founded in 1998 and are still in the process of developing our risk mitigation,
      investigative and global security services. We have incurred significant
      operating losses since inception, including a cumulative net loss available
      to
      common stockholders of approximately $46,800,000 for the years ended December
      31, 2006, 2005, and 2004, respectively. We cannot anticipate when or if we
      will
      achieve profitability in the future. We may not generate sufficient revenues
      to
      meet our expenses or to operate profitably in the future.




*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
      could have a materially adverse effect on both the market for our services
      or
      our ability to provide them, and/or the profits and services of our clients;
      as
      a result, these risks could materially adversely affect the operations and
      value
      of any of our services that we offer to overseas clients:





·
            changes
                in, and difficulty in complying with, laws and regulations of the
                different countries including authority to trade or perform the services
                of a commercial risk mitigation
                company;





·
            nullification,
                modification and renegotiation of
                contracts;





·
            reversal
                of current policies, including favorable tax policies, encouraging
                foreign
                investment of


foreign
      trade, or relating to the use of local agents;





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





·
            difficulty
                in collecting accounts receivable and longer collection
                times.




11


*Our
      business is vulnerable to fluctuations in government spending.*




Because
      many of our contracts are with governmental entities, our business is subject
      to
      certain risks, including global economic developments, wars, political
      instability, changes in the tax and regulatory environments, foreign exchange
      rate volatility and fluctuations in government spending. For example, the 2005
      Homeland Security Appropriations Act provided $28.9 billion in discretionary
      spending for the Department of Homeland Security, $1.8 billion more than the
      2004 level of funding, which may result in increased business opportunities
      for
      us. However, because many clients are federal, state or municipal governmental
      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.





*We
      may have difficulty pursuing our acquisition strategy.*




We
      intend
      to grow through acquisitions. 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. A number of competitors
      have also adopted a strategy of expanding and diversifying through acquisitions.
      We will likely experience significant competition in our effort to execute
      an
      acquisition strategy. As a result, we may be unable to continue to make
      acquisitions or may be forced to pay more for the acquisition targets than
      it
      would otherwise want to pay.




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




When
      companies are acquired, we may not be able to integrate or manage these
      businesses to produce returns that justify the investment. Any difficulty in
      successfully integrating or managing the operations of such acquired businesses
      could have a material adverse effect on our business, consolidated financial
      condition, results of operations or liquidity, and could lead to a failure
      to
      realize any anticipated synergies. Our management 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.




*Because
      a small number of clients account for a substantial portion of our revenues,
      the
      loss of any of these clients could cause our revenues to decline
      substantially.*




Revenues
      from our services to a limited number of clients have accounted for a
      substantial percentage of our total revenues. Our three largest clients
      accounted for approximately 51%, 11%, and 4% of revenues for the year ended
      December 31, 2006 of which the 51% and 4% net revenue clients represented work
      performed under government contracts. Our three largest clients also
      accounted for approximately 27%, 11% and 7% of our revenues for the year ended
      December 31, 2005. For the years ended December 31, 2006 and 2005,
      respectively, government contracts represented 57% and 0% of our net
      revenues, the most significant of which represented 94% of our net revenues
      within our JLWA- Crisis Management and Corporate Governance segment. This
      concentration of 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 engagements 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.





*Competitive
      conditions could adversely affect our business.*




We
      operate in a number of geographic and service markets, all of which are highly
      competitive with few barriers to entry. If we are unable to respond effectively
      to our competitors, some of which have greater financial resources, our business
      and results of operations will be materially adversely affected. In the risk
      management and security market, our competitors include Control Risks Group
      Limited, ArmorGroup International plc, Kroll Inc., Toribos GmbH and Olive
      Security (UK) Ltd. 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, Crossroads LLC, ChoicePoint
      Inc. and Applied Discovery, Inc., provide investigative, consulting and other
      services which are similar to services we provide. Some of these firms have
      indicated an interest in providing services similar to ours on a broader scale
      and may prove to be formidable competitors if they elect to devote the necessary
      resources to these competitive businesses. The national and international
      accounting and consulting firms have significantly larger financial and other
      resources than we have and have long-established relationships with their
      clients, which also are likely to be clients or prospective clients of our
      Company.


12


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




As
      a
      company in a client service business, we depend upon our reputation and the
      individual reputations of our senior professionals to obtain new client
      engagements. We obtain a substantial number of new engagements from existing
      clients or through referrals from existing clients. Any factor that diminishes
      our reputation or the reputations of our senior professionals may make it more
      difficult to compete for new engagements or to retain existing clients and,
      therefore, could materially adversely affect our business. In addition to any
      direct liability from any damaging events, any circumstances, including those
      where we are not at fault, which might publicly damage our goodwill, injure
      our
      reputation, or damage our business relationships may lead to a broader
      materially adverse effect on our business and prospects through loss of
      business, goodwill, clients, agents and employees.





*Our
      ability to sell our products and services and grow our business could be
      significantly impaired if we fail to retain or recruit key
      personnel.*




Our
      success will depend to a significant extent upon the abilities and high
      visibility of members of our senior management including Harvey W. Schiller,
      Ph.D., our Chairman and Chief Executive Officer, Jeffrey O. Nyweide, our Chief
      Financial Officer, Executive Vice President-Corporate Development and Secretary,
      our Board of Directors and our advisory boards. The loss of the services of
      Dr.
      Schiller or Mr. Nyweide, or any other executive officers, directors or advisors,
      could have a materially adverse effect upon our business. Our future success
      and
      growth also largely depends upon our ability to attract, motivate and retain
      additional highly competent technical, management, sales and marketing
      personnel. Competition for such qualified individuals is highly competitive
      in
      the global security market, and we cannot guarantee that we will be successful
      in attracting and retaining such personnel. Departure and additions of key
      personnel may be disruptive to and detrimentally affect our business, operating
      results and financial condition.




*We
      may become subject to significant legal proceedings.*




We
      are
      subject from time to time to litigation and other adverse claims, both asserted
      and unasserted, incidental to our businesses, some of which may be substantial.
      For example, those claims may include, but are not limited to, damages asserted
      by persons who are screened by us, regulatory agencies, clients, third parties
      and various other business-related matters. Final resolution of these matters
      in
      the future may impact our results of operations or cash flows.





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




We
      may be
      held liable should any present or future product or service offerings fail.
      We
      may not be able to maintain insurance at levels of risk coverage or policy
      limits that we deem adequate for our activities or guarantee that every contract
      contains or will contain adequate limitations on our liability. Because of
      the
      increasing cost of liability insurance, we may not be able to obtain sufficient
      amounts of insurance coverage, additional insurance when needed or
      reasonably-priced insurance policies. 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.*




Certain
      data and services that we provide are subject to regulation by various federal,
      state and local regulatory authorities. Compliance with existing federal, state
      and local laws and regulations has not had a material adverse effect on our
      consolidated results of operations or financial condition. Nonetheless, 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 increasingly affect our operations and could result in
      substantial regulatory compliance expense, litigation expense and revenue
      loss.


13


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




When
      working on a fixed-price basis, we deliver our services to a client’s
      specifications or requirements for a particular project based on a mutually
      agreed upon service level agreement. The profits of these projects are 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 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.





**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 such shares were
      purchased.*




The
      market price of our common stock may fluctuate significantly (since our reverse
      merger in June 2005 and through March 28, 2007, the high and low bid price
      for
      our common stock has been $32.00 and $8.75 per share, respectively) in response
      to 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 affect our contracts with governmental
                entities, and





·
            changes
                in the laws and regulations of different countries that affect our
                abilities to perform the services of a commercial security and risk
                mitigation company.




The
      stock
      market in general has experienced extreme price and volume fluctuations. The
      market prices of securities of security-related companies 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 is low.





*Because
      we became public by means of a reverse merger, we may not be able to attract
      the
      attention of major brokerage firms.*




Additional
      risks may exist since we became public through a “reverse merger.” Securities
      analysts of major brokerage firms may not provide us with coverage since there
      is no incentive for brokerage firms to recommend the purchase of our common
      stock. No assurance can be given that brokerage firms will want to conduct
      any
      secondary offerings on our behalf in the future.




*Our
      common stock may be difficult to sell.*




The
      Securities and Exchange Commission (“SEC”) has adopted regulations which
      generally define “penny stock” to be an equity security that has a market price
      of less than $5.00 per share or an exercise price of less than $5.00 per share,
      subject to specific exemptions. The market price of our common stock prior
      to
      our reverse stock split on March 6, 2007 was less than $5.00 per share and
      if
      the market price on our common stock drops below $5.00 again, it may be
      designated as a “penny stock” according to SEC rules. This designation requires
      any broker or dealer selling these securities to disclose certain information
      concerning the transaction, obtain a written agreement from the purchaser and
      determine that the purchaser is reasonably suitable to purchase the securities.
      These rules may restrict the ability of brokers or dealers to sell our common
      stock and may affect the ability of investors to sell their shares. In addition,
      since our common stock is currently traded on the NASD’s OTC Bulletin Board,
      investors may find it difficult to obtain accurate quotations of our common
      stock and may experience a lack of buyers to purchase such stock or a lack
      of
      market makers to support the stock price.


14


*A
      significant number of our shares will be eligible for sale, and their sale
      could
      depress the market price of our common stock.*





Sales
      of
      a significant number of shares of our common stock in the public market could
      harm the market price of our common stock. As of March 28, 2007, we have
      registered an aggregate of 5,028,882 shares of our common stock for resale
      in
      the public market as shares of our Series A and Series B convertible preferred
      stock and common stock underlying warrants. In addition, we remain obligated
      to
      register an additional 1,468,050 shares of common stock underlying Series B
      Preferred Stock pursuant to an Investor Rights Agreement dated June 28, 2006
      as
      amended. As such shares of our common stock are resold in the public market,
      the
      supply of our common stock will increase, which could decrease its
      price. Some or all of our shares of common stock may also be
      offered from time to time in the open market pursuant to an
      effective registration statement or Rule 144, and these sales may have
      a depressive effect on the market for our shares of common stock. In general,
      a
      person who has held restricted shares for a period of one year may, upon filing
      with the SEC a notification on Form 144, sell into the market shares of our
      common stock in an amount equal to the greater of 1% of the outstanding shares
      or the average weekly number of shares sold in the last four weeks prior to
      such
      sale. Such sales may be repeated once each three months, and any of the
      restricted shares may be sold by a non-affiliate after they have been held
      for
      two years.





*Failure
      to achieve and 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
      have
      an adverse effect on our stock price.*





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 operating results could be harmed.





Commencing
      for the year beginning January 1, 2007, 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 controls over financial reporting. We
      have
      carried out an evaluation of the effectiveness of the design and operation
      of
      our disclosure controls and procedures. Based upon that evaluation, our Chief
      Executive Officer and Chief Financial Officer have concluded that our disclosure
      controls and procedures are not effective. We have identified certain matters
      that would constitute a material weakness (as such term is defined under the
      Public Company Accounting Oversight Board Auditing Standard No. 2), related
      to
      the financial closing process, a lack of segregation of financial
      responsibilities and the need for additional qualified financial accounting
      personnel. Although we intend to augment our internal controls procedures and
      expand our accounting staff, there is no guarantee that this effort will be
      adequate.




During
      the course of our testing, we may identify additional deficiencies which we
      may
      not be able to remedy in time to meet the deadline imposed by the Sarbanes-Oxley
      Act for compliance with the requirements of Section 404. In addition, if we
      fail
      to maintain the adequacy of our internal accounting controls, as such standards
      are modified, supplemented or amended from time to time, we may not be able
      to
      ensure that we can conclude on an ongoing basis that we have effective internal
      controls over financial reporting in accordance with Section 404. Failure to
      achieve and maintain an effective internal control environment could cause
      us to
      face regulatory action and also cause investors to lose confidence in our
      reported financial information, either of which could have an adverse effect
      on
      our stock price.





*Our
      principal stockholders have significant voting power and may take actions that
      may not be in the best interest of other stockholders.*




Our
      officers, directors and principal stockholders control approximately 42.5%
      of
      our currently outstanding common stock. 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.


15


*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.
      We currently intend to retain our future earnings to support operations and
      to
      finance expansion and therefore we do not anticipate paying any cash dividends
      on our common stock in the foreseeable future.




*Investors
      in our securities may suffer dilution.*




The
      issuance of shares of our common stock, or shares of our common stock underlying
      warrants, options or Series A and Series B convertible preferred stock will
      dilute the equity interest of existing stockholders who do not have
      anti-dilution rights and could have a significant adverse effect on the market
      price of our common stock. The sale of our common stock acquired at a discount
      could have a negative impact on the market price of our common stock and could
      increase the volatility in the market price of our common stock. In addition,
      we
      may seek additional financing which may result in the issuance of additional
      shares of our common stock and/or rights to acquire additional shares of our
      common stock. The issuance of our common stock in connection with such financing
      may result in substantial dilution to the existing holders of our common stock
      who do not have anti-dilution rights. Those additional issuances of our common
      stock would result in a reduction of an existing holder’s percentage interest in
      our company.




*We
      may fail to qualify for NASDAQ or other listing.*




Although
      we have applied for the listing of our common stock on NASDAQ, there can be
      no
      assurance that such listing will be granted, or that the trading of our common
      stock will be sustained. In the event that our common stock fails to qualify
      for
      initial or continued listing on a registered stock exchange, trading, if any,
      in
      our common stock, would then continue to be conducted on the NASD’s “Electronic
      Bulletin Board” in the over-the-counter market and in what are commonly referred
      to as “pink sheets.” As a result, an investor may find it more difficult to
      dispose of, or to obtain accurate quotations as to the market value of our
      common stock, and our common stock would become substantially less attractive
      for margin loans, for investment by financial institutions, as consideration
      in
      future capital raising transactions or other purposes.




*Compliance
      with changing regulation of corporate governance and public disclosure 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, in the event we are
      approved for listing on either NASDAQ or a registered exchange, NASDAQ and
      stock
      exchange rules, will require an increased amount of management attention and
      external 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 a diversion of management time and
      attention from revenue-generating activities to compliance
      activities.


16


**Item
      2.   Description of** **Property**





**Facilities**




Until
      the
      acquisitions of CBR and JLWA on August 14, 2005 and March 10, 2006,
      respectively, we were primarily located in two leased facilities. Our operating
      base located at 1615 L Street, N.W., Suite 300, Washington, D.C. 20036, is
      comprised of 11,671 square feet leased at a cost of $40,000 per month. Our
      telephone number there is (202) 293-2490. Our administrative headquarters are
      located at 75 Rockefeller Plaza, 27th Floor, New York, NY 10019, and is
      comprised of approximately 1,800 square feet leased at a cost of $7,797 per
      month. Our telephone number there is (212) 445-6262.




Through
      the acquisitions of CBR, we assumed the lease to 40 Burton Hills Blvd., Suite
      410, Nashville, TN 37215, which is comprised of approximately 1,827 square
      feet
      at a cost of $1,979 per month. In addition, we assumed the leases to CBR’s
      branch offices in California, Texas, New Jersey, Illinois, Florida and
      Michigan.




Through
      the acquisition of JWLA, we assumed the lease to 701 13th Street NW, Suite
      850,
      Washington, DC 20005, which is comprised of 6,398 square feet at a cost of
      $27,722 per month. Effective January 2007, the lease in Washington was
      terminated and the JLWA personnel were relocated to our other local leased
      facility. In addition, we assumed the leases to JWLA’s branch offices in
      Atlanta, Chicago, Little Rock and Sacramento.





Through
      the acquisition of Safir, we assumed the lease to 415 Madison Ave.,
      17 th Floor,
      New York, NY 10017, which is comprised of approximately 8,150 square feet at
      a
      cost of $26,772 per month. In addition, we assumed the leases to Safir’s branch
      offices in California, Texas, Illinois and Massachusetts.




Through
      the acquisitions of Secure Source, we assumed the lease to 710 South Kimball
      Avenue, Southlake, Texas, which is comprised of approximately 2,510 square
      feet
      at a cost of $4,375 per month. In addition, we assumed the leases to the Secure
      Source branch office in Alexandria, VA.





Through
      the acquisition of Hyperion, we assumed the lease to 5950 Hazeltine National
      Drive, Suite 650, Orlando, FL, which is compromised of approximately
      7,872 square feet at a cost of $13,100 per month.





Through
      the acquisition of On Line Consulting, we assumed the lease to 388
      17th
      Street, Suite 230 Oakland, California,
      which is comprised of approximately 3,071 square feet at a cost of approximately
      $5,000 per month.





Through
      the acquisitions of Bode, we assumed the lease 10430 Furnace Road. Suite 107,
      Lorton, Virginia, which is comprised of approximately 39,000 square feet at
      a
      cost of $59,000 per month.





Through
      our acquisition of Facticon, we did not assume the commitment for any lease
      obligations.





We
      have no current intention to invest in real estate or real estate
      mortgages. We may purchase the common stock of companies, as a means of
      acquisition, but have no intent to passively hold or invest in the common stock
      of companies.





**Item
      3. Legal Proceedings**




From
      time
      to time, the Company is involved in litigation arising in the ordinary course
      of
      business. The Company does not believe that it is involved in any litigation
      that is likely, individually or in the aggregate, to have a material adverse
      effect on its consolidated financial condition or results of operations or
      cash
      flows.


17


**Item
      4.     Submission of Matters to a Vote of Security Holders**




The
      Company held a special meeting of stockholders on December 5, 2006. At the
      meeting the common stockholders voting along with the Series A and Series B
      Convertible Preferred stockholders, voting on an “as-converted” basis (up to the
      4.99% Beneficial Ownership Cap on the voting power of shares of Series B
      Convertible Preferred Stock), took the following actions:





(a)
            The
                proposal to adopt a Plan of Merger for the purposes of reincorporating
                into Delaware was approved by a vote of 22,088,925 votes in favor
                of the
                proposal, 251,000 votes against the proposal and no abstentions or
                broker
                non-votes.





(b)
            The
                proposal to adopt a Plan of Merger for the purposes of reincorporating
                into Delaware was approved by the Series A Convertible Preferred
                stockholders, voting as a separate class, by a vote of 3,385 votes
                in
                favor of the proposal and no votes against, abstentions or broker
                non-votes.





(c)
            The
                proposal to adopt a Plan of Merger for the purposes of reincorporating
                into Delaware was approved by the Series B Convertible Preferred
                stockholders, voting as a separate class, by a vote of 48,607 votes
                in
                favor of the proposal, no votes against, abstentions or broker
                non-votes.




(d)
            The
                proposal to approve an amendment to the Articles of Incorporation
                to
                increase the authorized capital stock assuming the Plan of Merger
                proposal
                was not approved, was approved by a vote of 22,338,545 votes in favor
                of
                the proposal, 1,380 votes against and no abstentions or broker
                non-votes.





(e)
            The
                proposal to approve an amendment to the Certificate of Incorporation
                to
                effect a reverse stock split of the our common stock such that one
                new
                share of common stock would be issued for any of five, six, seven,
                eight,
                nine or ten shares of outstanding common stock, such ratio and the
                date
                upon which such reverse stock split shall occur, as shall be determined
                by
                the Board was approved by a vote of 22,245,132 votes in favor of
                the
                proposal, 94,793 votes against and no abstentions or broker
                non-votes.




(f)
            The
                proposal to approve our 2006 Long-Term Incentive Plan was approved
                by a
                vote of 21,619,512 votes in favor of the proposal, 620,413 votes
                against,
                100,000 votes abstained and no broker
                non-votes.





(g)
            The
                proposal to approve our 2006 Employee Stock Purchase Plan was approved
                by
                a vote of 22,007,9645 votes in favor of the proposal, 231,960 votes
                against, 100,000 votes abstained and no broker
                non-votes.




All
      vote
      totals reflect the amount of pre-Reverse Stock Split totals.


18


**PART
      II**





**Item
      5. Market for Common Equity and Related Stockholder
      Matters**




**Market
      for Common Equity**





Our
      common stock is quoted on the OTC Bulletin board under the symbol GOPG.OB.
      Prior
      to March 6, 2007, when we effectuated a 1 for 8 reverse stock split, and since
      June 27, 2005, our common stock was quoted on the OTC Bulletin Board under
      the
      symbol GLOI.OB. Prior to June 27, 2005, there was no active market for our
      common stock. Based upon information furnished by our transfer agent, as of
      March 28, 2007, we had 117 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 the OTC Bulletin Board, as adjusted
      for
      the reverse stock split:


Fiscal
                Year 2005
            
            High
            
            
            LowFirst
                Quarter
            
            $N/A
            
            
            $N/ASecond
                Quarter (through June 24, 2005)
            
            N/A
            
            
            N/ASecond
                Quarter(1)
            
            20.08
            
            
            16.80Third
                Quarter
            
            32.00
            
            
            17.60Fourth
                Quarter
            
            23.20
            
            
            18.40Fiscal
                Year 2006
            
            High
            
            
            LowFirst
                Quarter
            
            $22.24
            
            
            $16.08Second
                Quarter
            
            23.20
            
            
            15.20Third
                Quarter
            
            20.00
            
            
            12.00Fourth
                Quarter
            
            16.40
            
            
            10.24Fiscal
              Year 2007
            
            High
            
            
            LowFirst
                Quarter(2)
            
            $15.44
            
            
            $8.75




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.
      We
      currently expect to retain future earnings, if any, for the development of
      our
      business. Dividends may be paid on our common stock only if and when declared
      by
      our Board of Directors and paid on an as-converted basis to the holders of
      our
      Series A and B convertible preferred stock.





(1)
            From
                June 27, 2005 to June 30, 2005. June 24, 2005 was the closing date
                of our
                reverse merger transaction.


(2)
            From
                January 1, 2007 through March 28,
                2007.




19


**Securities
      Authorized for Issuance Under Equity Compensation Plans**





Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            
            Weighted-average
                exercise price of outstanding options, warrants and rights
            
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))(a)
            
            (b)
            
            (c)Equity
                compensation plans approved by security holders
            1,030,560
            
            $13.65
            
            11,825,000Equity
                compensation plans not approved by security holders
            -
            
            -
            
            -Total
            1,030,560
            
            $13.65
            
            11,825,000





**Sale
      of Unregistered Securities**


None





**Item
      6. Managements Discussion and Analysis or Plan of
      Operation**




**Summary
      Financial Information**




The
      summary financial data set forth below are derived from and should be read
      in
      conjunction with the consolidated financial statements, including the notes
      thereto, filed as part of this Form 10-KSB.




Consolidated
                  Statement of Operations Data:(in
                thousands, except for share and per share data)
            
            
            Year
                      Ended December 31,2006
            
            
            Year
                    Ended December 31, 2005Revenues
            
            $
            61,924
            
            $
            9,028Net
                loss available to common stockholders
            
            $
            (42,259
            )
            $
            (4,550
            )Net
                loss per common share, basic and diluted
            
            $
            (18.89
            )
            $
            (3.03
            )Weighted
                average number of shares - basic and diluted
            
            
            2,237,168
            
            
            1,500,139Consolidated
                Balance Sheet Data:Working
                capital
            
            $
            27,519Total
                assets
            
            $
            69,226Total
                liabilities
            
            $
            15,327Stockholders'
                equity
            
            $
            53,899


20


**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
      herein.*





**Results
      of Operations**





The
      following discussion and financial information is presented to aid in
      understanding our consolidated financial position and results of operations.
      The
      emphasis of this discussion will be on the year ended December 31, 2006, as
      compared to the year ended December 31, 2005.





**Overview**




We
      experienced an increase in revenues of approximately $52,895,000 (586%) and
      reported an operating loss of approximatel y
      $7,453,000 and $3,523,000
      and a net loss of $17,846,000 and $3,570,000 for the years ended December 31,
      2006 and 2005, respectively. The
      increase in revenues for the year ended December 31, 2006 is primarily
      attributable to the full year revenues of CBR and the 2006 acquisitions of
      JLWA,
      Safir, Secure Source and Hyperion Risk which during 2006 provided revenues
      of
      $6,984,000, $37,556,000, $6,467,000, $1,352,000 and $2,065,000, respectively,
      offset by a decrease in revenues of $1,529,000 at the GlobalOptions
      unit.





Although
      we do have some long-term relationships with our clients, our ability to
      generate revenue is generally dependent upon obtaining many new projects each
      year, most of which are relatively short-term. Accordingly, period-to-period
      comparisons within a given year or between years will need to take this normal
      fluctuation into consideration.





Our
      gross
      profit for the year ended December 31, 2006 was 48% as compared to 44% for
      the
      year ended December 31, 2005. The increase in the year ended December 31, 2006
      was primarily due to changes in the mix of the types of client engagements,
      in
      connection with the recent acquisitions of CBR, JLWA, Safir, Secure Source
      and
      Hyperion Risk, with the JLWA unit providing a gross profit of 49%.





Net
      loss
      available to common stockholders for the years ended December 31, 2006 and
      2005
      was $42,259,000 and $4,550,000 respectively, for an increase of $37,709,000
      or
      approximately 829%. The increased net loss was primarily attributable to an
      impairment loss on goodwill and intangibles of $3,144,000, the amortization
      of
      debt discounts of $7,523,000 and amortization of deferred financing costs of
      $2,695,000 related to our financing programs, as well as to the deemed dividend
      on Series B convertible preferred stock of $24,413,000.





While
      the
      financial results show a significant net loss available to common stockholders
      for the year ended December 31, 2006, we believe that we represent a unique
      opportunity to be a profitable global leader in the highly fragmented risk
      mitigation industry. GlobalOptions Group is an established company that will
      serve as our nexus for a series of acquisitions that we believe will deliver
      capabilities, products and services designed to meet the ever increasing demand
      for the assessment and management of risk. We see no indication that the drivers
      of increased risk mitigation spending are likely to dissipate any time in the
      near future. Risk mitigation providers on both the product and services side
      are
      still fragmented and ripe for consolidation with no clear market leader or
      dominant brand. We believe there is an opportunity to provide comprehensive
      solutions which can drive increased revenues for a company that can build a
      comprehensive platform. We expect GlobalOptions Group to be that
      company.


21


Our
      strategic vision is to build the first truly integrated enterprise risk
      mitigation company by selectively acquiring the best companies in the industry
      with proven management teams and a strategic long-term vision. Platform
      acquisitions will be geographically diverse and offer solutions in different
      risk mitigation segments to gain scope and synergies. Targets will have a
      combination of existing clients, revenue, significant channel presence and/or
      a
      high margin core business. From August 2005 through February 2007, we acquired
      CBR, JLWA, Safir, Secure Source, Hyperion Risk, On Line, Bode and Facticon.
      We
      continue to seek appropriate acquisition candidates.





On
      August
      14, 2005, GlobalOptions acquired CBR, a privately-held nationwide investigations
      firm based in Nashville, Tennessee. The aggregate purchase price paid for CBR’s
      assets and business was approximately $5,208,000 subject to certain adjustments
      through August 13, 2006 to the opening balance working capital, as such purchase
      price adjustments are defined in the agreement. The aggregate purchase price
      of
      approximately $5,208,000 consisted of cash in the amount of $4,246,000 (net
      of
      cash acquired of $26,000) and inclusive of a broker fee of $143,000, and a
      note
      payable to the seller of $819,000 paid August 14, 2006.




On
      March
      10, 2006, GlobalOptions purchased substantially all of the assets and
      liabilities of JLWA, a privately held crisis and emergency consulting management
      firm based in Washington, D.C. The acquisition was made pursuant to the JLWA
      Agreement, as amended, between GlobalOptions Group and JLWA. The aggregate
      purchase price paid for JLWA’s assets and business was approximately $8,404,000
      after the purchase adjustment on June 9, 2006. The aggregate purchase price
      of
      approximately $8,404,000, consisted of a cash payment at closing of $3,600,000,
      a cash payment of $1,857,000 to pay off JLWA’s line of credit balance, the
      issuance of 102,459 shares of common stock of GlobalOptions Group valued at
      $2,000,000, or $19.52 per share, a 4.6% note payable to the seller of $400,000
      paid March 9, 2007, and a non-interest bearing working capital purchase price
      adjustment of approximately $546,000, paid on June 8, 2006. In addition, the
      JLWA Agreement provides for the sellers to obtain up to an additional
      $15,400,000 upon the attainment of certain revenue goals subsequent to the
      closing of the transaction and the continued employment of James Lee Witt,
      the
      former president and chief executive officer of JLWA. At December 31, 2006,
      the
      amount due to the former members of JLWA for the earnout liability due under
      the
      Agreement was approximately $5,228,000, and
      has
      been recorded in selling and marketing expenses in the consolidated statement
      of
      operations included elsewhere in this filing.





On
      May
      12, 2006, GlobalOptions acquired substantially all of the business and assets
      of
      Safir. Safir is a security consulting, investigative and intelligence firm
      headquartered in New York City with seven additional offices nationwide. The
      acquisition was made pursuant to the Safir Agreement between GlobalOptions
      Group
      and Safir. The aggregate purchase price paid for Safir’s business and assets was
      approximately $15,316,000, and included $6,000,000 in 8% promissory notes issued
      by the Company and paid on June 29, 2006, $1,000,000 in 4% promissory notes
      of
      the Company due on May 12, 2007, $6,000,000 in common stock of the Company,
      consisting of 375,000 shares at $16.00 per share, payments to retire certain
      indebtedness of approximately $1,941,000 of Safir in anticipation of the
      closing, which included as follows: approximately $553,000 on April 3, 2006
      and
      $1,388,000 on April 28, 2006 and a finders fee of $375,000 paid to QuanStar
      Group, LLC, a related party. The
      company shall prepay the obligation under the 4% Escrow Promissory Note in
      the
      amount of 1/3 of the collected amount of the purchased accounts receivable.
      The
      prepayments under the 4% Escrow Promissory Note were made on July 20,
      2006, September 21, 2006, November 14, 2006, February 27, 2007 and March 12,
      2007 and the Company paid $442,000, $164,000, $114,000, $50,000 and $40,000
      in principal on the 4% promissory notes due on May 12, 2007.




On
      May
      12, 2006, GlobalOptions acquired substantially all of the business and certain
      assets of Secure Source. Secure Source is an international risk consulting
      firm
      with offices in Washington, D.C. and Dallas, Texas. The acquisition was made
      pursuant to the Secure Source Agreement between the Company, Secure Source,
      Marian E. Nicastro and David W. Nicastro. The aggregate purchase price paid
      for
      Secure Source’s business and assets of $3,250,000 consists of $1,500,000 in 3%
      promissory notes paid on June 29, 2006 and $750,000 in 5% promissory notes
      due
      May 12, 2009, and $500,000 in 5% promissory notes due May 12, 2007 and $500,000
      in common stock of GlobalOptions Group, consisting of 26,371 shares valued
      at
      $18.96 per share.


22


On
      August
      10, 2006, the Company acquired substantially all of the business and assets
      of
      Hyperion Risk.   Hyperion Risk an investigative and intelligence
      firm.   The acquisition was made pursuant to the Hyperion Agreement
      between the Company and Hyperion Risk. The aggregate purchase price paid for
      Hyperion’s business and assets was $3,782,000, which consisted of cash in the
      amount of $2,022,000, and $1,500,000 consisting of 84,081 shares of the
      Company’s common stock valued at $17.84 per share, and the Company’s cash
      payments to pay off Hyperion Risk’s credit line balance of approximately
      $260,000.





On
      January 9, 2007, we acquired substantially all of the business and assets of
      SPZ
      Oakland Corporation, dba On Line Consulting Service, Inc. (“On Line”), a
      California corporation. On Line is a full service security and fire alarm
      consulting and design firm based in Oakland, California. The acquisition was
      made pursuant to a certain Asset Purchase Agreement dated January 9, 2007 (the
      “On Line Agreement”) between On Line and us. The aggregate purchase price paid
      for On Line’s business and assets was $2,658,000 and consisted of $1,308,000 in
      cash and $1,350,000 in our common stock consisting of 84,375 shares at $16.00
      per share and the assumption of certain liabilities. At closing, the Company
      paid $750,000 of the cash portion of the purchase price, and issued promissory
      notes for $417,000 due January 9, 2008, and $141,000 due on January 9, 2009.
      Further, at closing the Company delivered to the seller 46,875 shares of
      GlobalOptions common stock, with 37,500 shares to be held in escrow and
      delivered to the seller, 18,750 shares on January 9, 2008, and 18,750
      shares on January 9, 2009, respectively. The purchase price is subject to
      certain working capital purchase price adjustments.




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. Bode was a wholly-owned
      subsidiary of ChoicePoint. The acquisition was made pursuant to Bode Agreement,
      dated February 28, 2007, between the Company, ChoicePoint Government Services
      Inc. and ChoicePoint. The aggregate purchase price paid was $12.5 million in
      cash and is subject to certain purchase price adjustments as defined in the
      Bode
      Agreement.





On
      February 28, 2007, GlobalOptions Group acquired substantially all of the
      business and assets of Facticon, a Pennsylvania corporation. Facticon is a
      surveillance, investigative and intelligence firm based in Chadds Ford,
      Pennsylvania. The acquisition was made pursuant to the Facticon Agreement
      between the Company and Facticon. The aggregate purchase price paid was
      $2,800,000, which consisted of $1,400,000 in cash and $1,400,000 in the common
      stock GlobalOptions Group consisting of 87,500 shares at $16.00 per share and
      the assumption of certain liabilities.




Because
      of the personal and sensitive nature of risk mitigation and investigative
      engagements, the ability to provide services and retain clients is driven
      largely by reputation and personal relationships. Under the leadership of Harvey
      W. Schiller, Ph.D., executive Chairman of the Board of Directors and Chief
      Executive Officer of GlobalOptions Group, Jeffrey O. Nyweide, our Chief
      Financial Officer, Executive Vice President-Corporate Development and Secretary,
      Thomas P. Ondeck, President of Global International, Halsey R. Fischer,
      President of Investigations of GlobalOptions, James Lee Witt, Chief Executive
      Officer of the GlobalOptions/James Lee Witt Division and Howard Safir, Senior
      Chief Executive Officer of GlobalOptions/Safir Rosetti Division. GlobalOptions
      Group provides not only vision, management and leadership, but strong
      relationships with leaders in both corporate and government markets.
      GlobalOptions Group has the relationships to bring in high-margin, well-known
      clients, while our operational experience allows for execution of these
      sensitive and critical engagements. Once these projects are completed, there
      are
      a variety of annuity-based, long-term products and services that can be combined
      into a comprehensive suite of solutions to evolve the business into a more
      profitable and recurring revenue product-based business.




Acquired
      companies will give GlobalOptions Group a substantial revenue base, a wide
      array
      of products and services, geographic reach into almost every country in the
      world and experienced operators that will complement the current GlobalOptions
      Group team. Our objective is to sell bundled solutions and services through
      each
      acquired companies’ channels. To achieve revenue growth targets, GlobalOptions
      Group will use its own and acquired companies’ relationships to attain high-end,
      well-known risk mitigation engagements to accelerate our internal growth rate.
      The expectation is to leverage other GlobalOptions Group members, as opposed
      to
      using sub-contractors and joint ventures, to perform solutions and services,
      thereby keeping higher internal margins.




We
      will
      also use a shared corporate services approach in administrative areas to keep
      indirect costs reasonable and to help us achieve profitability sooner. We expect
      to find savings in shared services such as global marketing, human resources,
      finance, information technology, mergers and acquisitions, business integration
      and development, compliance and legal fees.


23


**GlobalOptions
      Group’s Year Ended December 31, 2006 Compared to Year Ended December 31, 2005**




**Revenues**




We
      had
      overall revenues of approximately $61,924,000 for the year ended December 31,
      2006 as compared to revenues of approximately $9,028,000 for the year ended
      December 31, 2005, for an increase of $52,896,000 or approximately 586%.
      Substantially all of the revenues reported in the year ended December 31, 2006,
      were from domestic clients. The increase in revenue for the year ended December
      31, 2006 was primarily attributable to the 2006 acquisitions of JLWA, Safir,
      Secure Source, Hyperion Risk and a full year of revenues for CBR.





**CBR
      - Investigations and Litigation Support Segment Revenues**





In
      the
      investigations/litigation support segment, we had revenues of $16,550,000 for
      the year ended December 31, 2006, as compared to revenues of $6,970,000 for
      the
      year ended December 31, 2005, for an increase of $9,580,000 or approximately
      138%. All of the investigations/litigation support revenues reported in the
      year
      ended December 31, 2006 were domestic. The increase in investigations/litigation
      support segment revenues for the year ended December 31, 2006 was primarily
      attributable to the expansion of our client base through the acquisitions of
      CBR, Safir and Hyperion Risk for which all revenues are included in this
      segment.




**JLWA
      - Crisis Management and Corporate Governance Segment
      Revenues**





In
      the
      crisis management segment, we had revenues of $37,556,000 for the year ended
      December 31, 2006 as compared to revenues of $1,261,000 for the year ended
      December 31, 2005, for an increase of $36,295,000 or approximately 2,878%.
      All of the crisis management revenue during the year ended December 31, 2006
      is
      primarily attributable to revenues from the JLWA operations, which were acquired
      on March 10, 2006.




**Safir
      - Security Segment Revenues**




In
      the
      security segment, we had revenues of $7,818,000 for the year ended December
      31,
      2006 as compared to revenues of $798,000 for the year ended December 31, 2005,
      for an increase of $7,020,000 or approximately 880%. Of the security segment
      revenues reported in the year ended December 31, 2006, all were domestic. The
      increase in security revenues is attributable to the acquisitions of Safir
      and
      Secure Source.




**Cost
      of Revenues and Gross Profit**




Our
      consolidated cost of revenues increased $27,169,000 or approximately 536% from
      $5,074,000 in the year ended December 31, 2005 to $32,243,000 in the year ended
      December 31, 2006. This increase is attributable to the additional volume from
      the CBR, JLWA, Safir, Secure Source and Hyperion Risk acquisitions.





**Operating
      Expenses**




We
      experienced a 1,498% increase in selling and marketing expenses for the year
      ended December 31, 2006, when compared to the same period in 2005. Selling
      and
      marketing expenses for year ended December 31, 2006 were $8,635,000, compared
      to
      $540,000 for the year ended December 31, 2005, for an increase $8,095,000.
      This
      increase is primarily attributable to the accrued earnout obligation of
      approximately $5,228,000 related to the JLWA acquisition, as well as to the
      selling and marketing expenses for the companies acquired in 2006 of JLWA,
      Safir, Secure Source and Hyperion Risk, as well as for a full year of operations
      of CBR.


24


We
      experienced a 266% increase in general and administrative expenses for the
      year
      ended December 31, 2006, when compared to the same period in 2005. General
      and
      administrative expenses for the year ended December 31, 2006 were $25,354,000
      compared to $6,937,000 for the year ended December 31, 2005. This increase
      is
      attributable to CBR, JLWA, Safir, Secure Source and Hyperion Risk acquisitions
      and legal, accounting, and other professional fees incurred in order to fulfill
      our responsibilities as a public company and costs incurred for due diligence
      related to fulfillment of our growth plan.





We
      experienced an impairment loss on our goodwill and intangibles of approximately
      $3,144,000. Of this impairment loss, $1,251,000 and $1,893,000 was attributable
      to the CBR investigation reporting unit and the Safir security reporting units,
      respectively. See Note 6 of the consolidated financial statements included
      elsewhere in this filing for further discussion regarding this impairment.





**CBR** - **Investigations
      and Litigation Support Segment Results**




Our
      investigations segment had an operating loss of $12,409,000 for the year ended
      December 31, 2006 as compared to operating loss of $2,635,000 for the year
      ended
      December 31, 2005, for an increase in our loss of $9,774,000 or approximately
      371%. The investigations segment general and administrative expenses have
      increased by 227% as compared to the year ended December 31, 2005. This is
      attributable in part to the increased infrastructure associated with the
      Company’s acquisitions and in part to the increased corporate overhead costs of
      operating a public company, as well as an impairment loss of $1,251,000
      attributable to the CBR investigations reporting unit.





**JLWA
      - Crisis Management and Corporate Governance Segment
      Revenues Segment Results**




Our
      crisis management segment had an operating profit of approximately $7,631,000
      for the year ended December 31, 2006 as compared to an operating loss of
      $687,000 for the year ended December 31, 2005, for an increased operating profit
      of $8,318,000 or approximately 1,211%. The significant increase in operating
      profit for year ended December 31, 2006 was primarily due to the operations
      of
      JLWA, and its Louisiana client engagement providing support for the disbursement
      of public assistance funds.





**Safir
      - Security Segment Results**




Our
      security segment had an operating loss of $2,675,000 for the year ended December
      31, 2006 as compared to an operating loss of $201,000 for the year ended
      December 31, 2005, for an increase of $2,474,000 or approximately 1,979%. The
      increased loss is attributable primarily to the additional overhead costs
      incurred with the acquisition of Safir and Secure Source.




**Interest
      Expense**




Interest
      expense increased by $588,000 or 900% to $653,000 in the year ended December
      31,
      2006 from $65,000 in the year ended December 31, 2005. The increase in interest
      expense is attributable to additional debt incurred in connection with the
      acquisitions of JLWA, Safir, and Secure Source.





**Income
      Taxes**




Although
      we have federal and state net operating losses available for income tax purposes
      that may be carried forward to offset future taxable income, the deferred tax
      assets are subject to a 100% valuation allowance because it is more likely
      than
      not that the deferred tax assets will not be realized as of December 31, 2006.
      Our ability to use our net operating loss (“NOL’s”) carryforwards are subject to
      an annual limitation in future periods pursuant to Section 382 of the Internal
      Revenue Code.


25


**Amortization
      of Deferred Financing Costs and Debt Discounts**





The
      Company incurred costs in conjunction with notes payable issued on March 10,
      2006, May 12, 2006 and June 28, 2006. These costs were capitalized to deferred
      financing costs, and amortized over the term of the related debt. Additionally,
      in accordance with Emerging Issues Task Force Issue No. 00-27 “Application
      of Issue 98-5 to Certain Convertible Instruments,” the
      notes
      issued on June 28, 2006 were considered to have a beneficial conversion premium
      feature. The Company recorded a debt discount of $6,922,602 related to this
      conversion premium. In addition, the Company recorded a debt discount of
      $600,000, as the value of the beneficial conversion feature related to the
      8%
      promissory note issued in conjunction with the acquisition of Safir on May
      12,
      2006.





The
      aggregate of $2,695,000 of deferred financing costs, as well as the aggregate
      $7,523,000 of deferred debt discounts were amortized through June 29, 2006,
      the
      date the notes were exchanged for Series B convertible preferred
      stock.





**Net
      Loss Available to Common Stockholders**




Net
      losses available to common stockholders for the years ended December 31, 2006
      and 2005 were $42,259,000 and $4,550,000, respectively, an increase of
      $37,709,000 or 829%. For the year ended December 31, 2006, we realized an
      overall gross profit of 48%, up from 44%. The gross profit amounts for the
      year
      ended December 31, 2006 and 2005 were $29,681,000 and $3,954,000, respectively,
      an increase of $25,726,000 or 651%. This increased gross profit is offset by
      an
      increase in operating expenses of $29,656,000 for the same period. The increased
      net loss of $37,710,000 for the year ended December 31, 2006 was primarily
      attributable to the amortization of the debt discounts of $7,523,000 and
      amortization of the deferred financing costs of $2,695,000 related to our
      financing transactions, a deemed dividend on the Series B convertible preferred
      stock of $24,413,000, and an impairment loss on goodwill and intangible assets
      of $3,144,000.





Basic
      net
      loss per share is computed based on the weighted average number of shares of
      common stock outstanding during the periods presented. Common stock equivalents,
      consisting of options, warrants, Series A and Series B convertible
      preferred stock were not included in the calculation of the diluted net losses
      per share because their inclusion would have been anti-dilutive. Basic and
      diluted net losses per share available to common stockholders was $18.89
      for the year ended December 31, 2006 as compared to $3.03 in the corresponding
      2005 period.





**Liquidity
      and Capital Resources**




We
      had
      cash balances on hand of $21,533,000 as of December 31, 2006, which resulted
      primarily from proceeds from issuance of convertible notes which provided
      $45,050,000 of cash during the year ended December 31, 2006. We incurred cash
      issuance costs of $1,933,500 in connection with the issuance of these notes.
      On
      June 29, 2006, these notes were exchanged for 53,073 units, at $1,000 per units
      of Series B convertible preferred stock. Approximately $9,979,000 of these
      funds
      were used to purchase or fund the repayment of debt issued to JLWA, Safir and
      Secure Source for the acquisitions.





Cash
      used
      in operating activities amounted to approximately $2,316,000 and $3,251,000
      during the years ended December 31, 2006 and 2005, respectively. The use of
      funds in operations is primarily due to the net operating losses before deemed
      dividend in 2006 and 2005 reduced by charges for non cash items included in
      the
      operating losses and decrease in amounts due to former members of JLWA for
      earnout offset by the use of funds in financing accounts receivable. In 2006
      and
      2005, the net operating losses before deemed dividends on Series A and B
      convertible preferred stock were approximately $17,800,000 and $3,600,00,
      respectively offset by non cash charges totaling $18,581,000 and $870,000,
      respectively. The non cash charges included amounts for depreciation and
      amortization of approximately, $2,110,000 and $208,000, charges for impairment
      of intangible assets and goodwill of approximately $3,144,000 and $0, charges
      for stock based compensation of approximately $3,110,000 and $662,000, charges
      for amortization of debt discounts on convertible notes payable of $7,523,000
      and $0, and charges for deferred financing costs of $2,695,000 and $0 for 2006
      and 2005, respectively. In addition, we utilized cash in funding working capital
      primarily funding an increase in accounts receivable of $11,051,000 and 346,000
      offset by decreases in amounts due to former members of JLWA for earnout of
      $5,228,000 and $0.


26


Cash
      used
      in investing activities of approximately $10,251,000 consisted primarily of
      approximately $9,899,000 related to our purchases of JLWA, Safir and Hyperion
      Risk.





Financing
      activities provided net funds of approximately $33,572,000 and $7,639,000 during
      the years ended December 31, 2006 and 2005, respectively. The increase was
      primarily a result of the net proceeds from the sale of the convertible notes
      of
      $45,050,000, net of repayments of notes aggregating $9,001,000 issued in
      connection with the acquisitions of CBR, Safir and Secure Source.





On
      August
      14, 2005, we, acquired CBR, CBR’s revenues and net losses for the year ended
      December 31, 2004 were approximately $8.8 million and $990,000, respectively.
      The aggregate purchase price paid for CBR’s assets and business was
      approximately $5,208,000 subject to certain adjustments through August 13,
      2006
      to the opening balance working capital, as such purchase price adjustments
      were
      defined in the agreement. The aggregate purchase price of approximately
      $5,208,000 consisted of cash in the amount of $4,246,000 (net of cash acquired
      of $26,000) and inclusive of a broker fee of $143,000, and a note payable to
      the
      seller of $819,000, paid in August 2006.




On
      March
      10, 2006, we purchased substantially all of the assets and liabilities of JLWA.
      The acquisition was made pursuant to the JLWA Agreement. The aggregate purchase
      price paid for JLWA’s assets and business was $8,403,540, subject to certain
      future working capital purchase price adjustments as defined in the agreement.
      The aggregate purchase price of $8,403,540, consisted of a cash payment at
      closing of $3,600,000, a cash payment of $1,857,000 to pay off JLWA’s line of
      credit balance, the issuance of 102,459 shares of our common stock valued at
      $2,000,000, a 4.6% note payable to the seller of $400,000 paid March 9, 2007,
      and a non-interest bearing working capital purchase price adjustment obligation
      estimated at $546,244 paid June 8, 2006. In addition, the JLWA Agreement
      provides for the sellers to obtain up to an additional $15,400,000 upon the
      attainment of certain revenue goals subsequent to the closing of the transaction
      and the continued employment of James Lee Witt, the former president and chief
      executive officer of JLWA. At December 31, 2006, the amount due to the former
      members of JLWA for the earnout liability due under the JLWA Agreement was
      approximately $5,228,000 and
      has
      been recorded in selling and marketing expenses in the consolidated statement
      of
      operations included elsewhere in this filing.





On
      May
      12, 2006, GlobalOptions acquired substantially all of the business and assets
      of
      Safir. Safir is a security consulting, investigative and intelligence firm
      headquartered in New York City with seven additional offices nationwide. The
      acquisition was made pursuant to the Safir Agreement between GlobalOptions
      Group
      and Safir. The aggregate purchase price paid for Safir’s business and assets was
      approximately $15,316,000, and included $6,000,000 in 8% promissory notes issued
      by the Company and paid on June 29, 2006, $1,000,000 in 4% promissory notes
      of
      the Company due on May 12, 2007, $6,000,000 in common stock of the Company,
      consisting of 375,000 shares at $16.00 per share, payments to retire certain
      indebtedness of approximately $1,941,000 of Safir in anticipation of the
      closing, which included as follows: approximately $553,000 on April 3, 2006
      and
      $1,388,000 on April 28, 2006 and a finders fee of $375,000 paid to QuanStar
      Group, LLC, a related party. The
      company shall prepay the obligation under the 4% Escrow Promissory Note in
      the
      amount of 1/3 of the collected amount of the purchased accounts receivable.
      The
      prepayments under the 4% Escrow Promissory Note were made on July 20,
      2006, September 21, 2006, November 14, 2006, February 27, 2007 and March 12,
      2007 and the Company paid $442,000, $164,000, $114,000, $50,000 and $40,000
      in principal on the 4% promissory notes due on May 12, 2007.




On
      May
      12, 2006, we acquired substantially all of the business and certain assets
      of
      Secure Source. The acquisition was made pursuant to a Secure Source Agreement.
      The aggregate purchase price paid for Secure Source’s business and assets of
      $3,212,000 consisted of $750,000 in 5% promissory notes due May 12, 2009,
      $1,462,500 in 3% promissory notes paid on June 29, 2006, $500,000 in 5%
      promissory notes due May 12, 2007 and $500,000 in our common stock consisting
      of
      26,371 shares at $18.96 per share.


27


On
      August
      10, 2006, we acquired substantially all of the business and assets of Hyperion
      Risk. The acquisition was made pursuant to the Hyperion Risk Agreement. The
      aggregate purchase price paid for Hyperion Risk’s business and assets was
      $3,782,000, and consisted of $2,022,000 in cash, $1,500,000 in our common stock
      of consisting of 84,081 shares at $17.84 per share, and the payment by us
      of Hyperion Risk's line of credit balance of approximately
      $260,000.





On
      January 9, 2007, we acquired substantially all of the business and assets of
      On
      Line. The acquisition was made pursuant to the On Line Agreement. The aggregate
      purchase price paid for On Line’s business and assets was $2,658,000 and
      consisted of $1,308,000 in cash and $1,350,000 in our common stock consisting
      of
      84,375 shares at $16.00 per share and the assumption of certain liabilities.
      At
      closing, the Company paid $750,000 of the cash portion of the purchase price,
      and issued promissory notes for $417,000 due January 9, 2008, and $141,000
      due
      on January 9, 2009. Further, at closing the Company delivered to the seller
      46,875 shares of GlobalOptions common stock, with 37,500 shares to be held
      in
      escrow and delivered to the seller, 18,750 shares on January 9, 2008, and
      18,750 shares on January 9, 2009, respectively. The purchase price is subject
      to
      certain working capital purchase price adjustments.





On
      February 28, 2007, we acquired the common stock of Bode. The acquisition was
      made pursuant to the Bode Agreement,. The aggregate purchase price paid was
      $12.5 million in cash and is subject to certain purchase price adjustments,
      as
      defined in the Bode Agreement. On March 8, 2007, Bode was reincorporated into
      Delaware.





On
      February 28, 2007, we acquired substantially all of the business and assets
      of
      Facticon. Facticon is a surveillance, investigative and intelligence firm based
      in Chadds Ford, Pennsylvania. The acquisition was made pursuant to the Facticon
      Agreement. The aggregate purchase price paid was $2,800,000, which consisted
      of
      $1,400,000 in cash and $1,400,000 in the common stock GlobalOptions Group
      consisting of 87,500 shares at $16.00 per share and the assumption of certain
      liabilities.





We
      historically have met our operating cash needs by using borrowings under our
      line of credit arrangement and through our private placement of equity and
      debt
      securities. At December 31, 2006, we had working capital of approximately
      $27,519,000. We currently believe that cash on hand, cash flows from operations
      and our, available borrowings under our line of credit facility, even after
      having expended cash of $15,532,000 to make the above described acquisitions
      of
      Online Consulting, Bode and Facticon, will be sufficient to finance our
      operations through December 31, 2007.




**Critical
      Accounting Policies**





GlobalOptions
      Group’s significant accounting policies, including the assumptions and judgments
      underlying them, are more fully described in our “Notes to Consolidated
      Financial Statements” included in this Form 10-KSB for the year ended December
      31, 2006. 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. GlobalOptions Group has identified certain of its 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.
      GlobalOptions Group’s critical accounting policies include the
      following:


28


*Revenue
      Recognition*





Revenue
      is recognized as the services are performed pursuant to the available
      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 are 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 certain foreign accounts, revenues are recognized and the
      related expenses are recorded only after the receipt in cash of the revenue
      amounts. We incur no obligations to third parties for expenses related to these
      certain foreign accounts until such time that invoiced revenues are received
      in
      cash. Revenues received in advance of when earned are credited to the deferred
      revenues account.





*Intangible
      Assets, Goodwill and Impairment*





In
      accordance with the requirements of Statement of Financial Accounting Standards
      No. 141 (“SFAS No. 141”), “Business Combinations”, the Company recognizes
      certain intangible assets acquired in acquisitions, primarily goodwill, trade
      names, covenants not to compete, and client relationships.  In
      accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible
      Assets”, on a regular basis, the Company performs 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.




At
      December 31, 2006, the Company engaged an outside valuation specialist to assist
      the Company with the evaluation of its goodwill. The Company performed its
      annual impairment tests of goodwill for three of its reporting units: CBR -
      Investigations, Safir - Security and Witt - Crisis Management., as required
      under SFAS 142. As a result of these tests, the Company determined that the
      remaining amount of goodwill recorded in connection with two of the three
      reporting units was impaired or not fully recoverable, as the current
      performance and future expectations does not support the carrying value of
      goodwill for these reporting units. The impairment affects CBR - Investigations
      and Safir - Security. As a result, the Company recorded a $3,028,533 impairment
      charge during the year ended December 31, 2006 of which $1,134,765 is for CBR
      -
      Investigations and Litigation segment and $1,893,768 is for Safir - Risk
      Management and Security segment.





*Allowance
      for Doubtful Accounts*





The
      number of clients that comprise the Company’s client base, along with the
      different industries 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, although the Company does require
      retainers, up-front deposits or irrevocable letters-of-credit in certain
      situations. 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.





*Stock-Based
      Compensation*





The
      Company accounts for equity instruments issued to non-employees in accordance
      with the provisions of SFAS 123 “Accounting for Stock Based Compensation” (SFAS
      123”) and the Emerging Issues Task Force (“EITF”) Issue No.  96-18, 
“Accounting  for  Equity  Instruments  That Are Issued to
      Other Than  Employees  for  Acquiring,  or In 
Conjunction  with Selling,  Goods or Services” (“EITF 96-18”) which
      require a 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 accounted for
      under EITF 96-18 and is reflected within general and administrative
      expenses.





The
      Company accounts for stock-based compensation in accordance with the provisions
      of SFAS 123R.





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.


29


Option
      valuation models require the input of highly subjective assumptions including
      the expected life of the option. Because the Company's employee stock options
      have characteristics significantly different from those of traded options,
      and
      because changes in the subjective input assumptions can materially affect the
      fair value estimate, in management's opinion, the existing models do not
      necessarily provide a reliable single measure of the fair value of its employee
      stock options. The fair value of the stock based instruments was estimated
      on
      the date of grant using the Black-Scholes option pricing model.




**Recent
      Accounting Pronouncements**




In
      February 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard 155 - Accounting for Certain Hybrid
      Financial Instruments (“SFAS 155”), which eliminates the exemption from applying
      SFAS 133 to interests in securitized financial assets so that similar
      instruments are accounted for similarly regardless of the form of the
      instruments. SFAS 155 also allows the election of fair value measurement at
      acquisition, at issuance, or when a previously recognized financial instrument
      is subject to a re-measurement event. Adoption is effective for all financial
      instruments acquired or issued after the beginning of the first fiscal year
      that
      begins after September 15, 2006. Early adoption is permitted. The adoption
      of SFAS 155 is not expected to have a material effect on our consolidated
      financial position, results of operations or cash flows.





In
      March 2006, the FASB issued Statement of Financial Accounting Standard 156
      - Accounting for Servicing of Financial Assets (“SFAS 156”), which requires all
      separately recognized servicing assets and servicing liabilities be initially
      measured at fair value. SFAS 156 permits, but does not require, the subsequent
      measurement of servicing assets and servicing liabilities at fair value.
      Adoption is required as of the beginning of the first fiscal year that begins
      after September 15, 2006. Early adoption is permitted. The adoption of SFAS
      156 is not expected to have a material effect on our consolidated financial
      position, results of operations or cash flows.





In
      June
      2006,  the FASB  issued  FASB  Interpretation  No.
      48,  "Accounting  for Uncertainty in Income Taxes - an 
interpretation  of FASB Statement No. 109" ("FIN 48"),  which 
clarifies the accounting  for  uncertainty  in tax
      positions.  This interpretation  requires  that the Company
      recognize  in its consolidated financial  statements,  the
      impact of a tax  position,  if that  position  is more 
likely than not of being sustained  on  audit,  based 
on  the  technical  merits  of the  position.  The
      provisions of FIN 48 are effective as of the beginning of the
      Company's 2007 fiscal year, with the cumulative effect of the change in
      accounting principle recorded as an adjustment to opening retained
      earnings.  The Company is currently evaluating the impact of adopting
      FIN 48 on its consolidated financial statements.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
      157”).  This Statement defines fair value, establishes a framework for
      measuring fair value and expands disclosure of fair value measurements. 
SFAS 157 applies under other accounting pronouncements that require or permit
      fair value measurements and accordingly, does not require any new fair value
      measurements.  SFAS 157 is effective for financial statements issued for
      fiscal years beginning after November 15, 2007.  The Company is in the
      process of evaluating the impact that the adoption of SFAS 157 will have on
      our
      consolidated financial position, results of operations and financial
      condition.





In
      September 2006, the staff of the SEC issued Staff Accounting Bulletin No. 108
      ("SAB 108") which provides interpretive guidance on how the effects of the
      carryover or reversal of prior year misstatements should be considered in
      quantifying a current year misstatement. SAB 108 becomes effective in fiscal
      2007. Adoption of SAB 108 is not expected to have a material impact on the
      Company's consolidated financial position, results of operations or cash
      flows.




In
      December 2006, the FASB issued FASB Staff Position (“FSP”) EITF 00-19-2
“Accounting for Registration Payment Arrangements” (“FSP EITF 00-19-2”) which
      specifies that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement should be
      separately recognized and measured in accordance with SFAS No. 5,
“Accounting for Contingencies.”    Adoption of FSP EITF 00-19-02
      is required for fiscal years beginning after December 15, 2006. The Company
      is currently evaluating the expected effect of FSP EITF 00-19-02 on its
      consolidated financial statements and is currently not yet in a position to
      determine such effects.


30


In
      February 2007, the FASB issued Statement of Financial Accounting Standard 159
      “The Fair Value Option for Financial Assets and Financial Liabilities -
      Including an amendment of FASB Statement No. 115”, 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 FASB Statement No. 157, Fair Value Measurements. The
      Company is currently evaluating the expected effect of SFAS 159 on its
      consolidated financial statements and is currently not yet in a position to
      determine such effects.




**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.





**Item
      7.**  **Financial
      Statements**





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-KSB.





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





None.





**Item
      8A.     Controls and Procedures**





*Evaluation
      of our Disclosure Controls and Internal Controls*





As
      of the
      year end covered by this annual report, we carried out an evaluation of the
      effectiveness of the design and operation of our disclosure controls and
      procedures (as defined in Exchange Act Rule 13-d-15(e) and 15d-15(e)). Based
      upon that evaluation, our Chief Executive Officer (“CEO”) and Chief Financial
      Officer (“CFO”) concluded that as of the end of the period covered by this
      annual report on Form 10-KSB our disclosure controls and procedures were not
      effective.





*Officers’
      Certifications*





Appearing
      as exhibits to this annual report are “Certifications” of the CEO and the CFO.
      The Certifications are required pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 (the “Section 302 Certifications”). This section of the annual
      report contains information concerning the Controls Evaluation referred to
      in
      the Section 302 Certifications and this information should be read in
      conjunction with the Section 302 Certifications for a more complete
      understanding of the topics presented.





*Disclosure
      Controls and Internal Controls*


**


Disclosure
      controls are procedures that are designed with the objective of ensuring that
      information required to be disclosed in our reports filed under the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”), such as this annual
      report, is recorded, processed, summarized and reported within the time periods
      specified in the SEC’s rules and forms. Disclosure controls are also designed
      with the objective of ensuring that such information is accumulated and
      communicated to our management, including the CEO and CFO, as appropriate to
      allow timely decisions regarding required disclosure. Internal controls are
      procedures which are designed with the objective of providing reasonable
      assurance that (1) our transactions are properly authorized, recorded and
      reported; and (2) our assets are safeguarded against unauthorized or improper
      use, to permit the preparation of our consolidated financial statements in
      conformity with United States generally accepted accounting
      principles.




31




We
      are
      not an accelerated filer (as defined in the Exchange Act) and are not required
      to deliver management’s report on internal controls over our financial reporting
      until our year ending December 31, 2007. We became a public company on June
      24,
      2005. In our efforts to comply with Section 404 of the Sarbanes-Oxley Act of
      2002, during the first half of 2005, we initially identified certain matters
      that would constitute material weakness (as such term is defined under the
      Public Company Accounting Oversight Board Auditing Standard No. 2) in our
      internal controls over financial reporting that continue to apply as of the
      year
      end covered by this report. The material weakness relates to the financial
      closing process, a lack of segregation of financial responsibilities and the
      need for additional qualified financial accounting personnel.




*Remediation
      of Material Weaknesses and Significant Deficiencies*





During
      the year ended December 31, 2006, we have taken specific actions to remediate
      the reportable conditions and material weakness, including the devotion of
      additional resources to the quarterly and year-end closing processes, the hiring
      of additional qualified financial accounting personnel, and realignment of
      certain financial responsibilities to achieve stronger segregation of financial
      duties. We intend to expand our accounting staff and continue to further
      strengthen our controls and procedures regarding the closing process. There
      is
      no assurance that this effort will be adequate.





*Changes
      in Internal Control Over Financial Reporting*





Other
      than expressly noted above in this Item 3, there were no significant changes
      in
      our internal controls over financial reporting that occurred during the year
      that have materially affected, or are reasonably likely to materially affect,
      our internal controls over financial reporting.





**Item
      8B. Other Information**





There
      are
      no items required to be disclosed on Current Report on Form 10-KSB during the
      year ended December 31, 2006 that were not so reported.


32


**PART
      III**





**Item
      9.**  **Di** r **ectors,
      Executive Officers, Promoters and Control Persons and Corporate Governance;
      Compliance with Section 16(a)**  **of
      the Exchange Act**





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,
      Daniel L. Burstein and Ronald M. Starr became directors or officers on June
      24,
      2005. John P. Bujouves was subsequently appointed to the Board of Directors
      on
      June 27, 2005. 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
            
            PositionHarvey
                W. Schiller, Ph.D.
            
            67
            
            Chairman
                of the Board of Directors and Chief Executive OfficerPer-Olof
                Lööf
            
            56
            
            Vice
                Chairman of the Board of DirectorsJeffrey
                O. Nyweide
            
            51
            
            Chief
                Financial Officer, Executive Vice President-Corporate Development
                and
                SecretaryDaniel
                L. Burstein
            
            53
            
            Chairman
                of the Compensation and the Nominating Committee and
                DirectorRonald
                M. Starr
            
            37
            
            Chairman
                of the Audit Committee and DirectorJohn
                P. Bujouves
            
            44
            
            DirectorThomas
                P. Ondeck
            
            60
            
            President
                of the Global International Division of GlobalOptions,
                Inc.Halsey
                Fischer
            
            57
            
            President
                of the Investigations Division of GlobalOptions, Inc.James
                Lee Witt
            
            63
            
            Chief
                Executive Officer of the GlobalOptions/James Lee Witt Division of
                GlobalOptions, Inc.Howard
                Safir
            
            64
            
            Chief
                Executive Officer of GlobalOptions/Safir Rosetti Division of
                GlobalOptions, Inc.


The
      principal occupations for the past five years (and, in some instances, for
      prior
      years) of each of our directors and officers are as follows:




**Harvey
      W. Schiller, Ph.D.** , had
      been Chairman of the Board of Directors of privately-held GlobalOptions since
      February 2004, and became our Chairman and Chief Executive Officer on June
      24,
      2005. Mr. Schiller oversees our administrative headquarters with a focus on
      our
      strategy and new business development. Prior to joining GlobalOptions, Dr.
      Schiller served as Chairman of Assante U.S. 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 partner in The QuanStar Group, LLC, a management consulting firm in New
      York.


33


**Per-Olof
      Lööf** had been
      Vice Chairman of the Board of Directors of privately-held GlobalOptions since
      August 2004, and became our Vice Chairman on June 24, 2005. Mr. Lööf has been
      the Chief Executive Officer and a Director of Kemet Corporation, a
      standardized-components supplier in Greenville, South Carolina since April
      2005.
      Prior to joining Kemet, Mr. Lööf was Managing Partner of The QuanStar Group LLC
      from 2003 to 2004. Mr. Lööf has significant experience in acquisition
      integration efforts through past positions at Sensormatic Electronics
      Corporation, where he was President and Chief Executive Officer from 1999 until
      its acquisition by Tyco International, Ltd. in 2003. Prior to Sensormatic,
      Mr.
      Lööf was Senior Vice President at NCR Corporation and Chief Executive Officer
      of
      AT&T ISTEL. He also worked for twelve years at Digital Equipment Corporation
      as Vice President of Sales and Marketing.




**Jeffrey
      O. Nyweide** had been
      Chief Financial Officer and Executive Vice President-Corporate Development
      of
      privately-held GlobalOptions since April 2003, and became our Chief Financial
      Officer, Executive Vice President-Corporate Development and Secretary on June
      24, 2005. Mr. Nyweide has been a successful entrepreneur and executive for
      the
      past 20 years. Mr. Nyweide has also 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.





**Daniel
      L. Burstein** had been
      a director of privately-held GlobalOptions since November 1998, and became
      a
      member of our Board of Directors on June 24, 2005. Since 2000, Mr. Burstein
      has
      served as the Managing Partner of Millennium Technology Ventures, L.P. and
      since
      2004, as Managing Partner of Millennium Technology Value Partners, L.P. Prior
      to
      founding the Millennium funds, Mr. Burstein served as Chief Investment Officer
      for PS Capital Holdings, L.P. and PS Capital Ventures, L.P., the predecessor
      funds of Millennium. From 1989 to March 2000, Mr. Burstein served as senior
      advisor at The Blackstone Group. Mr. Burstein is the author of more than ten
      books on new technology trends, global economic issues, and popular culture,
      including Road Warriors, a 1995 book about the birth of digital media and the
      Internet and Big Dragon, a book about China's future. Mr.Burstein has been
      a
      forum fellow at the World Economic Forum in Davos and has been honored many
      times for his books and journalistic work, including awards from the Overseas
      Press Club and Sigma Delta Chi. He is also the creator of the "Secrets" series
      of books which have sold over four million copies in more than thirty languages
      worldwide. Mr. Burstein is a director of Transforma Acquisition Group,
      Inc.





**Ronald
      M. Starr** had been
      a director of privately-held GlobalOptions since November 1998, and became
      a
      member of our Board of Directors on June 24, 2005 and has been appointed as
      chairman of the audit committee as of November 2, 2005. Mr. Starr is a Managing
      Director at Starr & Company, LLC, an accounting and business management firm
      for high net worth individuals. He has been with the firm since 1996. Mr. Starr
      was a General Partner of Millennium Technology Ventures, L.P. a venture capital
      fund focusing on technology and Internet-related companies 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 included negotiating and structuring the funds’ venture capital
      investments, since 1996. 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.


34


**John
      P. Bujouves** became a
      member of our Board of Directors on June 27, 2005. Mr. Bujouves has been the
      President of Bayshore Asset Management Inc. since 2003 and the Chief Executive
      Officer of Integris Funds Limited, a Cayman Islands based mutual fund company
      since 1999. Mr. Bujouves has served as a director of Nationwide Credit Inc.,
      one
      of the ten largest account receivable companies in the United States, since
      2003. He also serves as Chairman of Globacor Capital Inc., a Canadian private
      equity investment firm, Bayshore Bank & Trust Corp., one of Barbados’
largest private banks, and the Ontario Arthritis Society. Mr. Bujouves’ past
      experiences include directing CIBC’s International Private Banking group in
      Canada, where he provided leadership and technical expertise to a professional
      consulting group on the uses of international banking and trust services. Prior
      to that, as Managing Partner for Royal Trust International, Mr. Bujouves
      launched Royal Trust Corporation’s first two locations in the United
      States.




**Thomas
      P. Ondeck** has been
      President of GlobalOptions, Inc. since January 1999, and President of its
      GlobalOptions International division since its inception in June of 2006 and
      heads the multi-disciplinary crisis management teams comprised of investigatory,
      legal, government relation and public relations experts. He 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. In so doing,
      Mr.
      Ondeck’s substantial experience as a litigator enables him to quickly reach the
      core of clients’ investigative needs, and ensure that their needs are fully met.
      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
      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 President of Investigations Division of GlobalOptions, Inc. upon its
      acquisition of the assets and business of CBR on August 14, 2005. Mr. Fischer
      oversees GlobalOptions’ national investigations practice. Mr. Fischer served as
      the President and Chief Executive Officer of CBR from its founding in 1998
      up
      until its acquisition by GlobalOptions. During his tenure at CBR, Mr. Fischer
      built an investigations firm with eight offices services in the United States
      through acquisitions and organic growth. Under Mr. Halsey’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 and Investigations,
      Inc., since acquired by Securitas AB, and was responsible for each of its 28
      profit centers across the United States. Mr. Fischer made substantial
      improvements to the Pinkerton unit’s performance during his leadership. Prior to
      Pinkerton, Mr. Fischer was Group President of Security Consulting and
      Investigations for Business Risks International, the predecessor to Pinkerton’s
      investigations unit.


35


**James
      Lee Witt** became
      the Chief Executive Officer of the GlobalOptions/James Lee Witt Division upon
      its acquisition of the assets and business of JLWA on March 10, 2006. As the
      Chairman 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. In 2003, Mr. Witt became 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. James Lee Witt has over 25 years of
      disaster management experience, culminating in his appointment as the Director
      of the Federal Emergency Management Agency (“FEMA”), where he served from
      1993-2001. Mr. Witt was appointed by President Clinton and confirmed by the
      U.S.
      Senate as Director of the Federal Emergency Management Agency 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 that
      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 tapped 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 the Safir Rosetti Division of GlobalOptions
      in
      May 2006 and has served as Chairman and CEO of Safir Rosetti since December
      2001. 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 (“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 on the boards of GVI Security Solutions (Chairman) and Verint
      Systems, Inc. Mr. Safir also serves as a Consultant to the Chief Executive
      Officer of ChoicePoint, Inc.





There
      are
      no family relationships among our directors and executive officers. No director
      or executive officer has been a director or executive officer of any business
      which has filed a bankruptcy petition or had a bankruptcy petition filed against
      it. No director or executive officer has been convicted of a criminal offense
      or
      is the subject of a pending criminal proceeding. No director or executive
      officer has been the subject of any order, judgment or decree of any court
      permanently or temporarily enjoining, barring, suspending or otherwise limiting
      his involvement in any type of business, securities or banking activities.
      No
      director or officer has been found by a court to have violated a federal or
      state securities or commodities law.




None
      of
      our directors or executive officers or their respective immediate family members
      or affiliates is indebted to us. As of the date of this annual report, there
      is
      no material proceeding to which any of our directors, executive officers or
      affiliates is a party or has a material interest adverse to us.





All
      directors hold office until the next annual meeting of stockholders and the
      election and qualification of their successors. Four of our five directors
      are
      considered “independent” under NASDAQ’s independence standards. Officers are
      elected annually by the Board of Directors and serve at the discretion of the
      Board.





**Compliance
      with Section 16(a) if the Exchange Act**





Not
      Applicable


36


**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. Ronald M. 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.
      Burstein, Starr and Lööf, and Mr. Burstein 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 Board of
      Director 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 of Director
      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 of Director members, management and search companies.
      Our nominating committee is comprised of Messrs. Lööf, Bujouves and Burstein.
      Mr. Burstein is the chairman of the committee.


37


**Code
      of Business Conduct and Ethics**





We
      have
      adopted a Code of Business Conduct and Ethics applying to our directors,
      officers and employees. The Code 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 to appropriate persons identified in the code, and (v) accountability
      for adherence to the Code. A copy of the code was filed as Exhibit 14 to our
      2005 Annual Report on Form 10-KSB filed with the SEC on April 17, 2006.
      Additional copies of the Code 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
      10. Executive Compensation**





Summary
      Compensation Table


Name
                and Principal Position
            
            Year
            
            Salary
            
            Bonus
            
            Stock
              Awards
            
            Option
              Awards
            
            All
                Other
              Compensation
            
            TotalHarvey
                Schiller, Ph.D.
              Chairman
                and Chief Executive Officer
            
            2006
            
            $300,000
            
            $750,000
            
            (1)
            
            $1,558,800(2)
            
            $12,244(4)
            
            $2,621,044Jeffrey
                O. Nyweide
              Chief
                Financial Officer and Executive Vice President
            
            2006
            
            $300,000
            
            $450,000
            
            (1)
            
            $779,400(3)
            
            -
            
            $1,529,400James
                Lee Witt
              Chief
                Executive Officer of Global Options/James Lee Witt
                Division
            
            2006
            
            $305,000
            
            $125,000
            
            -
            
            -
            
            $10,901(4)
            
            $440,901





(1)
            Dr.
                Schiller and Mr. Nyweide were granted 100,000 shares and 75,000 shares
                of
                restricted stock, respectively, which is subject to vesting starting
                in 2007 in accordance with annual performance criteria established
                by the
                Compensation Committee. None of such restricted stock was vested
                in
                2006.




(2)
            On
                June 12, 2006 Dr. Schiller received a stock option to purchase 125,000
                shares of our common stock at $17.60 per share. The option vests
                ratably
                upon the first, second and third anniversaries of the date of grant.
                The
                option was valued using the Black-Sholes pricing model (For assumptions
                used in this calculation, See Note 15 in the consolidated financial
                statements, included within this annual report).





(3)
            On
                June 12, 2006 Mr. Nyweide received a stock option to purchase 62,500
                shares of our common stock at $17.60 per share. The option was valued
                using the Black-Sholes pricing model (For assumptions used in this
                calculation, See Note 15 in the consolidated financial statements,
                included within this annual report). The option vests ratably upon
                the
                first, second and third anniversaries of the date of
                grant.





(4)
            Amount
                represents health, life and disability insurance benefits as well
                as
                parking fees for Mr. Witt. For Dr. Schiller $10,404 is for health
                insurance. For James Lee Witt, $6,983 is for health
                insurance.




38


**Employment
      and Consulting Arrangements and Change in Control
      Arrangements**





Dr. Schiller
      entered into a three year employment agreement with GlobalOptions in January
      2004. On December 19, 2006 the agreement was amended to extend the term through
      January 31, 2010. 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 amendment provides for an annual base salary of
      $375,000, $400,000 and $425,000 starting January 1 of 2007, 2008, and 2009
      respectively, as well as an annual performance bonus payable 50% in cash and
      50%
      in vested restricted stock based upon the achievement of goals agreed upon
      mutually between Dr. Schiller and the Compensation Committee. In connection
      with
      the extension of the term of this employment agreement, Dr. Schiller was awarded
      a one-time grant of 100,000 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 to exercise vested options; unvested options will be forfeited.
      If terminated for cause, Dr. Schiller will forfeit all unexercised options.
      In
      the event Dr. Schiller terminates for good reason or the employment agreement
      is
      terminated without cause, 50% of his unvested stock options will vest and all
      vested options will remain exercisable for a period of 90 days from termination.
      The employment agreement contains non-compete and non-solicitation provisions
      for 12 months following termination, as well confidentiality provisions. In
      the
      event of a change of control of the company, the employment agreement provides
      for the vesting of all unvested options.




GlobalOptions
      is a party to a consulting agreement with BKS Advisors, LLC (“BKS”) pursuant to
      which BKS Advisors provides GlobalOptions management with certain business,
      strategy and financial services. The agreement with BKS had a term which
      extended through October 2006 and provided for a monthly fee of
      $25,000 which could be adjusted based on the level of services provided. On
      June 1, 2005, BKS assigned its rights under this agreement to Jeffrey O.
      Nyweide, Chief Financial Officer and Executive Vice President of Corporate
      Development of GlobalOptions Group. On December 19, 2006 the Compensation
      Committee amended the term of this consulting agreement to extend through
      January 2010. In addition, the monthly fee provided for in this agreement was
      increased to $27,083, $29,167, and $31,250 for the years 2007, 2008 and 2009
      respectively. In connection with the extension of this consulting agreement,
      Mr.
      Nyweide was awarded a one-time grant of 75,000 shares of restricted common
      stock, subject to vesting in accordance with performance criteria established
      by
      the compensation committee. Mr. Nyweide is eligible for an annual performance
      bonus based upon the achievement of performance criteria established by the
      compensation committee.





Concurrently
      with our acquisition of the JLWA, in March 2006, GlobalOptions entered into
      a
      four year employment agreement with James Lee Witt, the former president and
      chief executive officer of Witt. Pursuant to the agreement, Mr. Witt became
      the
      Chief Executive Officer of the GlobalOptions/James Lee Witt Division and agreed
      to perform such other duties and responsibilities as the Board of Directors
      may
      assign, and has agreed to devote his full time to GlobalOptions at a salary
      of
      $300,000 per year and a discretionary annual bonus. The employment agreement
      may
      be terminated for cause by GlobalOptions, upon the death or disability of the
      executive, or upon 30-days’ notice by either party. In the event GlobalOptions
      terminates the employment agreement without cause, it is required to pay Mr.
      Witt his base salary and certain benefits for twelve months following
      termination. The employment agreement also contains non-compete and
      non-solicitation provisions for 12 months following termination, as well as
      confidentiality provisions.


39


**Outstanding
      Equity Awards at Year End**





Option
                Awards
            
            Stock
                AwardsName
            
            Number
                of Securities Underlying Unexercised Options (#)
              Exercisable
            
            Number
                of Securities Underlying Unexercised Options(1)(#)
                Unexercisable
            
            Option
                Exercise Price ($)
            
            Option
                Expiration Date
            
            Equity
                Incentive Plan Awards: Number of Unearned Shares that have not vested
                (#)
            
            Equity
                Incentive Plan Awards: Market value at December 31, 2006 of Unearned
                shares that have not vested($)Harvey
                Schiller(2)
            
            110,294
              221
              110
              110
              110
              110
              110
              36,765
              41,667
              -
            
            -
              -
              -
              -
              -
              -
              -
              -
              83.333
              125,000
            
            $
                4.80
              $
                4.80
              $
                4.80
              $
                4.80
              $
                4.80
              $
                4.80
              $
                4.80
              $
                5.44
              $20.00
              $17.60
            
            2/1/07
              12/31/07
              4/22/08
              7/22/08
              10/24/08
              12/16/08
              1/16/07
              12/20/09
              11/18/10
              6/12/11
            
            100,000(1)
            
            $1,240,000(3)Jeffrey
                O. Nyweide
            
            1,226
              20,833
              62,500
            
            613
              41,667
              62,500
            
            $
                5.44
              $20.00
              $17.60
            
            12/20/09
              11/18/10
              6/12/11
            
            75,000(1)
            
            $930,000(3)James
                Lee Witt
            
            -
            
            -
            
            -
            
            -
            
            -
            
            -





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




(2)
            On
                February 1, 2007 Dr. Schiller exercised options of 110,294, on a
                cashless
                basis and was issued 39,706 shares of common
                stock.





(3)
            Amounts
                represent shares of restricted stock valued at $12.40 per share,
                which
                were granted in connection with the extension of Dr. Schiller’s and Mr.
                Nyweide’s agreements on December 19, 2006, and are subject to vesting in
                accordance with performance criteria established by the Compensation
                Committee. We estimate that the target number of shares to vest for
                Dr.
                Schiller and Mr. Nyweide, during 2007, are 31,250 and 23,438,
                respectively. Twenty percent of the vesting amount can be earned
                by
                achieving single year performance criteria established annually by
                the
                Compensation Committee and the Board of Directors. Eighty percent
                of the
                vesting amount can be earned by achieving longer term, strategic
                performance metric targets as established by the Compensation Committee
                and the Board of Directors.





**2004
      Non-Statutory Stock Option Plan**




In
      April
      2004, the Board of Directors and stockholders of Creative Solutions adopted
      and
      approved the 2004 Non-Statutory Stock Option Plan (the “2004 Plan”), which
      provided for grants of non-statutory, or non-qualified, stock options to
      purchase up to 1,500,000 shares of our common stock. However, no options have
      been issued or are outstanding under the 2004 Plan, nor does our management
      intend to grant any options under the 2004 Plan.


40


**2005
      Stock Option Plan**




The
      2005
      Stock Option Plan (the “2005 Plan”) was adopted as of August 5, 2005. At the
      time of the reverse merger, our wholly-owned subsidiary GlobalOptions had
      outstanding stock options to purchase 556,340 shares of GlobalOptions’ common
      stock, which became stock options to purchase 237,259 shares of common stock
      of
      GlobalOptions Group after giving effect to the reverse merger exchange ratio.
      We
      have assumed all of the options to purchase 327,259 shares of our common stock
      under the 2005 Plan. In addition, during November 2005, March 2006, April 2006
      and May 2006 we granted options for the purchase of 237,259,
      27,778, 15,375 and 107,276 shares of common stock, respectively,
      under the 2005 Plan.




The
      purpose of the 2005 Plan is to provide directors, officers and employees of,
      as
      well as consultants advisors to our company and our subsidiaries, with
      additional incentives by increasing their ownership interest in our company.
      Our
      Board of Directors believes that our policy of granting stock options to such
      persons will provide us with a potential critical advantage in attracting and
      retaining qualified candidates. In addition, the 2005 Plan is intended to
      provide us with maximum flexibility to compensate plan participants. We believe
      that such flexibility will be an integral part of our policy to encourage
      employees, non-employee directors, consultants and advisors to focus on the
      long-term growth of stockholder value. Our Board of Directors believes that
      important advantages are gained through an option program such as the 2005
      Plan
      which includes incentives for motivating our employees while simultaneously
      promoting a closer identity of interest between employees, non-employee
      directors, consultants and advisors on the one hand, and the stockholders on
      the
      other.




Stock
      options granted under the 2005 Plan may be either incentive stock options,
      as
      defined in Section 422A of the Internal Revenue Code of 1986, or non-qualified
      stock options. We have reserved 6,500,000 shares of our common stock for
      issuance under the 2005 Plan.




The
      2005
      Plan is administered by the Compensation Committee of the Board of Directors.
      The Compensation Committee has the power to determine the terms of any stock
      options granted under the 2005 Plan, including the exercise price, the number
      of
      shares subject to the stock option and conditions of exercise. Stock options
      granted under the 2005 Plan are generally not transferable and are exercisable
      during the lifetime of the optionee only by such optionee. The exercise price
      of
      all incentive stock options granted under the 2005 Plan must be at least equal
      to the fair market value of the shares of our common stock on the date of the
      grant. With respect to any participant who owns stock possessing more than
      10%
      of the voting power of all classes of the company’s stock, the exercise price of
      any incentive stock option granted must be equal to at least 110% of the fair
      market value on the grant date.




The
      2005
      Plan may be amended, altered, suspended, discontinued or terminated by the
      Board
      of Directors without further stockholder approval, unless such 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
      which
      might increase the cost of the 2005 Plan or broaden eligibility except that
      no
      amendment or alteration to the 2005 Plan shall be made without the approval
      of
      stockholders which would:




·
            materially
                increase the number of options that may be granted under the 2005
                Plan,
                or




·
            materially
                increase the benefits accruing to 2005 Plan participants,
                or




·
            materially
                modify 2005 Plan participation eligibility requirements,
                or




·
            materially
                decrease the exercise price of any options,
                or




·
            extend
                the term of any option.




Unless
      otherwise indicated, the 2005 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 Plan shall remain in
      effect until they have expired or been exercised.




41


On
      October 17, 2006, the Board of Directors stipulated that the remaining shares
      reserved, but unissued, with respect to any awards under the Company’s 2005 Plan
      were hereby unreserved and that no new awards were to be issued pursuant to
      the
      2005 Plan.





**2006
      Stock Option** **Plan**




The
      purpose of the 2006 Stock Option Plan, which was adopted as of June 12, 2006
      (the “2006 Plan”), is to provide directors, officers and employees of, as well
      as consultants and advisors to our company and our subsidiaries, with additional
      incentives by increasing their ownership interest in our company. Stock options
      granted under the 2006 Plan may be either incentive stock options, as defined
      in
      Section 422A of the Internal Revenue Code of 1986, or non-qualified stock
      options. We have reserved 8,500,000 shares of our common stock for issuance
      under the 2006 Plan.





The
      2006
      Plan is administered by the Compensation Committee of the Board of Directors.
      The Compensation Committee has the power to determine the terms of any stock
      options granted under the 2006 Plan, including the exercise price, the number
      of
      shares subject to the stock option and conditions of exercise. Stock options
      granted under the 2006 Plan are generally not transferable and are exercisable
      during the lifetime of the optionee only by such optionee. The exercise price
      of
      all incentive stock options granted under the 2006 Plan must be at least equal
      to the fair market value of the shares of our common stock on the date of the
      grant. With respect to any participant who owns stock possessing more than
      10%
      of the voting power of all classes of the company’s stock, the exercise price of
      any incentive stock option granted must be equal to at least 110% of the fair
      market value on the grant date.




In
      June
      2006 and August 2006, the Company granted options for the purchase of 230,000
      and 30,488 shares, respectively, of common stock under the 2006
      Plan.




The
      2006
      Plan may be amended, altered, suspended, discontinued or terminated by the
      Board
      of Directors without further stockholder approval, unless such 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
      which
      might increase the cost of the 2006 Plan or broaden eligibility except that
      no
      amendment or alteration to the 2006 Plan shall be made without the approval
      of
      stockholders which would:




·
            materially
                increase the number of options that may be granted under the 2006
                Plan,
                or




·
            materially
                increase the benefits accruing to 2006 Plan participants,
                or




·
            materially
                modify 2006 Plan participation eligibility requirements,
                or




·
            materially
                decrease the exercise price of any options,
                or




·
            extend
                the term of any option.




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





On
      October 17, 2006, the Board of Directors approved that the remaining shares
      reserved, but unissued, with respect to any awards under the Company’s 2006 Plan
      were hereby unreserved and that no new awards were to be issued pursuant to
      the
      2006 Plan.


42


**2006
      Long Term Incentive Plan**




The
      purposes of the 2006 Long Term Incentive Plan, which was adopted by stockholders
      on December 5, 2006 is to promote the long-term financial interest of the
      Company, including growth in the value of the Company's equity and enhancement
      of long-term stockholder return, by: (i) attracting and retaining persons
      eligible to participate in the Plan; (ii) motivating Plan participants, by
      means
      of appropriate incentives, to achieve long-range goals; (iii) providing
      incentive compensation opportunities that are competitive with those of other
      similar companies; and (iv) further aligning Plan participants' interests with
      those of other stockholders of the Company through compensation that is based
      on
      the Company's common stock. Awards under this plan include stock options, stock
      appreciation rights, stock awards, performance awards and other stock based
      awards. Stock options granted under this plan may be either incentive stock
      options, as defined in Section 422A of the Internal Revenue Code of 1986, or
      non-qualified stock options. We have reserved 12,000,000 shares of our common
      stock for issuance under the 2006 Long-Term Incentive Plan.




The
      2006 Long-Term Incentive Plan is administered by the Compensation
      Committee of the Board of Directors. The Compensation Committee has the power
      to
      determine the terms of any awards granted under the 2006 Long-Term Incentive
      Plan, including the exercise price, the number of shares subject to the stock
      option and conditions of exercise, terms of restriction and vesting, as
      applicable. Stock options granted under the 2006 Long-Term Incentive Plan are
      generally not transferable and are exercisable during the lifetime of the
      optionee only by such optionee. The exercise price of all incentive stock
      options granted under the 2006 Long-Term Incentive Plan must be at least
      equal to the fair market value of the shares of our common stock on the date
      of
      the grant. With respect to any participant who owns stock possessing more than
      10% of the voting power of all classes of the company’s stock, the exercise
      price of any incentive stock option granted must be equal to at least 110%
      of
      the fair market value on the grant date.





On
      December 19, 2006, we awarded 175,000 shares of restricted stock to two
      senior officers under the terms of the renewal of their employment and
      consulting agreements under the 2006 Long-Term Incentive Plan. On January
      1, 2007, we  granted stock options to purchase an aggregate of 32,500
      shares of our common stock under the 2006 Long-Term Incentive Plan. On January
      9, 2007, we granted stock options to purchase an aggregate of 26,409 shares
      of
      common stock in connection with the acquisition of Online under the 2006
      Long-Term Incentive Plan. On February 28, 2007, we granted stock options to
      purchase an aggregate of 62,504 shares of its common stock in connection with
      the acquisition of Facticon under the 2006 Long-Term Incentive Plan. On February
      28, 2007, we granted stock options to purchase 38,894 shares of its common
      stock
      in connection with the acquisition of Bode under the 2006 Long-Term Incentive
      Plan. On January 1, 2007, we awarded 3,471 shares of our common stock
      under the 2006 Long-Term Incentive Plan.




The
      2006
      Long-Term Incentive Plan may be amended, altered, suspended, discontinued or
      terminated by the Board of Directors without further stockholder approval,
      unless such 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 which might increase the cost of the 2006 Long-Term Incentive
      Plan or broaden eligibility except that no amendment or alteration to the 2006
      Long-Term Incentive Plan shall be made without the approval of stockholders
      which would:




·
            materially
                increase the number of options that may be granted under the 2006
                Long-Term Incentive Plan, or




·
            materially
                increase the benefits accruing to the 2006 Long-Term Incentive Plan
                participants, or




·
            materially
                modify the 2006 Long-Term Incentive Plan participation eligibility
                requirements, or




·
            materially
                decrease the exercise price of any options,
                or




·
            extend
                the term of any option.




Unless
      otherwise indicated, the 2006 Long-Term Incentive Plan will remain in effect
      for
      a period of ten years from the date adopted unless terminated earlier by the
      Board of Directors, and all stock options then outstanding under the 2006
      Long-Term Incentive Plan shall remain in effect until they have expired or
      been
      exercised.


43


**2006
      Employee Stock Purchase Plan**




The
      purpose of the 2006 Employee Stock Purchase Plan, which was adopted by
      stockholders on December 5, 2006 is to provide an incentive for employees
      of the Company and its participating subsidiaries. The Plan permits such
      employees to acquire or increase their proprietary interests in the Company
      through the purchase of shares of Common Stock of the Company, thereby creating
      a greater community of interest between the Company's stockholders and its
      employees. The Plan is intended to qualify as an "Employee Stock Purchase Plan"
      under Sections 421 and 423 of the Internal Revenue Code of 1986, as amended
      (the
      "Code"). We have reserved 2,000,000 shares of our common stock for issuance
      under the 2006 Employee Stock Purchase Plan.





The
      2006
      Employee Stock Purchase Plan is administered by the Compensation Committee
      of
      the Board of Directors. The Compensation Committee has the authority to make
      rules and regulations for the administration of the 2006 Employee Stock Purchase
      Plan. All employees are eligible to participate in the 2006 Employee Stock
      Purchase Plan.





**Director
      Compensation**





Director
      Compensation Table




Name
            
            Fees
                Earned or Paid in Cash
            
            Option     
                Awards(1)
            
            All
                Other Compensation
            
            TotalHarvey
                Schiller (2)
            
            -
            
            -
            
            -
            
            -Per-Olof
                Lööf (3)
            
            -
            
            $124,704
            
            -
            
            $124,704Daniel
                Burstein (4)
            
            -
            
            $124,704
            
            -
            
            $124,704Ronald
                Starr (5)
            
            -
            
            $155,580
            
            -
            
            $155,580John
                Bujouves (6)
            
            -
            
            $124,701
            
            -
            
            $124,701




(1)
            Amount
                represents the value of stock options granted to members of the Board
                of
                Directors in 2006. The options were valued using the Black-Sholes
                pricing model (For assumptions used in this calculation, See Note
                15 in
                the consolidated financial statements, included within this annual
                report).




(2)
            Pursuant
                solely to his position as Chief Executive Officer, Dr. Schiller was
                awarded stock options to purchase 272,831 and 125,000 shares of our
                common stock under the 2005 Plan, and the 2006 Plan, respectively.
                On
                February 1, 2007, Dr Schiller exercised options to purchase 110,294
                common
                shares in a cashless basis and was issued 39,706 shares of our common
                stock. As of March 23, 2007, an aggregate 282,537 shares of our common
                stock are issuable to Dr. Schiller upon exercise of options outstanding
                under our equity compensation
                plans.





(3)
                Stock
                    options to purchase 8,125 and 10,000 shares of our common stock
                    have been
                    granted to Mr. Lööf under the 2005 Plan, and the 2006 Plan, respectively.
                    On January 1, 2007, an option to purchase an additional 6,250
                    shares was
                    granted to Mr. Lööf under the 2006 Long Term Incentive Plan. As of March
                    23, 2007, an aggregate 24,375 shares of our common stock are
                    issuable to
                    Mr. Lööf upon exercise of options outstanding under our equity
                    compensation plans.




44


(4)
            Stock
                options to purchase 9,044 and 10,000 shares of our common stock have
                been
                granted to Mr. Burstein under the 2005 Plan, and the 2006 Plan,
                respectively. On January 1, 2007 an option to purchase an additional
                6,250
                shares of our common stock was granted to Mr. Burstein under the
                2006 Long
                Term Incentive Plan. As of March 23, 2007, an aggregate 25,294 shares
                of
                our common stock are issuable to Mr. Burstein upon exercise of options
                outstanding under our equity compensation
                plans.





(5)
                Stock
                    options to purchase 10,607 and 12,500 shares of our common stock
                    have been
                    granted to Mr. Starr under the 2005 Plan and the 2006 Plan, respectively.
                    As of March 23, 2007, an aggregate 23,107 shares of our common
                    stock are
                    issuable to Mr. Starr upon exercise of options outstanding under
                    our
                    equity compensation
                    plans.





(6)
            Stock
                options to purchase 8,125 and 10,000 shares of our common stock have
                been
                granted to Mr. Bujouves under the 2005 Plan and the 2006 Plan,
                respectively. On January 1, 2007 an option to purchase an additional
                6,250
                shares of our common stock was granted to Mr. Bujouves under the
                2006 Long
                Term Incentive Plan. As of March 23, 2007, an aggregate 24,375 shares
                of
                our common stock are issuable to Mr. Bujouves upon exercise of options
                outstanding under our equity compensation
                plans.





A
      compensation plan for our Board of Directors for the fiscal years 2005, 2006,
      and 2007 (the “Directors Plan”) has been established.




Following
      the Directors Plan, each member of our Board of Directors will receive an annual
      stock option grant for attending board meetings and serving on and chairing
      board committees. All stock options will be exercisable at the then prevailing
      market price on the date of grant. No other fees will be paid to members of
      our
      board. Before June 24, 2005, our directors were not compensated for their
      services as directors.




On
      November 18, 2005, we granted options to purchase a total of 34,063 shares
      of
      our common stock to the independent members of our Board of Directors. These
      options were granted at an exercise price based upon the closing price of the
      common stock on the date of grant, have a term of five years and are fully
      vested at December 31, 2005.





On
      June
      12, 2006, we granted options to purchase a total of 42,500 shares of our common
      stock to the independent members of our Board of Directors. These options were
      granted at an exercise price based upon the closing price of the common stock
      on
      the date of grant, have a term of five years and vested in equal installments,
      50% in June 30, 2006, 25% in September 30, 2006 and 25% in December 31,
      2006.





On
      January 1, 2007, we granted, in the aggregate, 32,500 options to three of the
      four independent members of the Board of Directors, to purchase shares of our
      common stock under the 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 of grant, have a term of five years and vest in equal installments, 25%
      at
      March 31, 2007, 25% at June 30, 2007, 25% in September 30, 2007 and 25% in
      December 31, 2007.


45


**PRINCIPAL
      STOCKHOLDERS**




**Item
      11. 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 28, 2007 and Series A Convertible
      Preferred Stock and Series B Convertible Preferred Stock beneficially owned
      on
      March 28, 2007 by:





·
            Each
                person who is known by us to beneficially own 5% or more of our common
                stock, or 5% of


more
      of
      our Series A or Series B Convertible Preferred Stock


·
            each
                of our directors and executive officers; and


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





Some
      of
      the persons listed below may own stock in another class, but such ownership
      is
      only listed if it is more than 5% of such other class. Except as otherwise
      set
      forth below, the address of each of the persons listed below is GlobalOptions
      Group, Inc., 75 Rockefeller Plaza, 27 th Floor,
      New York, New York 10019.





Name
                and Address of
              Beneficial
                Owner
            Common
                Stock Owned
              Beneficially
                Owned(1)
            
            Series
                A Convertible Preferred Stock Beneficially Owned(2)
            
            Series
                B Convertible Preferred Stock Beneficially Owned(3)Shares
            
            %
            
            Shares
            
            %
            
            Shares
            
            %5%
                or Greater Stockholders:SR
                II, LLC
            375,000
            (4)
            12.6Rising
                Wolf II, LLC
            308,383
            (5)
            10.3Neil
                Simon
            189,780
            (6)
            6.3
            
            104
            
            1.6
            
            1,178
            
            2.2Gale
                Hayman
            189,780
            (7)
            6.3
            
            104
            
            1.6Joan
                Stanton
            181,249
            (8)
            6.1IIU
                Nominees Ltd.
            178,125
            (9)
            5.6
            
            1,500
            
            23.7Moore
                Macro Fund L.P.
            131,743
            (10)
            4.3
            
            1,000
            
            15.8Integris
                Funds Ltd.
            123,047
            (11)
            4.0
            
            1,500
            
            23.7Capital
                Trust Investments Limited
            41,016
            (12)
            1.4
            
            500
            
            7.9Verus
                International Group Limited
            32,396
            (13)
            1.1
            
            358
            
            5.7Magnetar
                Capital Fund, L.P.
            710,490
            (14)(28)
            4.9
            
            
            
            
            
            5,271
            
            9.9North
                Sound Legacy Institutional Fund
                LLC
            3,129,547
            (15)(28)
            4.9
            
            
            
            
            
            29,332
            (16)(28)
            55.3North
                Sound Legacy InternationalLtd.
            3,129,547
            (17)(28)
            4.9
            
            
            
            
            
            29,332
            (18)(28)
            55.3Vicis
                Capital LLC
            684,100
            (19)(28)
            4.9
            
            
            
            
            
            6,052
            
            11.4Directors
                and Executive Officers:Harvey
                W. Schiller
            243,115
            (20)
            7.9
            
            22
            
            *Per-Olof
                Lööf
            41,263
            (21)
            1.4
            
            11
            
            *Jeffrey
                O. Nyweide
            97,059
            (22)
            3.2Ronald
                M. Starr
            22,923
            (23)
            *Daniel
                L. Burstein
            328,807
            (24)
            10.9John
                P. Bujouves
            19,688
            (25)
            *James
                Lee Witt
            66,266
            (26)
            2.2All
                executive officers and directors as a group (10 persons)
            1,278,372
            
            42.5%
            
            33
            
            *





___________________




*
 
      Less than 1% of outstanding shares.


46




(1)
            Unless
                otherwise indicated, 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. Includes the conversion of all shares of Series
                A
                Convertible Preferred Stock and such shares of Series B Convertible
                Preferred Stock as permitted pursuant to the 4.99% beneficial ownership
                cap set forth in the Series B Convertible Preferred Stock Certificate
                of
                Designation. Includes warrants to purchase shares of our common stock
                exercisable within 60 days of March 28, 2007. Also includes options
                to
                purchase shares of our common stock exercisable within 60 days of
                March
                28, 2007, which have been granted under the 2005 Stock Option Plan,
                the
                2006 Stock Option Plan or the 2006 Long-Term Incentive Plan. Each
                share of
                Series A Convertible Preferred Stock and each share of Series B
                Convertible Preferred Stock are convertible into 62.5 shares of our
                common
                stock, subject to the 4.99% beneficial ownership cap set forth in
                the
                Series B Convertible Preferred Stock Certificate of Designations.  Based upon 2,984,514 shares of our common stock
              outstanding on March 28, 2007 and, with respect to each individual
              holder,
              rights to acquire our common stock exercisable within 60 days
              of March 28, 2007.




(2)
            Consists
                solely of shares of Series A Convertible Preferred Stock, as a separate
                class, and 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.





Based
      upon 6,330 shares of our Series A Convertible Preferred Stock, convertible
      into
      395,625 shares of our common stock, outstanding on March 28, 2007.





(3)
            Consists
                solely of shares of Series B Convertible Preferred stock, as a separate
                class, and 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.





Based
      upon 53,070 shares of our Series B Convertible Preferred Stock, convertible
      into
      3,316,875 shares of our common stock, outstanding on March 19,
      2007.





(4)
            SR
                II, LLC is a Delaware Limited Liability Company. As the Chief Executive
                Officer and significant member of SR II, LLC Mr. Howard Safir, an
                executive officer, may be deemed to beneficial owner of the shares
                of our
                common stock held by SR II, LLC. Mr. Safir disclaims beneficial ownership
                of such shares except to the extent of his pecuniary interest therein.
                The
                address of SR II, LLC is 415 Madison Avenue, 17th Floor, New York,
                NY
                10017.





(5)
            Rising
                Wolf II, LLC is a Delaware limited liability company owned by
                Millennium Technology Value Partners, LP and Millennium Technology
                Value
                Partners (RCM), LP (collectively, the “TVP Funds”). Daniel L. Burstein is
                a member of the general partner that manages the TVP Funds and may
                be
                deemed to be the beneficial owner of the shares of our common stock
                held
                by Rising Wolf II, LLC. Mr. Burstein disclaims beneficial ownership
                of such shares except to the extent of his pecuniary interest therein.
                The
                address of Rising Wolf II, LLC is 350 Park Avenue, New York, NY
                10022.





(6)
            Consists
                of 181,249 shares of our common stock, 6,500 shares of our common
                stock
                issuable upon the conversion of Series A Convertible Preferred Stock
                and
                2,031 shares of Common Stock reserved for issuance upon exercise
                of
                warrants. Does not include 73,625 shares of our common stock issuable
                upon
                the conversion of Series B Convertible Preferred Stock and 52,092
                shares
                of our common stock reserved for issuance upon exercise of warrants
                subject to the 4.99% beneficial ownership cap set forth in the Series
                B
                Convertible Preferred Stock Certificate of
                Designation.





(7)
            Consists
                of 181,249 shares of our common stock, 6,500 shares of our common
                stock
                issuable upon the conversion of Series A Convertible Preferred Stock
                and
                2,031 shares of our common stock reserved for issuance upon exercise
                of
                warrants.





(8)
            Consists
                of 181,249 shares of our common
                stock.





(9)
            IIU
                Nominees Ltd. is incorporated in Ireland with an address at c/o
                International Investment and Underwriting, IFSC House Custom House
                Quay,
                Dublin 1 Ireland. Consists of 6,250 shares of our common stock, 93,750
                shares of our common stock issuable upon the conversion of Series
                A
                Convertible Preferred Stock and 78,125 shares of our common stock
                reserved
                for issuance upon exercise of
                warrants.




47




(10)
            Moore
                Macro Fund L.P. is a Bahamian limited partnership with an address
                at c/o
                Citco Fund Services (Bahamas), Ltd., One Montague Place, Nassau,
                Bahamas.
                Consists of 62,500 shares of our common stock issuable upon the conversion
                of Series A Convertible Preferred Stock, 31,250 shares of our common
                stock
                and 37,993 shares of our common stock reserved for issuance upon
                exercise
                of warrants.





(11)
            Integris
                Funds Ltd. is a Cayman Islands company with an address at c/o Bayshore
                Bank and Trust, Lauriston House, Lower Collymare Rock, PO Box 1132,
                Bridgetown Barbados. Consists of 93,750 shares of our common stock
                issuable upon the conversion of Series A Convertible Preferred Stock
                and
                29,297 shares of our common stock reserved for issuance upon exercise
                of
                warrants. Integris Funds Ltd. is an affiliate of Bayshore Bank & Trust
                Corp. of which Mr. Bujouves is the Chairman. He disclaims beneficial
                ownership with respect to the shares held by Integris Funds Ltd.




(12)
            The
                address of Capital Trust Investments Limited is 1717 Pennsylvania
                Avenue,
                N.W., Suite 300, Washington, D.C., 20006. Consists of 31,250 shares
                of our
                common stock issuable upon the conversion of Series A Convertible
                Preferred Stock and 9,766 shares of our common stock reserved for
                issuance
                upon exercise of warrants.





(13)
            The
                address of Verus International Group Limited is 655 Madison Avenue,
                17th
                Floor, New York, New York, 10021. Consists of 22,375 shares of our
                common
                stock issuable upon the conversion of Series A Convertible Preferred
                Stock, 3,029 shares of our common stock and 6,992 shares of our common
                stock reserved for issuance upon exercise of
                warrants.





(14)
            Consists
                of 147,966 shares of our common stock, 329,438 shares of our common
                stock
                issuable upon the conversion of Series B convertible preferred stock
                and
                233,086 shares of our common stock issuable upon the exercise of
                warrants.
                Magnetar Financial LLC is the sole general partner of Magnetar Capital
                Fund, LP (“Magnetar Capital Fund”) and consequently has sole voting
                control and investment discretion over securities held by Magnetar
                Capital
                Fund. Magnetar Financial LLC disclaims beneficial ownership of the
                shares
                held by Magnetar Capital Fund. Alec Litowitz has voting control over
                Supernova Management LLC, the general partner of Magnetar Capital
                Partners
                LP, the sole managing member of Magnetar Financial LLC. As a result,
                Mr.
                Litowitz may be considered the beneficial owner of any shares deemed
                to be
                beneficially owned by Magnetar Financial LLC. Mr. Litowitz disclaims
                beneficial ownership of these
                shares.





(15)
            Consists
                of 1,319,944 shares of our common stock issuable upon the conversion
                of
                Series B convertible preferred stock, 513,294 shares of our common
                stock
                issuable upon the conversion of Series B convertible preferred stock
                held
                by North Sound Legacy Institutional Fund LLC, a related entity, 933,899
                shares of our common stock issuable upon the exercise of warrants
                and
                362,410 shares of our common stock issuable upon the exercise of
                warrants
                held by North Sound Legacy Institutional Fund LLC, a related entity.
                NorthSound Capital LLC is the investment advisor to North Sound Legacy
                International Ltd. Thomas McAuley is the manager and controlling
                person of
                North Sound Capital LLC and disclaims beneficial ownership of the
                shares
                except for his precuniary interest. The address of North Sound Legacy
                International Ltd. is 20 Horseneck Lane, Greenwich, CT 06830.





(16)
            Consists
                of 21,119.1 shares of Series B Convertible Preferred Stock and 8,212.7
                shares of our Series B Convertible Preferred Stock held by North
                Sound
                Legacy Institutional Fund LLC, a related entity. North Sound Capital
                LLC
                is the investment advisor to North Sound Legacy International Ltd.
                Thomas
                McAuley is the manager and controlling person of North Sound Capital
                LLC
                and disclaims beneficial ownership of the shares except for his precuniary
                interest. The address of North Sound Legacy International Ltd. is
                20
                Horseneck Lane, Greenwich, CT 06830.




(17)
            Consists
              of 513,294 shares of our common stock issuable upon the conversion
              of
              Series B convertiblepreferred
              stock, 1,319,944 shares of our common stock issuable upon the conversion
              of Series B convertible preferred stock held by North Sound Legacy
              International Ltd., a related entity, 362,410 shares of our common
              stock issuable upon the exercise of warrants and 933,899 shares of
              our
              common stock issuable upon the exercise of warrants held by North Sound
              Legacy International Ltd., a related entity. North Sound Capital LLC
              is
              the managing member of North Sound Legacy Institutional Fund LLC. Thomas
              McAuley is the manager and controlling person of North Sound Capital
              LLC
              and disclaims beneficial ownership of the shares except for his pecuniary
              interest. The address of North Sound Legacy Institutional Fund LLC
              is 20
              Horseneck Lane Greenwich, CT 06830.  (18)
            Consists
                of 8,212.7 shares of Series B Convertible Preferred Stock and 21,119.1
                shares of our Series B Convertible Preferred Stock held by North
                Sound
                Legacy International Ltd., a related entity. North Sound Capital
                LLC is
                the managing member of North Sound Legacy Institutional Fund LLC.
                Thomas
                McAuley is the manager and controlling person of North Sound Capital
                LLC
                and disclaims beneficial ownership of the shares except for his pecuniary
                interest. The address of North Sound Legacy Institutional Fund LLC
                is 20
                Horseneck Lane Greenwich, CT 06830.




48




(19)
            Consists
                of 37,500 shares of our common stock, 378,233 shares of our common
                stock
                issuable upon the conversion of Series B convertible preferred stock
                and
                268,367 shares of our common stock issuable upon the exercise of
                warrants.
                The address of Vicis Capital LLC is Tower 56, Suite 700 New York,
                NY
                10022.





(20)
            Consists
                of 162,106 shares of our common stock, 1,375 shares of our common
                stock
                issuable upon the conversion of Series A convertible preferred stock,
                430
                shares of our common stock reserved for issuance upon exercise of
                warrants
                and 79,204 shares of our common stock issuable upon exercise of stock
                options exercisable under the 2005 Stock Option
                Plan.





(21)
            Consists
                of 20,672 shares of our common stock, 688 shares of our common stock
                issuable upon the conversion of Series A convertible preferred stock,
                215
                shares of our common stock reserved for issuance upon exercise of
                warrants
                held by Lööf Holdings, LLC, a limited liability company controlled by Mr.
                Lööf, 8,125 shares of our common stock issuable upon the exercise of
                stock
                options exercisable under the 2005 Stock Option Plan, 10,000 shares
                of our
                common stock issuable upon the exercise of stock options exercisable
                under
                the 2006 Stock Option Plan and 1,563 shares of our common stock issuable
                upon the exercise of stock options issued under the 2006 Long Term
                Incentive Plan.





(22)
            Consists
                of 75,000 shares of our common stock and 22,059 shares of our common
                stock
                issuable upon exercise of stock options exercisable under the 2005
                Stock
                Option Plan.





(23)
            Consists
                of 10,423 shares of our common stock issuable upon exercise of stock
                options exercisable under the 2005 Stock Option Plan and 12,500 shares
                of
                our common stock issuable upon the exercise of stock options exercisable
                under the 2006 Stock Option Plan.





(24)
            Consists
                of 8,861 shares of our common stock issuable upon exercise of stock
                options exercisable under the 2005 Stock Option Plan, 10,000 shares
                of our
                common stock issuable upon the exercise of stock options exercisable
                under
                the 2006 Stock Option Plan and 1,563 shares of our common stock issuable
                upon the exercise of stock options issued under the 2006 Long Term
                Incentive Plan and 308,383 shares of our common stock held by Rising
                Wolf
                II, LLC. Rising Wolf II, LLC is a Delaware limited liability
                company owned by Millennium Technology Value Partners, LP and Millennium
                Technology Value Partners (RCM), LP (collectively, the “TVP Funds”).
                Daniel L. Burstein is a member of the general partner that manages
                the TVP
                Funds and may be deemed to be the beneficial owner of the shares
                of our
                common stock held by Rising Wolf II, LLC. Mr. Burstein disclaims
                beneficial ownership of such shares except to the extent of his pecuniary
                interest therein. The address of Rising Wolf II, LLC is 350 Park
                Avenue, New York, NY 10022.





(25)
            Mr.
                Bujouves is the Chairman of Bayshore Bank & Trust Corp., an affiliate
                of Integris Funds Ltd. He disclaims beneficial ownership with respect
                to
                the shares held by Integris Funds Ltd. Consists of 8,125 shares of
                our
                common stock issuable upon exercise of stock options exercisable
                under the
                2005 Stock Option Plan and 10,000 shares of our common stock issuable
                upon
                the exercise of stock options exercisable under the 2006 Stock Option
                Plan, and 1,563 shares of our common stock issuable upon the exercise
                of
                stock options exercisable under the 2006 Long Term Incentive
                Plan.





(26)
            Consists
                of 66,265 shares of our common stock and 81,967 of our common stock
                issued to James Lee Witt Associates, LLC in the closing of our acquisition
                of JLWA on March 10, 2006.




49


(27)
            Consists
                of 1,278,372 shares of our common stock, 2,063 shares of our common
                stock issuable upon the conversion of Series A convertible preferred
                stock, 645 shares of our common stock reserved for issuance upon
                exercise
                of warrants, 176,932 shares of our common stock issuable upon the
                exercise
                of stock options exercisable under the 2005 Stock Option Plan and
                42,500
                shares of our common stock issuable upon the exercise of stock options
                exercisable under the 2006 Stock Option Plan, and 4,689 shares of
                our
                common stock issuable upon the exercise of stock options exercisable
                under
                the 2006 Long Term Incentive Plan. Included in the above calculations
                are
                three executive officers who are not specifically identified in the
                Security Ownership Table.


(28)
            Pursuant to the terms of the certificate of designation
              for the Series B convertible preferred stock, the number of shares
              of our
              common stock that may be acquired by any holder of Series B convertible
              preferred stock upon any conversion of the preferred stock or that
              shall
              be entitled to voting rights is limited to the extent necessary to
              ensure
              that, following such conversion, the number of shares of our common
              stock
              then beneficially owned by such holder and any other persons or entities
              whose beneficial ownership of common stock would be aggregated with
              the
              holder’s for purposes of the Securities and Exchange Act of 1934, as
              amended, does not exceed 4.99% of the total number of shares of our
              common
              stock then outstanding. In addition, the holder of the Series B
              convertible preferred stock also owns warrants (the “Series B Warrants”)
              which also provide that the number of shares of our common stock that
              may
              be acquired by any holder of the Series B Warrants upon exercise of
              the
              Series B Warrants is limited to the extent necessary to ensure that,
              following such exercise, the number of shares of our common stock then
              beneficially owned by such holder and any other persons or entities
              whose
              beneficial ownership of common stock would be aggregated with the holder’s
              for purposes of the Securities and Exchange Act of 1934, as amended,
              does
              not exceed 4.99% of the total number of shares of our common stock
              then
              outstanding.




**Item
      12. Certain Relationships and Related Transactions, and Director
      Independence**





On
      May
      12, 2006, in connection with our acquisition of Safir, the QuanStar Group,
      LLC
      ("QuanStar Group”) was paid a finder's fee of $375,000. In addition, for the
      years ended December 31, 2006 and 2005 we paid the QuanStar Group approximately
      $7,800 per month for our administrative headquarters. Harvey W. Schiller, Ph.D.,
      the Company's Chairman and Chief Executive Officer, is a partner in the QuanStar
      Group. Per Olof Loof, the Company's Vice Chairman of the Board is a former
      partner in the Quanstar Group. The rental arrangement with the QuanStar group
      was terminated in January 2007.





As
      more
      fully described in Item 1. Description of Business, on March 10, 2006, we
      purchased substantially all of the assets and liabilities of JLWA. As a result,
      James Lee Witt became our Chief Executive Officer of the GlobalOptions/James
      Lee
      Witt Division of GlobalOptions, Inc. The terms of Mr. Witt’s employment
      agreement are described in Item 10. Executive Compensation above.





As
      more
      fully described in Item 1. Description of Business, on May 12, 2006, we acquired
      substantially all of the business and assets of Safir. As a result, Howard
      Safir
      became our Chief Executive Officer of GlobalOptions/Safir Rosetti Division
      of
      GlobalOptions, Inc.





Concurrently
      with our acquisition of Safir, we entered into a three year employment agreement
      with Howard Safir whereby Mr. Safir agreed to perform such duties and
      responsibilities as the Board of Directors may assign, and has agreed to devote
      his full time to GlobalOptions at a salary of $300,000 per year and a
      discretionary annual bonus. The employment agreement may be terminated for
      cause
      by GlobalOptions, upon the death or disability of the executive, or upon
      30-days’ notice by either party. In the event GlobalOptions terminates the
      employment agreement without cause, it is required to pay Mr. Safir his base
      salary and certain benefits through March 21, 2009, if the date of termination
      occurs during the initial term. The employment agreement also contains
      non-compete and non-solicitation provisions for 12 months following termination,
      as well as confidentiality provisions.


50


Concurrently
      with its acquisition of the assets and business of CBR on August 14, 2005,
      we
      entered into a three-year employment and noncompetition agreement with Halsey
      Fischer, our current President of the Investigations Division of GlobalOptions,
      Inc. and the former president and chief executive officer of CBR. Pursuant
      to
      the agreement, Mr. Fischer agreed to perform such duties and responsibilities
      as
      the Board of Directors may assign, and has agreed to devote his full business
      time to GlobalOptions at a salary of $200,000 per year and a discretionary
      annual bonus of up to $50,000. The employment agreement may be terminated for
      cause by GlobalOptions, upon the death or disability of the executive, or upon
      30-days’ notice by either party after three years from the commencement date. In
      the event GlobalOptions terminates the employment agreement without cause,
      it is
      required to pay Mr. Fischer his base salary and certain benefits for six months
      following termination. The employment agreement also contains non-compete and
      non-solicitation provisions for 12 months following termination, as well as
      confidentiality provisions.





Mr.
      Ondeck, our President of the Global International Division of GlobalOptions,
      Inc., entered into a five year
      employment agreement in January 2002. On October 17, 2006, this agreement was
      amended to extend the term through January 2010. 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 amended agreement
      provides for an annual base salary of $300,000 and an annual bonus of up to
      one
      hundred percent of base salary. The bonus amount
      is
      based upon the achievement of mutually agreed upon goals established by the
      Compensation Committee. Salary increases will be determined by the Compensation Committee
      and will be based upon the Company’s performance, as well as Mr. Ondeck’s
      contribution to that performance. Pursuant to the employment agreement,
      GlobalOptions maintains a “key-man” life insurance policy on the life of Mr.
      Ondeck, with a face amount of $500,000. The employment agreement may be
      terminated for cause by GlobalOptions upon the death or disability of Mr.
      Ondeck, or upon 30-days’ notice by either party. In the event GlobalOptions
      terminates the employment agreement without cause, it is required to pay Mr.
      Ondeck his current base salary and benefits for the lesser
      of
      12 months, or the remaining term of the agreement.





The
      Board
      of Directors considered the following relationships in determining that Per-Olof
      Lööf, Daniel L. Burstein, Ronald M. Starr and John P. Bujouves meet the
      independence standards of Nasdaq. The Board of Directors considered Mr. Loof's
      prior relationship with the QuanStar Group and determined it would not interfere
      with his independence, as defined by Nasdaq’s rules and regulations. The Board
      of Directors considered that Mr. Burstein is a member of the general partner
      that manages Millennium Technology Value Partners, LP and Millennium Technology
      Value Partners (RCM), LP, the owners of Rising Wolf II, LLC, a 10% owner of
      our
      Common Stock and determined it would not interfere with his independence, as
      defined by Nasdaq’s rules and regulations. The Board of Directors considered
      that Mr. Bujoves is the Chairman of Bayshore Bank & Trust Corp. an affiliate
      of Integris Funds Ltd., a 5% owner of our Series A Convertible Preferred Stock
      and determined it would not interfere with his independence, as defined by
      Nasdaq’s rules and regulations. The Board of Directors considered that Mr. Starr
      is a Managing Director at Starr & Company, LLC, an accounting and business
      management firm for high net worth individuals, of which numerous of our
      stockholders are clients and determined it would not interfere with his
      independence, as defined by Nasdaq’s rules and regulations.


51





**Item
      13. Exhibits.**





**Exhibit
                No.**
            **Description**2.1
            Agreement
                and Plan of Merger, dated June 24, 2005, among Creative Solutions
                with
                Art, Inc., GlobalOptions Acquisition Corp. and GlobalOptions, Inc.
                (2)2.2
            Agreement
                and Plan of Merger between GlobalOptions Group, Inc., a Nevada corporation
                and GlobalOptions Group, Inc., a Delaware corporation, dates as of
                December 5, 2006. (17)3.1
            Certificate
                of Incorporation of GlobalOptions Group, Inc. (17)3.2
            Certificate
                of Designations, Powers, Preferences and Other Rights and Qualifications
                of Series A convertible peferred stock. (17)3.3
            Certificate
                of Designations, Powers, Preferences and Other Rights and Qualifications
                of Series B convertible preferred stock. (17)3.4
            Certificate
                of Amendment to Certificate of Incorporation effecting a 1 for 8
                reverse
                stock split, effective March 6, 2007. (20)3.5
            Bylaws.
                (17)4.1
            Form
                of Four-Year Warrant to Purchase Common Stock at $2.00 per share.
                (3)4.2
            Form
                of Four-Year Warrant to Purchase Common Stock at $2.50 per share.
                (3)4.3
            Form
                of Series B-1 and B-2 Warrant. (13)10.1
            2004
                Non-Statutory Stock Option Plan. (1)10.2
            2005
                Stock Option Plan. (4)10.3
            Employment
                Agreement, dated as of January 29, 2004, between Harvey W. Schiller,
                Ph.D.
                and GlobalOptions, Inc., assigned to and assumed by GlobalOptions
                Group,
                Inc. (3)10.4
            Letter
                Agreement among GlobalOptions Group, Inc., GlobalOptions, Inc. and
                Harvey
                W. Schiller, pursuant to which GlobalOptions Group, Inc. assumed
                Dr.
                Schiller’s original employment agreement with GlobalOptions, Inc.
                (3)10.5
            Employment
                Agreement, dated as of January 24, 2002, between Thomas P. Ondeck
                and
                GlobalOptions, Inc. (3)10.6
            Form
                of Lock-Up letter between GlobalOptions Group and certain pre-merger
                stockholders. (3)10.7
            Form
                of Lock-Up letter between GlobalOptions Group and former GlobalOptions
                stockholders. (3)10.8
            Form
                of Private Placement Subscription Agreement. (3)10.9
            Asset
                Purchase Agreement by and among GlobalOptions, Inc., Confidential
                Business
                Resources, Inc., Halsey R. Fisher and Fisher & Associates, Inc.
                (5)10.10
            Amendment
                to Asset Purchase Agreement by and among GlobalOptions, Inc., Confidential
                Business Resources, Inc., Halsey R. Fisher and Fisher & Associates,
                Inc., dated as of June 14, 2005. (5)10.11
            Second
                Amendment to Asset Purchase Agreement by and among GlobalOptions,
                Inc.,
                Confidential Business Resources, Inc., Halsey R. Fisher and Fisher
&
                Associates, Inc., dated as of July 29, 2005. (5)10.12
            Asset
                Purchase Agreement, dated as of January 13, 2006, by and between
                GlobalOptions Group, Inc. and James Lee Witt Associates, LLC.
                (6)10.13
            First
                Amendment to Asset Purchase Agreement, dated as of February 28, 2006,
                by
                and between GlobalOptions Group, Inc. and James Lee Witt Associates,
                LLC.
                (8)




52




10.14
            Form
                of Notes Offering Subscription Agreement. (8)10.15
            Form
                of Notes Offering Agreement. (8)10.16
            Form
                of Subordination Agreement. (8)10.17
            Asset
                Purchase Agreement, dated as of January 27, 2006, by and between
                GlobalOptions Group, Inc. and Safir Rosetti, LLC. (7)10.18
            First
                Amendment to Asset Purchase Agreement by and between GlobalOptions
                Group,
                Inc. and Safir Rosetti, LLC, dated as of May 12, 2006.
                (10)10.19
            Asset
                Purchase Agreement, dated as of May 12, 2006 by and between GlobalOptions
                Group, Inc., Secure Source, Inc., Marian E. Nicastro and David W.
                Nicastro. (11)10.23
            2006
                Stock Option Plan. (12)10.24
            Form
                of Convertible Note Purchase Agreement. (13)10.25
            Asset
                Purchase Agreement, dated as of August 10, 2006, by and between
                GlobalOptions Group, Inc. and Hyperion Risk, Inc. (14)10.26
            Second
                Amended and Restated Loan and Security Agreement dated as of October
                12,
                2006, by and between GlobalOptions, Inc. and Silicon Valley Bank.
                (16)10.27
            Unconditional
                Guaranty by GlobalOptions Group, Inc. in favor of Silicon Valley
                Bank.
                (16)10.28
            Amended
                and Restated Security Agreement, dated as of October 12, 2006, by
                and
                between GlobalOptions Group, Inc. and Silicon Valley Bank. (16)10.29
            2006
                Long-Term Incentive Plan. (17)10.30
            2006
                Employee Stock Purchase Plan. (17)10.31
            Amendment
                to Employment Agreement of Harvey W. Schiller with GlobalOptions
                Group,
                Inc. dated as of December 19, 2006. (18)10.32
            Amendment
                to Consulting Agreement of Jeffrey O. Nyweide with GlobalOptions
                Group,
                Inc. dated as of December 19, 2006. (18)10.33
            Asset
                Purchase Agreement, dated as of January 19, 2007, by and between
                GlobalOptions Group, Inc. and On Line Consulting Services, Inc. (19)10.34
            Stock
                Purchase Agreement, dated as of February 28, 2007, by and among
                GlobalOptions Group, Inc., ChoicePoint Government Services Inc. and
                ChoicePoint Inc. (21)10.35
            Asset
                Purchase Agreement, dated as of February 28, 2007, by and among
                GlobalOptions Group, Inc. and Facticon, Inc. (22)10.36
            Form
                of Investor Rights Agreement. (13)10.37
            Amendment
                to Investor Rights Agreement. (15)14.1
            Code
                of Business Conduct and Ethics. (9)21.1
            Subsidiaries
                of GlobalOptions Group, Inc.23.1
            Consent
                of Marcum & Kliegman, LLP31.1
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.31.2
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.32.1
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.





53





(1)
      Incorporated by reference to the exhibits included with our Registration
      Statement on Form SB-2, filed with the SEC on July 20, 2004.




(2)
      Incorporated by reference to the exhibits included with our Current Report
      on
      Form 8-K filed with the SEC on June 27, 2005.




(3)
      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.




(4)
      Incorporated by reference to the exhibits included with our Current Report
      on
      Form 8-K filed with the SEC on August 11, 2005.




(5)
      Incorporated by reference to the exhibits included with our Current Report
      on
      Form 8-K filed with the SEC on August 18, 2005.




(6)
      Incorporated by reference to the exhibits included with our Current Report
      on
      Form 8-K filed with the SEC on January 18, 2006.




(7)
      Incorporated by reference to the exhibits included with our Current Report
      on
      Form 8-K filed with the SEC on February 1, 2006.




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




(9)
      Incorporated by reference to the exhibits included with our 2005 Annual Report
      on Form 10-KSB filed with the SEC on April 17, 2006.




(10)
      Incorporated by reference to the exhibits included with our Current Report
      on
      Form 8-K filed with the SEC on May 16, 2006, as amended.




(11)
      Incorporated by reference to the exhibits included with our Current Report
      on
      Form 8-K filed with the SEC on May 16, 2006, as amended.




(12)
      Incorporated by reference to the exhibits included with our Current Report
      on
      Form 8-K filed with the SEC on June 16, 2006.




(13)
      Incorporated by reference to the exhibits included with our Current Report
      on
      Form 8-K filed with the SEC on June 29, 2006.




(14)
      Incorporated by reference to the exhibits included with our current report
      on
      Form 8-K filed with the SEC on August 15, 2006, as amended.




(15)
      Incorporated by reference to the exhibits included with our current report
      on
      Form 8-K filed with the SEC on October 26, 2006.




(16)
      Incorporated by reference to the exhibits included with our current report
      on
      Form 8-K filed with the SEC on October 27, 2006.




(17)
      Incorporated by reference to the exhibits included with our current report
      on
      Form 8-K filed with the SEC on December 11, 2006.




(18)
      Incorporated by reference to the exhibits included with our current report
      on
      Form 8-K filed with the SEC on December 22, 2006.




(19)
      Incorporated by reference to the exhibits included with our current report
      on
      Form 8-K with the SEC on January 10, 2006.




(20)
      Incorporated by reference to the exhibits included with our current report
      on
      Form 8-K with the SEC on February 23, 2007.




(21)
      Incorporated by reference to the exhibits included with our current report
      on
      Form 8-K with the SEC on March 1, 2007.




(22)
      Incorporated by reference to the exhibits included with our current report
      on
      Form 8-K with the SEC on March 1, 2007.


54


**ITEM
      14.**  **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**




***Audit
      Fees.*** The
      aggregate fees billed for professional services rendered was $919,000 and
      $175,000 for the audits of the Company’s annual financial statements for the
      fiscal years ended December 31, 2006 and 2005, respectively, which services
      included the cost of the reviews of the condensed consolidated financial
      statements included in the Company’s Forms 10-KSB for each respective
      year.




***Audit-Related
      Fees.*** The
      aggregate fees billed for professional services categorized as Audit-Related
      Fees rendered was $0 and $50,000 for the years ended December 31, 2006 and
      2005,
      respectively, relating principally to registration statements and mergers and
      acquisitions.




***Tax
      Fees*** **.** For
      the
      years ended December 31, 2006 and 2005, the principal accountant billed $24,000
      and $15,000, respectively, for tax compliance.




***All
      Other Fees*** **.** Other
      than the services described above, the aggregate fees billed for services
      rendered by the principal accountant was $0 and $0, respectively, for the fiscal
      years ended December 31, 2006 and 2005.




***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-KSB. 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-minimus exception to the pre-approval contained
      in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934.


55


**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:April 2, 2007
            By:
            /s/
                Harvey W.
                SchillerHarvey
                W. Schiller
              Chairman
                and Chief Executive Officer
              (Principal
                Executive Officer)


Dated:April 2, 2007
            By:
            /s/
                Jeffrey O.
                NyweideJeffrey
                O. Nyweide
              Executive
                Vice President-Corporate Development,
              Chief
                Financial Officer and
              Secretary
                (principal financial and
              accounting
                officer)




Signatures
            
            Title
            
            Date/s/
                Harvey W. Schiller
            
            Chairman,
                Chief Executive Officer and
              Director
                (principal executive officer
            
            April
                2, 2007Harvey
                W. Schiller/s/
                Jeffrey O. Nyweide
                Jeffrey
                  O. Nyweide
            
            Executive
                Vice President, Corporate
              Development,
                Chief Financial Officer
              and
                Secretary (principal financial officer
              and
                principal accounting officer
            
            April
                2, 2007/s/
                Per-Olof Lööf
            
            Director
            
            April
                2, 2007Per-Olof
                Lööf/s/
                Daniel L. Burstein
            
            Director
            
            April
                2, 2007Daniel
                L. Burstein______________Ronald
                M. Starr
            
            Director
            
            April
                2 , 2007______________
            
            Director
            
            April
                2 , 2007John
                P. Bujouves




56


**GLOBALOPTIONS
        GROUP, INC. AND SUBSIDIARIES**


**Table
      of Contents to Consolidated Financial Statements**


**Page(s)**Report
                of Independent Registered Public Accounting Firm
            
            
            F-1Consolidated
                Balance Sheet as of December 31, 2006
            
            
            F-2Consolidated
                Statements of Operations for the Years Ended December 31, 2006 and
                2005
            
            
            F-3Consolidated
                Statements of Stockholders' Equity for the Years Ended December 2006
                and
                2005
            
            
            F-4Consolidated
                Statements of Cash Flows for the Years Ended December 31, 2006 and
                2005
            
            
            F-6Notes
                to Consolidated Financial Statements
            
            
            F-10









REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To
          the
          Stockholders and Board of Directors
 GlobalOptions
          Group, Inc. and Subsidiaries
 
 We
          have
          audited the accompanying consolidated balance sheet of GlobalOptions Group,
          Inc.
          and Subsidiaries (the “Company”) as of December 31, 2006 and the related
          consolidated statements of operations, stockholders’ equity, and cash flows for
          the years ended December 31, 2006 and December 31, 2005. 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 audit 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 consolidated 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, 2006, and the consolidated
          results of their operations and their cash flows for the years ended December
          31, 2006 and 2005 in conformity with United States generally accepted accounting
          principles.
 
 /s/
          Marcum & Kliegman LLP
 
 New
          York,
          New York
  March
          26,
          2007
  F-1





**GLOBALOPTIONS
      GROUP, INC. AND SUBSIDIARIES**


**Consolidated
      Balance Sheet**


**December
      31, 2006**





**ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            21,533,381Accounts
                receivable, net of allowance for doubtfulaccounts
                of approximately $1,464,000
            
            
            19,918,791Prepaid
                expenses and other current assets
            
            
            453,611Total
                current assets
            
            
            41,905,783Property
                and equipment, net
            
            
            798,366Intangible
                assets, net
            
            
            7,630,425Goodwill
            
            
            18,577,261Security
                deposits and other assets
            
            
            314,445Total
                assets
            
            $
            69,226,280**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Note
                payable to seller for JLWA acquisition
            
            $
            400,000Notes
                payable for Safir acquisition
            
            
            280,819Notes
                payable for Secure Source acquisition
            
            
            500,000Due
                to former members of JLWA for earnout
            
            
            5,227,985Accounts
                payable
            
            
            4,148,158Deferred
                revenues
            
            
            106,872Accrued
                compensation and related benefits
            
            
            2,526,512Other
                current liabilities
            
            
            1,196,881Total
                current liabilities
            
            
            14,387,227Long
                term liabilities:Notes
                payable for Secure Source acquistion, less current portion
            
            
            750,000Deferred
                rent obligations
            
            
            190,008Total
                long term liabilities
            
            
            940,008Total
                liabilities
            
            
            15,327,235Commitments
                and contingenciesStockholders'
                equity:Preferred
                stock, $0.001 par value,14,924,000
                shares authorized, no sharesissued
                or outstanding
            
            
            -Series
                A convertible preferred stock, voting, $0.001 parvalue,
                16,000 shares authorized, 6,380 sharesissued
                and outstanding, liquidation preference $6,380,000
            
            
            6Series
                B convertible preferred stock, voting, $0.001 par value,60,000
                shares authorized, 53,073 shares issued andoutstanding,
                liquidation preference $53,073,000
            
            
            53Common
                stock, $0.001 par value; 100,000,000 shares authorized;2,678,059
                shares issued and outstanding
            
            
            2,678Additional
                paid-in capital
            
            
            78,557,545Accumulated
                deficit
            
            
            (24,661,237
            )Total
                stockholders' equity
            
            
            53,899,045Total
                liabilities and stockholders' equity
            
            $
            69,226,280




F-2




**GLOBALOPTIONS
      GROUP, INC. AND SUBSIDIARIES**


**Consolidated
      Statements Of Operations**





For
                the Years EndedDecember
                31,2006
            
            2005Revenues
            
            $
            61,923,822
            
            $
            9,028,341Cost
                of revenues
            
            
            32,243,298
            
            
            5,074,045Gross
                profit
            
            
            29,680,524
            
            
            3,954,296Operating
                expenses:Selling
                and marketing
            
            
            8,635,235
            
            
            540,301General
                and administrative
            
            
            25,354,303
            
            
            6,937,148Impairment
                loss on goodwill and intangibles
            
            
            3,144,309
            
            
            -Total operating expenses
            
            
            37,133,847
            
            
            7,477,449Loss
                from operations
            
            
            (7,453,323
            )
            
            (3,523,153
            )Other
                income (expense):Interest
                income
            
            
            477,027
            
            
            18,229Interest
                expense
            
            
            (652,639
            )
            
            (65,049
            )Amortization
                of debt discounts on convertiblenotes payable
            
            
            (7,522,602
            )
            
            -Amortization
                of deferred financing costs
            
            
            (2,694,500
            )
            
            -Other (expense), net
            
            
            (10,392,714
            )
            
            (46,820
            )Net
                loss
            
            
            (17,846,037
            )
            
            (3,569,973
            )Deemed
                dividends to Series A and B convertiblepreferred
                stockholders
            
            
            (24,413,362
            )
            
            (979,750
            )Net
                loss available to common stockholders
            
            $
            (42,259,399
            )
            $
            (4,549,723
            )Basic
                and diluted net loss per share
            
            $
            (18.89
            )
            $
            (3.03
            )Weighted
                average number of common sharesoutstanding
                - basic and diluted
            
            
            2,237,168
            
            
            1,500,139




F-3




**GLOBALOPTIONS
      GROUP, INC. AND SUBSIDIARIES**


**Consolidated
      Statements of Stockholders' Equity**


**For
      the Year Ended December 31, 2006**





**Series
                A**
            
            **Series
                B****Convertible**
            
            **Convertible**
            
            **Additional****Common
                Stock**
            
            **Preferred
                Stock**
            
            **Preferred
                Stock**
            
            **Paid-in**
            
            **Accumulated****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Capital**
            
            **Deficit**
            
            **Total**Balance,
                January 1, 2006
            
            
            1,811,323
            
            $
            1,811
            
            
            7,750
            
            $
            8
            
            
            -
            
            $
            -
            
            $
            11,599,819
            
            $
            (6,815,200
            )
            $
            4,786,438Issuance
                of common stock inconnection
                with the purchaseof
                JLWA
            
            
            102,459
            
            
            103
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,999,897
            
            
            -
            
            
            2,000,000Issuance
                of common stock to executiveemployee
                for future services
            
            
            100,000
            
            
            100
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (100
            )
            
            -
            
            
            -Issuance
                of common stock to consultantfor
                future services
            
            
            75,000
            
            
            75
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (75
            )
            
            -
            
            
            -Issuance
                of common stock as finders feein
                connection with the acquisition of Safir
            
            
            10,883
            
            
            11
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            174,989
            
            
            -
            
            
            175,000Issuance
                of common stock to consultantfor
                services
            
            
            7,317
            
            
            7
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            117,071
            
            
            -
            
            
            117,078Amortization
                of deferredconsulting fees
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            735,525
            
            
            -
            
            
            735,525Issuance
                of Series B convertible preferredstock
                upon exchange ofconvertible
                notes payable andaccrued
                interest
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            53,073
            
            
            53
            
            
            46,150,679
            
            
            -
            
            
            46,150,732Issuance
                of common stock inconnection
                with purchase of Safir
            
            
            375,000
            
            
            375
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            5,999,625
            
            
            -
            
            
            6,000,000Issuance
                of common stock inconnection
                with purchase of
              Secure Source
            
            
            26,371
            
            
            26
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            499,974
            
            
            -
            
            
            500,000Issuance
                of common stock   inconnection
                with purchase ofHyperion
                Risk
            
            
            84,081
            
            
            84
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,499,916
            
            
            -
            
            
            1,500,000Amortization
                of debt discounts onconvertible
                notes payable
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            7,522,602
            
            
            -
            
            
            7,522,602Amortization
                of stock options costs
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,257,707
            
            
            -
            
            
            2,257,707Issuance
                of common stock in connectionwith the conversion of shares of SeriesA convertible preferred stock.
            
            
            85,625
            
            
            86
            
            
            (1,370
            )
            
            (2
            )
            
            -
            
            
            -
            
            
            (84
            )
            
            -
            
            
            -Net
                loss
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (17,846,037
            )
            
            (17,846,037
            )Balance,
                December 31, 2006
            
            
            2,678,059
            
            $
            2,678
            
            
            6,380
            
            $
            6
            
            
            53,073
            
            $
            53
            
            $
            78,557,545
            
            $
            (24,661,237
            )
            $
            53,899,045








F-4




**GLOBALOPTIONS
      GROUP, INC. AND SUBSIDIARIES**


**Consolidated
      Statements of Stockholders' Equity**


**For
      the Year Ended December 31, 2005**








**Series
                A Convertible**
            
            **Series
                B Convertible**
            
            **Additional**
            
            
            
            **Total****Common
                Stock**
            
            **Preferred
                Stock**
            
            **Preferred
                Stock**
            
            **Paid-in**
            
            **Accumulated**
            
            **Stockholders'****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Capital**
            
            **Deficit**
            
            **Equity**Balance,
                January 1, 2005
            
            
            1,166,416
            
            $
            1,166
            
            
            -
            
            $
            -
            
            
            -
            
            $
            -
            
            $
            3,350,496
            
            $
            (3,245,227
            )
            $
            106,435Issuance
                of stock optionsfor
                services
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            157,005
            
            
            -
            
            
            157,005Amortization
                of deferredconsulting
                fees
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            16,819
            
            
            -
            
            
            16,819Issuance
                of common stock inconnection
                with exercise ofwarrants
                for cash
            
            
            22,059
            
            
            22
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            119,978
            
            
            -
            
            
            120,000Issuance
                of common stock   inconnection
                with exercise of cashlesswarrants
            
            
            2,572
            
            
            3
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (3
            )
            
            -
            
            
            -Issuance
                of common stock uponconversion
                of principal and interestof
                convertible note payable -stockholder
            
            
            45,236
            
            
            45
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            267,038
            
            
            -
            
            
            267,083Issuance
                of common stockfor
                services
            
            
            25,290
            
            
            25
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            487,825
            
            
            -
            
            
            487,850Issuances
                of Series Aconvertible
                preferred stock
            
            
            -
            
            
            -
            
            
            7,750
            
            
            8
            
            
            -
            
            
            -
            
            
            7,749,992
            
            
            -
            
            
            7,750,000Offering
                costs in connection withprivate
                placements of Series Aconvertible
                preferred stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (548,781
            )
            
            -
            
            
            (548,781
            )Outstanding
                common stock ofGlobalOptions
                Group, Inc. atdate
                of reverse merger
            
            
            549,750
            
            
            550
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (550
            )
            
            -
            
            
            -Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (3,569,973
            )
            
            (3,569,973
            )Balance,
                December 31, 2005
            
            
            1,811,323
            
            $
            1,811
            
            
            7,750
            
            $
            8
            
            
            -
            
            $
            -
            
            $
            11,599,819
            
            $
            (6,815,200
            )
            $
            4,786,438




F-5





**GLOBALOPTIONS
      GROUP, INC. AND SUBSIDIARIES**


**Consolidated
      Statements of Cash Flows**








For
                the Years EndedDecember
                312006
            
            2005Cash
                flows from operating activities:Net
                loss
            
            $
            (17,846,037
            )
            $
            (3,569,973
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Provision
                for bad debts
            
            
            653,623
            
            
            254,224Depreciation
                and amortization
            
            
            2,109,544
            
            
            208,057Deferred
                rent
            
            
            136,476
            
            
            35,582Impairment
                of goodwill and intangible assets
            
            
            3,144,309
            
            
            -Stock
                based compensation
            
            
            3,110,308
            
            
            661,674Amortization
                of debt discounts on convertible notes payable
            
            
            7,522,602
            
            
            -Amortization
                of deferred financing costs
            
            
            2,694,500
            
            
            -Changes
                in operating assets:Accounts
                receivable
            
            
            (11,050,971
            )
            
            (346,433
            )Prepaid
                expenses and other current assets
            
            
            (12,382
            )
            
            (43,844
            )Security
                deposits and other assets
            
            
            (165,215
            )
            
            34,745Changes
                in operating liabilites:Accounts
                payable
            
            
            494,716
            
            
            (167,286
            )Deferred
                revenues
            
            
            (47,546
            )
            
            -Accrued
                compensation and related benefits
            
            
            1,424,959
            
            
            (2,005
            )Due
                to former stockholder of CBR
            
            
            (441,602
            )
            
            (201,829
            )Due
                to former members of JLWA for earnout
            
            
            5,227,985
            
            
            -Other
                current liabilites
            
            
            728,255
            
            
            (113,522
            )Total
                adjustments
            
            
            15,529,561
            
            
            319,363Net
                cash used in operating activities
            
            
            (2,316,476
            )
            
            (3,250,610
            )Cash
                flows from investing activities:Purchases of property and equipment
            
            
            (286,871
            )
            
            (29,699
            )Purchase of client lists
            
            
            (65,000
            )
            
            -Acquisition of CBR, less cash acquired of $26,086
            
            
            -
            
            
            (4,362,876
            )Acquisition of Safir, less cash acquired of $447,115
            
            
            (1,693,534
            )
            
            -Acquisition of JLWA
            
            
            (6,003,540
            )
            
            -Acquisition of Hyperion Risk, less cash acquired of
                $79,592
            
            
            (2,202,034
            )
            
            -Net
                cash used in investing activities
            
            
            (10,250,979
            )
            
            (4,392,575
            )








F-6





**GLOBALOPTIONS
      GROUP, INC. AND SUBSIDIARIES**


**Consolidated
      Statements of Cash Flows, continued**








For
                the Years EndedDecember
                31,2006
            
            2005Cash
                flows from financing activities:Net
                (repayments of) proceeds from line of credit
            
            $
            (543,453
            )
            $
            437,550Proceeds
                from issuance of Series A convertible preferred stock
            
            
            -
            
            
            7,750,000Proceeds
                from convertible notes payable
            
            
            45,050,000
            
            
            -Repayment
                of convertible notes payable
            
            
            (8,181,681
            )
            
            -Repayment
                of notes payable
            
            
            (819,132
            )
            
            -Offering
                costs in connection with private placementsof
                Series A convertible preferred stock
            
            
            -
            
            
            (548,781
            )Deferred
                financing costs
            
            
            (1,933,500
            )
            
            -Net
                cash provided by financing activities
            
            
            33,572,234
            
            
            7,638,769Net
                increase (decrease) in cash and cash equivalents
            
            
            21,004,779
            
            
            (4,416
            )Cash
                and cash equivalents - beginning of year
            
            
            528,602
            
            
            533,018Cash
                and cash equivalents - end of year
            
            $
            21,533,381
            
            $
            528,602Supplemental
                disclosure of cash flow information:Cash
                paid during the year for interest
            
            $
            100,131
            
            $
            56,299Supplemental
                disclosures of non-cash investing and financing
                activities:Common
                stock of GlobalOptions Inc. issued upon conversion ofSeries
                A convertible prefered stock
            
            $
            86
            
            $
            -Common
                stock of GlobalOptions, Inc. issued upon conversion ofconvertible
                note payable - stockholder and related accrued interest
            
            $
            -
            
            $
            267,083Common
                stock issued upon the cashless exercise of warrants
            
            $
            -
            
            $
            21Issuance
                of Series B convertible preferred stock upon exchange ofof
                notes payable and accrued interest
            
            $
            46,150,732
            
            $
            -Deferred
                financing costs incurred through the issuance ofconvertible
                notes payable
            
            $
            761,000
            
            $
            -








F-7




**GLOBALOPTIONS
      GROUP, INC. AND SUBSIDIARIES**


**Consolidated
      Statements of Cash Flows, continued**





For
                the Years EndedDecember
                31,2006
            
            2005Supplemental
                non-cash investing and financing activity - acquisition of
                JLWA:Assets
                acquired and liabilities assumed:Current
                assets
            
            $
            4,345,154
            
            $
            -Property
                and equipment
            
            
            185,235
            
            
            -Intangible
                assets
            
            
            4,930,000
            
            
            -Goodwill
                recognized on purchase business combination
            
            
            883,183
            
            
            -Security
                deposits and prepaid expenses
            
            
            100,475
            
            
            -Accounts
                payable, accrued expenses and deferred revenues
            
            
            (2,040,507
            )
            
            -Total
                purchase price
            
            
            8,403,540
            
            
            -Less:
                Cash paid to acquire JLWA
            
            
            (6,003,540
            )
            
            -Non-cash
                consideration to seller
            
            $
            2,400,000
            
            $
            -Non-cash
                consideration, consisted of:Common
                stock issued to acquire JLWA
            
            $
            2,000,000
            
            $
            -Note
                payable issued to seller
            
            
            400,000
            
            
            -Total non-cash consideration
            
            $
            2,400,000
            
            $
            -Supplemental
                non-cash investing and financing activity - acquisition of
                Safir:Assets
                acquired and liabilities assumed:Current
                assets (including cash of $447,115)
            
            $
            2,852,888
            
            $
            -Property
                and equipment
            
            
            180,906
            
            
            -Intangible
                assets
            
            
            1,770,000
            
            
            -Goodwill
                recognized on purchase business combination
            
            
            11,534,765
            
            
            -Security
                deposits and prepaid expenses
            
            
            156,525
            
            
            -Accounts
                payable, accrued expenses and deferred revenues
            
            
            (1,179,435
            )
            
            -Total
                purchase price
            
            
            15,315,649
            
            
            -Less:
                Cash acquired
            
            
            (447,115
            )
            
            -Less:
                Cash paid to acquire Safir
            
            
            (1,493,534
            )
            
            -Less:
                Cash paid as finders fee
            
            
            (200,000
            )
            
            -Non-cash
                consideration to seller
            
            $
            13,175,000
            
            $
            -Non-cash
                consideration, consisting of:Common
                stock issued to acquire Safir
            
            
            6,000,000
            
            
            -Common
                stock issued as finders fee
            
            
            175,000
            
            
            -Note
                payable issued to seller
            
            
            7,000,000
            
            
            -Total
                non-cash consideration
            
            $
            13,175,000
            
            $
            -








F-8




**GLOBALOPTIONS
      GROUP, INC. AND SUBSIDIARIES**


**Consolidated
      Statements of Cash Flows, continued**





For
                the Years EndedDecember
                31,2006
            
            2005Supplemental
                non-cash investing and financing activity - acquisition of Secure
                Source:Assets
                acquired and liabilities assumed:Property
                and equipment
            
            $
            101,459
            
            $
            -Intangible
                assets
            
            
            1,111,000
            
            
            -Goodwill
                recognized on purchase business combination
            
            
            2,107,867
            
            
            -Other
                assets
            
            
            1,795
            
            
            -Accounts
                payable, accrued expenses and deferred revenues
            
            
            (109,621
            )
            
            -Non-cash
                consideration to seller
            
            $
            3,212,500
            
            $
            -Non-cash
                consideration, consisting of:Common
                stock issued to acquire Secure Source
            
            $
            500,000
            
            $
            -Note
                payable issued to seller
            
            
            2,712,500
            
            
            -Total non-cash consideration
            
            $
            3,212,500
            
            $
            -Supplemental
                non-cash investing and financing activity - acquisition of Hyperion
                Risk:Assets
                acquired and liabilities assumed:Current
                assets (including cash of $79,592)
            
            $
            878,218
            
            $
            -Property
                and equipment
            
            
            60,958
            
            
            -Intangible
                assets
            
            
            687,690
            
            
            -Goodwill
                recognized on purchase business combination
            
            
            2,815,368
            
            
            -Other
                assets
            
            
            14,100
            
            
            -Accounts
                payable, accrued expenses and deferred revenues
            
            
            (674,708
            )
            
            -Total purchase price
            
            $
            3,781,626
            
            $
            -Less:
                Cash acquired
            
            
            (79,592
            )Less:
                Cash paid to acquire Hyperion Risk
            
            
            (2,202,034
            )
            
            -Non-cash
                consideration to seller
            
            $
            1,500,000
            
            $
            -Non-cash
                consideration, consisting of:Common
                stock issued to acquire Hyperion Risk
            
            $
            1,500,000
            
            $
            -Supplemental
                non-cash investing and financing activity - acquisition of
                CBR:Current
                assets acquired (including cash of $26,086)
            
            $
            -
            
            $
            1,573,706Property
                and equipment acquired
            
            
            -
            
            
            153,802Intangible
                assets acquired
            
            
            -
            
            
            1,192,000Goodwill
                recognized on purchase business combination
            
            
            -
            
            
            4,264,612Security
                deposits acquired
            
            
            -
            
            
            16,032Current
                liabilities assumed with acquisition
            
            
            -
            
            
            (1,348,627
            )Due
                to former stockholder of CBR assumed with acquisition
            
            
            -
            
            
            (643,431
            )Total
                purchase price
            
            
            -
            
            
            5,208,094Less:   
                Cash acquired
            
            
            -
            
            
            (26,086
            )Less:   
                Cash paid to acquire business
            
            
            -
            
            
            (4,362,876
            )Non-cash
                consideration to seller - note payable to seller
            
            $
            -
            
            $
            819,132




F-9
 **GLOBALOPTIONS
          GROUP, INC. AND SUBSIDIARIES**
 **Notes
          To Consolidated Financial Statements**




**1. 
      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, with the approval of the members
        of the LLC, the LLC converted to a corporation under Delaware law with the
        name
        GlobalOptions, Inc. (“GlobalOptions”).
  On
        June
        24, 2005, GlobalOptions consummated a “reverse merger” transaction, with
        Creative Solutions with Art, Inc., (“Creative Solutions”) a Nevada corporation,
        and the newly formed GlobalOptions Acquisition Corp., (“GlobalOptions
        Acquisition”) a Delaware corporation, a wholly-owned subsidiary of Creative
        Solutions.  GlobalOptions Acquisition merged with and into GlobalOptions
        with the result that on June 24, 2005, GlobalOptions became the subsidiary
        of a
        public company.
  Following
        the merger, Creative Solutions changed its name to GlobalOptions Group, Inc.
        (“GlobalOptions Group” or the “Company”) and began trading on the OTC (over the
        counter) Bulletin Board.  As a result of the reverse merger, GlobalOptions
        became the wholly-owned subsidiary of the newly renamed GlobalOptions Group,
        with GlobalOptions’ former stockholders acquiring a majority of the outstanding
        shares of the Company’s common stock, par value $.001 per share, and
        GlobalOption’s officers and directors replaced the officers and directors of
        Creative Solutions.  The reverse merger was consummated under Delaware law
        and pursuant to an Agreement and Plan of Merger, dated June 24, 2005 (the
“Merger Agreement”).  For accounting purposes, the reverse merger has been
        treated as an acquisition of Creative Solutions by GlobalOptions and a
        recapitalization of GlobalOptions.  The historical consolidated financial
        statements prior to June 24, 2005 are those of GlobalOptions.  Pursuant to
        the reverse merger, GlobalOptions has restated its statements of stockholders’
equity on a recapitalization basis, so that all accounts are now presented
        as if
        the reverse merger had occurred at the beginning of the earliest period
        presented.
  The
        Company is a provider of risk mitigation services to Fortune 500 corporations,
        governmental organizations 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.
  On
        August
        14, 2005, the Company acquired Confidential Business Resources,
        Inc. (“CBR”), a privately-held nationwide investigations firm based in
        Nashville, Tennessee (See Note 4).
  On
        March
        10, 2006, the Company acquired James Lee Witt Associates, LLC (“JLWA”), a
        nationwide crisis and emergency management consulting firm headquartered
        in
        Washington, D.C. with three additional offices nationwide (See Note
        4).
  On
        May
        12, 2006 the Company acquired Safir Rosetti, LLC (“Safir”). Safir is a security
        consulting, investigative and intelligence firm headquartered in New York
        City
        (See Note 4).
 
 On
        May
        12, 2006, the Company acquired substantially all of the business and certain
        assets of Secure Source, Inc. (“Secure Source”), a Delaware corporation. Secure
        Source is an international risk consulting firm with offices in Washington,
        D.C.
        and Dallas, Texas (See Note 4).
 
 On
        August
        10, 2006, the Company acquired substantially all of the business and assets
        of
        Hyperion Risk, Inc. (“Hyperion Risk”). Hyperion Risk is a security consulting,
        investigative and intelligence firm with its central corporate office located
        in
        Orlando, Florida (See Note 4).
  F-10
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **1. 
        Nature of Operations, continued**
 
 Effective
        on December 8, 2006, as approved by a special meeting of stockholders held
        on
        December 5, 2006, the Company became a Delaware Corporation. In connection
        with
        the chartering of the Company in the state of Delaware, the authorized capital
        stock was increased to 115,000,000 shares, with 15,000,000 shares authorized
        as
        preferred stock, and 100,000,000 shares authorized as common stock.
 
 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 20).
 
 On
        February 28, 2007, GlobalOptions Goup acquired substantially all of the business
        and assets of Facticon, Inc. (“Facticon”), a Pennsylvania corporation.
        Facticon is a surveillance, investigative and intelligence firm based in
        Chadds
        Ford, Pennsylvania (See Note 20).
 
 On
        February 28, 2007, GlobalOptions Group purchased the common stock of The
        Bode
        Technology Group, Inc. ("Bode"), a Virginia corporation. Bode is a leading
        provider forensic DNA analysis and proprietary DNA collection tools. Bode
        is
        based in Lorton, Virginia (See Note 20).
 
 On
        March
        6, 2007 the Company executed a 1 for 8 reverse stock split and began trading
        under the symbol GOPG.OB. Accordingly, all share and per share information
        has
        been restated within this report.
 
 **2.
        Principles of Consolidation**
  The
        consolidated financial statements of the Company include the consolidated
        financial statements of GlobalOptions Group, Inc. and its wholly owned
        subsidiary, GlobalOptions, Inc. All material intercompany accounts and
        transactions are eliminated in consolidation (See Note 20).
 
 **3. 
        Summary of Significant Accounting Policies**
 
 ***Use
        of Estimates***
 
 The
        preparation of financial statements in conformity with United States generally
        accepted accounting principles requires management to makes 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.
 
 ***Concentrations
        of Credit Risk***
 
 Cash:
        The
        Company maintains its cash with primarily two financial institutions,
        which exceeded the federally insured limit throughout the year. At December
        31,
        2006, the Company had cash on deposit of approximately $22,086,000 in excess
        of
        federally insured limits.
 
 Accounts
        Receivable: The number of clients that comprise the Company’s client base, along
        with the different industries 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, although the
        Company
        does require retainers, up-front deposits or irrevocable letters-of-credit
        in
        certain situations. 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.
 
 
  F-11
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
 
 **3. 
        Summary of Significant Accounting Policies, continued**
 
 ***Concentrations
        of Credit Risk, continued***
 
 Cash
        Equivalents: The Company considers all short-term investments with a maturity
        of
        three months or less when purchased to be cash equivalents.
 
 ***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.
 
 ***Intangible
        Assets***
  In
        accordance with the requirements of Statement of Financial Accounting Standards
        (“SFAS”) No. 141 (“SFAS No. 141”), “Business Combinations”, the Company
        recognizes certain intangible assets acquired in acquisitions, primarily
        goodwill, trade names, covenants not to compete, and
        client relationships.
 
 ***Goodwill
        and Impairment***
  The
        Company accounts for its goodwill in accordance with SFAS No. 142,
“Goodwill and Other Intangible Assets” ** (“SFAS
        142”). Under this standard, the Company is required to perform a goodwill impairmenttest at
        least on an annual basis and whenever events or changes in circumstances
        indicate that the carrying value may not be recoverable from estimated future
        cash flows. The testing for impairmentof goodwillis
        performed in two steps: (1) potential impairmentis
        identified by comparing the fair value of a reporting unit (based on market
        capitalization, undiscounted 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.
 
 ***Deferred
        Financing Costs***
  The
        costs
        incurred in connection with issuance of certain notes payable (See Note 9)
        was
        capitalized to deferred financing costs and was amortized over the term of
        the
        related debt.
 
 ***Investment
        in Company***
 
 The
        Company maintains a 50% ownership interest in a risk management company
        operating in Europe and accounts for its investment using the equity method.
        In
        accordance with FASB Interpretation No. 46R, “Consolidation of Variable Interest
        Entities” (“FIN 46R”), the Company has evaluated its relationship with this
        entity which is related to the Company by virtue of common ownership and
        has
        determined that that it is not a variable interest entity and therefore will
        not
        be consolidating this entity with the Company’s consolidated financial
        statements.
  F-12
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **3. 
        Summary of Significant Accounting Policies, continued** ******
 
 ***Revenue
        Recognition***
 
 Revenue
        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 are 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 certain foreign accounts, revenues are recognized and
        the
        related expenses are recorded only after the receipt in cash of the revenue
        amounts. The Company incurs no obligations to third parties for expenses
        related
        to these certain foreign accounts until such time that invoiced revenues
        are
        received in cash. Revenues received in advance of when earned are credited
        to
        the deferred revenues account.
 
 ***Advertising***
 
 The
        Company expenses the cost of advertising as incurred. Advertising expense
        for
        the years ended December 31, 2006 and 2005 was approximately $62,000 and
        $26,000, respectively.
 
 ***Income
        Taxes***
 
 The
        Company accounts for income taxes using the liability method as required
        by SFAS
        No. 109, “Accounting for Income Taxes” (“SFAS 109”). Under this method, deferred
        tax assets and liabilities are determined based on differences between their
        financial reporting and tax basis of assets and liabilities. The Company
        establishes a valuation allowance for deferred tax assets. The Company was
        not
        required to provide for a provision for income taxes for the years ended
        December 31, 2006 and 2005, respectively, as a result of losses incurred
        during
        the years.
 
 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.
  ***Stock-Based
          Compensation***
 
 The
          Company accounts for equity instruments issued to non-employees in accordance
          with the provisions of SFAS 123 “Accounting for Stock Based Compensation” (SFAS
          123”) and the Emerging Issues Task Force (“EITF”) Issue No.  96-18, 
“Accounting  for  Equity  Instruments  That Are Issued to
          Other Than  Employees  for  Acquiring,  or In 
Conjunction  with Selling,  Goods or Services” (“EITF 96-18”) which
          require a 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 accounted for
          under EITF 96-18 and is reflected within general and administrative
          expenses.
 
 The
          Company accounts for stock-based compensation in accordance with the provisions
          of SFAS 123R “Share Based Payment” (“SFAS
          123R”).
 
 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 during the years presented. Common stock
        equivalents, consisting of stock options, warrants and Series A and B
        convertible preferred stock, as further discussed in the notes to the
        consolidated financial statements, were not included in the calculation of
        the
        diluted loss per share because their inclusion would have been
        anti-dilutive.  The total common shares issuable upon the exercise of stock
        options, warrants, and the Series A and B convertible preferred stock as
        of
        December 31, 2006 and 2005 was 7,611,163 and 1,552,653 respectively.
  F-13
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
 
 **3. 
        Summary of Significant Accounting Policies, continued**
 
 ***Recent
        Accounting Pronouncements***
  In
        February 2006, the Financial Accounting Standards Board (“FASB”) issued
        SFAS No. 155 - Accounting for Certain Hybrid Financial Instruments (“SFAS 155”),
        which eliminates the exemption from applying SFAS 133 to interests in
        securitized financial assets so that similar instruments are accounted for
        similarly regardless of the form of the instruments. SFAS 155 also allows
        the
        election of fair value measurement at acquisition, at issuance, or when a
        previously recognized financial instrument is subject to a remeasurement
        event.
        Adoption is effective for all financial instruments acquired or issued after
        the
        beginning of the first fiscal year that begins after September 15, 2006.
        Early adoption is permitted. The adoption of SFAS 155 is not expected to
        have a
        material effect on the Company’s consolidated financial position, results of
        operations or cash flows. ****
 
 In
        March 2006, the FASB issued SFAS No. 156 - Accounting for Servicing of
        Financial Assets (“SFAS 156”), which requires all separately recognized
        servicing assets and servicing liabilities be initially measured at fair
        value.
        SFAS 156 permits, but does not require, the subsequent measurement of servicing
        assets and servicing liabilities at fair value. Adoption is required as of
        the
        beginning of the first fiscal year that begins after September 15, 2006.
        Early adoption is permitted. The adoption of SFAS 156 is not expected to
        have a
        material effect on the Company’s consolidated financial position, results of
        operations or cash flows.
 
 In
        July
        2006,  the FASB  issued  FASB  Interpretation  No.
        48,  "Accounting  for Uncertainty in Income Taxes - an 
interpretation  of FASB Statement No. 109" ("FIN 48"),  which 
clarifies the accounting  for  uncertainty  in tax
        positions.  This Interpretation  requires  that the Company
        recognize in its consolidated financial  statements,  the impact
        of a tax  position,  if that  position  is more  likely
        than not of being sustained  on  audit,  based  on 
the  technical  merits  of the  position.  The
        provisions of FIN 48 are effective as of the beginning of the
        Company's 2007 fiscal year, with the cumulative effect of the change in
        accounting principle recorded as an adjustment to opening retained
        earnings.  The Company is currently evaluating the impact of adopting
        FIN 48 on its consolidated financial statements.
 
 In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
        No. 157”).  This Statement defines fair value, establishes a framework for
        measuring fair value and expands disclosure of fair value measurements. 
SFAS No. 157 applies under other accounting pronouncements that require or
        permit fair value measurements and accordingly, does not require any new
        fair
        value measurements.  SFAS No. 157 is effective for financial statements
        issued for fiscal years beginning after November 15, 2007.  The
        Company is in the process of evaluating the impact that the adoption of SFAS
        No.
        157 will have on its consolidated financial position results of operations
        and
        financial condition.
 
 In
        September 2006, the staff of the SEC issued Staff Accounting Bulletin No.
        108
        ("SAB 108") which provides interpretive guidance on how the effects of the
        carryover or reversal of prior year misstatements should be considered in
        quantifying a current year misstatement. SAB 108 becomes effective in fiscal
        2007. Adoption of SAB 108 is not expected to have a material impact on the
        Company's consolidated financial position, results of operations or cash
        flows.
  F-14
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **3. 
        Summary of Significant Accounting Policies, continued**
 
 ***Recent
        Accounting Pronouncements,*** **continued** ******
 
  In
        December 2006, the FASB issued FASB Staff Position (“FSP”) EITF 00-19-2
“Accounting for Registration Payment Arrangements” (“FSP EITF 00-19-2”) which
        specifies that the contingent obligation to make future payments or otherwise
        transfer consideration under a registration payment arrangement should be
        separately recognized and measured in accordance with SFAS No. 5,
“Accounting for Contingencies.”    Adoption of FSP EITF 00-19-02
        is required for fiscal years beginning after December 15, 2006, and is not
        expected to have a material impact on the Company's consolidated financial
        position, results of operations or cash flows.
 
 In
        February 2007, the FASB issued Statement of Financial Accounting Standard
        159
“The Fair Value Option for Financial Assets and Financial Liabilities -
        Including an amendment of FASB Statement No. 115”, 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 FASB Statement No. 157, Fair Value Measurements.
        The
        Company is currently evaluating the expected effect of SFAS 159 on its
        consolidated financial statements and is currently not yet in a position
        to
        determine such effects.
 
 ***Reclassifications***
 
 During
        the year ended December 31, 2006, the Company reclassified certain components
        of
        the stockholders’ equity section to reflect the elimination of deferred
        compensation arising from unvested share-based compensation pursuant
        to the requirements of Staff Accounting Bulletin No. 107, regarding Statement
        of
        Financial Accounting Standards No. 123(R), “Share-Based Payment.” This deferred
        compensation was previously recorded as an increase to additional paid-in
        capital with a corresponding reduction to stockholders’ equity for such deferred
        compensation. This reclassification has no effect on net loss available to
        common stockholders or total stockholders’ equity as previously
        reported. The Company will record an increase to additional paid-in
        capital as the share-based payments vest.
 
 **4.** **Acquisition** **s**
 
 ***Acquisition
        of CBR***
 
 On
        August
        14, 2005, GlobalOptions purchased substantially all of the assets and business
        activities of CBR. The aggregate purchase price paid for CBR’s assets and
        business was approximately $5,208,000.
 
 The
        aggregate purchase price of approximately $5,208,000 was subject to certain
        adjustments through August 13, 2006 to the opening balance working capital,
        as
        such purchase price adjustments were defined in the agreement. The aggregate
        purchase price of $5,208,000 consisted of cash in the amount of $4,246,000
        (net
        of cash acquired of $26,000), a broker fee of approximately $143,000 and
        a note
        payable to the seller in the amount of $819,000 paid August 14, 2006. The
        note
        payable to the seller was non-interest bearing and was unsecured.
  F-15
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **4.** **Acquisitions,
        continued**
 
 ***Acquisition
        of CBR, continued***
  The
        assets and liabilities of CBR were recorded in the Company’s consolidated
        balance sheet at their fair values at the date of acquisition. As part of
        the
        purchase of CBR on August 14, 2005, the Company acquired identifiable intangible
        assets of approximately $1,192,000. Of the identifiable intangibles acquired,
        $80,000 has been assigned to trade names, $52,000 to developed technology,
        $550,000 to customer relationships, and $510,000 to non-compete agreements.
        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
                  Period
                in
                  yearsTrade
                  names
              
              5
                  yearsDeveloped
                  technology
              
              3
                  yearsNon-compete
                  agreements
              
              3
                  yearsClient
                  relationships
              
              5
                  years
 
 The
        following details the allocation of the purchase price for the acquisition
        of
        CBR:
 
 Fair
                  ValueCash
              
              $
              26,086Accounts
                  receivable
              
              
              1,527,071Prepaid
                  expenses
              
              
              20,549Property
                  and equipment
              
              
              153,802Security
                  deposits
              
              
              16,032Intangible
                  asset - trade names
              
              
              80,000Intangible
                  asset - developed technology
              
              
              52,000Intangible
                  asset - non-compete agreements
              
              
              510,000Intangible
                  asset - client relationships
              
              
              550,000Accounts
                  payable
              
              
              (900,175
              )Accrued
                  compensation and related benefits
              
              
              (413,457
              )Due
                  to former stockholder of CBR
              
              
              (643,431
              )Other
                  current liabilities
              
              
              (34,995
              )Net
                  fair values assigned to assets acquired andliabilities
                  assumed
              
              
              968,572Goodwill
              
              
              4,264,612Total
              
              $
              5,208,094
 
  F-16
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **4.**
              **Acquisitions,
                  continued**
 
 ***Acquisition
        of CBR, continued***
 
 The
        following represents a summary of the purchase price consideration:
 
 Cash
                  (net of $26,086 cash acquired)
              
              $
              4,246,092Broker
                fee incurred
                - included as part of purchase price
              
              
              142,870Note
                  payable
              
              
              819,132Total
                  Purchase Price Consideration
              
              $
              5,208,094
 
 The
        results of operations for CBR for the year ended December 31, 2006 and for
        the
        period from August 15, 2005 to December 31, 2005, are reflected in the Company’s
        results for the years ended December 31, 2006 and December 31, 2005,
        respectively, in the accompanying consolidated statements of operations.
 
 ***Acquisition
        of JLWA***
  The
        acquisition of JLWA was made pursuant to a certain Asset Purchase Agreement
        (the
“JLWA Agreement”) dated January 13, 2006, as amended, between GlobalOptions
        Group and JLWA. The aggregate purchase price paid for JLWA’s assets and business
        was $8,404,000, after finalization and payment of a purchase price adjustment
        of
        $546,000 on June 9, 2006. The aggregate purchase price consisted of a cash
        payment at closing of $3,600,000, a cash payment of $1,857,000 to pay off
        JLWA’s
        line of credit balance and related accrued interest, the issuance of 102,459
        shares of common stock of GlobalOptions Group, valued at $2,000,000, a 4.6%
        note
        payable to JLWA of $400,000 that was paid on March 9, 2007, and a non-interest
        bearing working capital purchase price adjustment obligation of $546,000
        that
        was paid on June 9, 2006.
  The
        assets and liabilities of JLWA 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 JLWA on March 10, 2006, the Company acquired identifiable
        intangible assets of approximately $4,930,000.  Of the identifiable
        intangibles acquired, $1,870,000 has been assigned to trade names and $3,060,000
        to client relationships. 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
                  yearsClient
                  relationships
              
              3
                  years
 
  F-17
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
 
 **4.**
              **Acquisitions,
                  continued**
 
 ***Acquisition
        of JLWA, continued***
  The
        following details the allocation of the final purchase price for the acquisition
        of JLWA, after the aforementioned purchase price adjustment recorded on June
        9,
        2006:
 
 Fair
                  ValueAccounts
                  receivable
              
              $
              4,345,154Prepaid
                  expenses
              
              
              35,154Property
                  and equipment
              
              
              185,235Security
                  deposits
              
              
              65,321Intangible
                  asset - trade names
              
              
              1,870,000Intangible
                  asset - client relationships
              
              
              3,060,000Accounts
                  payable
              
              
              (1,830,599
              )Deferred
                  revenues
              
              
              (116,917
              )Accrued
                  expenses
              
              
              (92,991
              )Net
                  fair values assigned to assets acquired andliabilities assumed
              
              
              7,520,357Goodwill
              
              
              883,183Total
              
              $
              8,403,540
  The
        following presents a summary of the purchase price consideration for the
        purchase of JLWA:
 
 Cash
              
              $
              5,457,296Note
                  payable
              
              
              400,000Working
                  capital purchase price adjustment, in cash
              
              
              546,244Value
                  of common stock issued
              
              
              2,000,000Total
                  Purchase Price Consideration
              
              $
              8,403,540
 
 The
        note
        payable of $400,000 that was paid on March 9, 2007 and bore interest at a
        rate
        of 4.6% per annum and is subordinated to the Company’s line of credit (See Note
        8).   On June 8, 2006, in connection with the finalization of the
        working capital adjustment for the purchase of JLWA, the Company recorded
        an
        adjustment of approximately $1,779,000, primarily related to uncollected
        accounts receivable, to reduce the total purchase price to approximately
        $8,404,000 and paid the final adjusted note and obligation payable of $546,244.
        In addition, the agreement provides for JLWA to obtain up to an additional
        $15,400,000 in earnout payments upon the attainment of certain revenue goals
        subsequent to the closing of the transaction and the continued employment
        of
        James Lee Witt, the former president and chief executive officer or JLWA.
        At
        December 31, 2006, the amount due to the former members of JLWA for the Earnout
        liability due under the Agreement was approximately $5,228,000 and has been
        recorded in selling and marketing expenses in the accompanying
        consolidated statement of operations (See Note 10).
 
 The
        results of operations for JLWA for the period from March 10, 2006 to December
        31, 2006, are reflected in the Company’s results for the year ended December 31,
        2006 in the accompanying consolidated statement of operations.
   F-18
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
 
 **4.**
              **Acquisitions,
                  continued**
 
 ***Acquisition
        of Safir***
 
 On
        May
        12, 2006 GlobalOptions, a wholly-owned subsidiary of the Company, acquired
        substantially all of the business and assets of Safir, a Delaware limited
        liability company. Safir is a security consulting, investigative and
        intelligence firm headquartered in New York City with seven additional offices
        nationwide.
 
 The
        acquisition was made pursuant to a certain Asset Purchase Agreement (the
“Safir
        Agreement”) dated January 27, 2006, as amended on May 12, 2006. The aggregate
        purchase price paid for Safir’s
        assets and business was approximately $15,300,000 consisting of $6,000,000
        in 8%
        convertible promissory notes paid on June 29, 2006, $1,000,000 in 4% promissory
        notes of the Company (“4% Escrow Promissory Note”), due May 12, 2007, $6,000,000
        in the common stock of GlobalOptions Group, consisting of 375,000 shares
        at
        $16.00 per share, payments to retire certain indebtedness of $1,940,649 of
        Safir
        previously advanced and a finders fee of $375,000 paid to QuanStar Group,
        LLC, a
        related party. The Company shall prepay the obligation under the 4% Escrow
        Promissory Note in the amount of 1/3 of the collected amount of the purchased
        accounts receivable. The prepayments under the 4% Escrow Promissory Note
        were
        made on July 20, 2006, September 21, 2006, November 14, 2006, February 7,
        2007
        and March 12, 2007 and the Company paid $442,000, $164,000, $114,000, $50,000
        and $40,000 in principal on the 4% promissory notes due on May 12,
        2007.
 
 The
        $6,000,000 8% convertible promissory note contained a feature that allowed,
        upon
        the election of the conversion option by the holder, for the holder to receive
        a
        premium of 10% of the note, just prior to conversion of the note into common
        stock. The Company recorded an adjustment of $600,000 for the value of this
        beneficial conversion premium feature as a conversion option liability in
        accordance with EITF 00-19 “Accounting for Derivative Financial Instruments
        Indexed to, and Potentially Settled in, a Company’s Own Stock” (“EITF 00-19”) as
        the number of shares of common stock required to repay the note were not
        fixed
        and determinable. The debt discount was amortized to expense over the term
        of
        the note. As of June 29, 2006, the Company had recorded $367,500 of amortization
        of the debt discount. On June 29, 2006, the Company repaid this debt in full.
        Upon extinguishment, the Company reclassified the conversion option liability
        to
        additional paid-in capital and the unamortized debt discount $232,500 was
        adjusted to loss on extinguishment of debt and classified as amortization
        of
        debt discount on convertible notes payable on the accompanying consolidated
        statement of operations for the year ended December 31, 2006.
  The
        assets and liabilities of Safir 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 Safir on May 12, 2006, the Company acquired identifiable
        intangible assets of approximately $1,770,000, consisting of a trade name
        for
        $420,000, $70,000 for the value of non-servicing agreements and $1,280,000
        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.
 
 The
        following details amortization periods for the identifiable, amortizable
        intangibles:
 
 Intangible
                  Asset Category
              
              Amortization
                  PeriodTrade
                  names
              
              10
                  yearsNon-compete
                  agreements
              
              3
                  yearsClient
                  relationships
              
              3
                  years
  F-19
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
 
 **4.
        Acquisitions, continued**
 
 ***Acquisition
        of Safir, continued***
 
 The
        following details the allocation of the purchase price for the acquisition
        of
        Safir:
  Fair
                  ValueCash
              
              $
              447,115Accounts
                  receivable
              
              
              2,405,773Prepaid
                  expenses
              
              
              107,729Property
                  and equipment
              
              
              180,906Intangible
                  assets - trade name
              
              
              420,000Intangible
                  assets - non-compete-agreements
              
              
              70,000Intangible
                  assets - client relationships
              
              
              1,280,000Security
                  deposits and other assets
              
              
              48,796Accounts
                  payable
              
              
              (487,383
              )Accrued
                  compensation and related benefits
              
              
              (393,773
              )Accrued
                  expenses
              
              
              (298,279
              )Net
                  fair values assigned to assets acquired andliabilities assumed
              
              
              3,780,884Goodwill
              
              
              11,534,765Total
              
              $
              15,315,649
  The
        following presents a summary of the purchase price consideration for the
        purchase of Safir:
 
 Cash
                  (net of cash acquired of $447,115)
              
              $
              1,940,649Notes
                  payable
              
              
              7,000,000Value
                  of common stock issued
              
              
              6,000,000Finders
                  fee paid in cash
              
              
              200,000Finders
                  fee paid in value of common stock issued
              
              
              175,000Total Purchase Price Consideration
              
              $
              15,315,649
 
 The
        results of operations for Safir for the period from May 12, 2006 to December
        31,
        2006, are reflected in the Company’s results for the year ended December 31,
        2006 in the accompanying consolidated statement of operations.
  F-20
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **4.
        Acquisitions, continued**
 
 ***Acquisition
        of Secure Source***
 
 On
        May
        12, 2006, the Company acquired substantially all of the business and certain
        assets of Secure Source, a Delaware corporation.
 
 The
        acquisition was made pursuant to a certain Asset Purchase Agreement dated
        May
        12, 2006, (the "Secure Source Agreement"), between the Company, Secure Source,
        Marian E. Nicastro and David W. Nicastro. The aggregate purchase price paid
        for
        Secure Source’s assets and business of $3,212,000 consisted of $750,000 in 5%
        promissory notes due May 12, 2009, $1,462,500 in 3% promissory notes that
        were
        paid on June 29, 2006, $500,000 in 5% promissory notes due May 12, 2007 and
        $500,000 in common stock of GlobalOptions Group, consisting of 26,371 shares
        at
        $18.96 per share.
  The
        assets and liabilities of Secure Source 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 Secure Source on May 12, 2006, the
        Company acquired identifiable intangible assets of approximately $1,111,000,
        consisting of a trade name of $60,000, client relationships of $250,000 and
        the
        value of a non-compete agreement of $801,000. 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
                  yearsNon-compete
                  agreements
              
              3
                  yearsClient
                  relationships
              
              3
                  years
  The
        following details the allocation of the purchase price for the acquisition
        of
        Secure Source:
  Fair
                  ValueProperty
                  and equipment
              
              $
              101,459Other
                  assets
              
              
              1,795Intangible
                  asset - trade names
              
              
              60,000Intangible
                  asset - non-compete agreement
              
              
              801,000Intangible
                  asset - client relationships
              
              
              250,000Capital
                  leases
              
              
              (72,121
              )Client
                  advances
              
              
              (37,500
              )Net
                  fair values assigned to assets acquired andliabilities assumed
              
              
              1,104,633Goodwill
              
              
              2,107,867Total
              
              $
              3,212,500
 
  F-21
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **4.
        Acquisitions, continued**
 
 ***Acquisition
        of Secure Source, continued***
 
 The
        following presents a summary of the purchase price consideration for the
        purchase of Secure Source:
 
 Notes
                  payable
              
              $
              2,712,500Value
                  of common stock issued
              
              
              500,000Total
                  Purchase Price Consideration
              
              $
              3,212,500
 
 The
        results of operations for Secure Source for the period from May 12, 2006
        to
        December 31, 2006, are reflected in the Company’s results for the year ended
        December 31, 2006 in the accompanying consolidated statement of operations.
  ***Acquisition
        of Hyperion Risk***
 
 On
        August
        10, 2006, the Company acquired substantially all of the business and assets
        of
        Hyperion Risk, a Florida corporation.
 
 The
        acquisition was made pursuant to a certain Asset Purchase Agreement dated
        August
        10, 2006, (the "Hyperion Risk Agreement"), between the Company and Hyperion
        Risk. The aggregate purchase price paid was $3,782,000, which consisted of
        $2,282,000 in cash, of which $260,000 was used for the payment by the Company
        of
        Hyperion Risk's credit line balance , $1,500,000 consisting of 84,081 shares
        of
        the common stock of the Company, valued at $17.84 per share.
  The
        assets and liabilities of Hyperion Risk 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 Hyperion Risk on August 10, 2006,
        the Company acquired identifiable intangible assets of $687,690, consisting
        of a
        trade name of $60,000, developed technology of $277,690, client relationships
        of
        $240,000 and the value of a non-compete agreement of $110,000.  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
              
              5
                  yearsDeveloped
                  technology
              
              2.5
                  yearsClient
                  relationships
              
              5
                  yearsNon-compete
                  agreements
              
              3
                  years
  F-22
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **4.**  **Acquisitions, continued**
 
 ***Acquisition
        of Hyperion Risk - continued***
  The
        following details the allocation of the purchase price for the acquisition
        of
        Hyperion Risk:
  Fair
                  ValueCurrent
                  assets (including cash of $79,592)
              
              $
              878,218Property
                  and equipment
              
              
              60,958Security
                  deposits and other assets
              
              
              14,100Intangible
                  asset - non-compete agreement
              
              
              110,000Intangible
                  asset - trade names
              
              
              60,000Intangible
                  asset - developed technology
              
              
              277,690Intangible
                  asset - client relationships
              
              
              240,000Accounts
                  payable
              
              
              (334,950
              )Accrued
                  payroll and related benefits
              
              
              (77,858
              )Other
                  current liabilities
              
              
              (220,121
              )Deferred
                  rent obligations
              
              
              (41,779
              )Net
                  fair values assigned to assets acquired and
              
              
              966,258liabilities assumedGoodwill
              
              
              2,815,368Total
              
              $
              3,781,626
 
 
 The
        following presents a summary of the purchase price consideration for the
        purchase of Hyperion Risk:
 
 Cash
              
              $
              2,281,626Value
                  of common stock issued
              
              
              1,500,000Total
                  Purchase Price Consideration
              
              $
              3,781,626
 
 The
        results of operations for Hyperion Risk for the period from August 10, 2006
        to
        December 31, 2006, are reflected in the Company’s results for the year ended
        December 31, 2006 in the accompanying consolidated statement of operations.
  F-23
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **4.
        Acquisitions, continued**
 
 ***Unaudited
        Pro-Forma Financial Information***
 
 The
        following presents the unaudited pro-forma combined results of operations
        of the
        Company with CBR, JLWA, Safir, Secure Source and Hyperion Risk added in for
        the
        periods preceding the acquisition of their respective net assets. The respective
        acquisition dates are August 14, 2005 for CBR, March 10, 2006 for JLWA, May
        12,
        2006 for both Safir and Secure Source and August 10, 2006 for Hyperion
        Risk.
 
 For
                  the Years Ended December 31,2006
              
              2005Revenues
              
              $
              76,999,647
              
              $
              49,911,935Net
                  loss available to
                common
                  stockholders
              
              $
              (40,083,753
              )
              $
              (3,390,193
              )Pro-forma
                  basic and diluted
                net
                  loss per common share
              
              $
              (16.33
              )
              $
              (1.99
              )Pro-forma
                  weighted average
                common
                  shares   outstanding
                -
                  basic and diluted
              
              
              2,455,145
              
              
              1,702,086
  The
        pro
        forma combined results are not necessarily indicative of the results that
        actually would have occurred if the acquisitions of CBR, JLWA, Safir, Secure
        Source and Hyperion Risk had been completed as of the beginning of 2006 or
        2005,
        nor are they necessarily indicative of future consolidated results.
 
 **5. 
        Intangible Assets and Goodwill**
 
 Intangible
        assets consist of amounts related to the acquisitions of CBR, JLWA, Safir,
        Secure Source and Hyperion Risk.  Intangible assets at December 31, 2006
        consisted of the following:
  Amount
              
              Weighted
                  Average
                Amortization
                  PeriodTrade
                  names
              
              $
              2,490,000
              
              
              9.0Developed
                  technology
              
              
              329,690
              
              
              2.5Non-compete
                  agreements
              
              
              1,440,224
              
              
              3.0Client
                  relationships
              
              
              5,380,000
              
              
              3.79,639,914Less: accumulated amortization
              
              
              (2,009,489
              )Intangible
                  assets, net
              
              $
              7,630,425
  F-24
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **5. 
        Intangible Assets and Goodwill, continued**
 
 The
        estimated amortization of amortizable intangible assets for the five years
        ending December 31, 2011 is as follows:
  For
                  the Years
                Ending
                December
                  31,
              
              Total
              
              Trade
                  Names
              
              Developed
                Technology
              
              Non-CompeteAgreements
              
              Client
                Relationships2007
              
              $
              2,466,283
              
              $
              305,000
              
              $
              131,876
              
              $
              483,448
              
              $
              1,545,9582008
              
              
              2,291,375
              
              
              305,000
              
              
              125,575
              
              
              418,951
              
              
              1,441,8492009
              
              
              1,070,138
              
              
              305,000
              
              
              -
              
              
              150,468
              
              
              614,6712010
              
              
              636,633
              
              
              298,907
              
              
              -
              
              
              -
              
              
              337,7262011
              
              
              352,452
              
              
              230,677
              
              
              -
              
              
              -
              
              
              121,775Totals
              
              $
              6,816,881
              
              $
              1,444,584
              
              $
              257,451
              
              $
              1,052,867
              
              $
              4,061,979
 
 During
        the years ended December 31, 2006 and 2005, the Company recorded amortization
        expense related to the acquired amortizable intangibles of $1,872,169, and
        $137,320, respectively.  For the year ended December 31, 2006, the Company
        recorded a charge to impairment expense of $115,878 for the impairment of
        the
        value of a non-compete agreement.
  ***Goodwill
        Impairment***
  At
        December 31, 2006, the Company engaged an outside valuation specialist to
        assist
        the Company with the evaluation of its goodwill. The Company performed its
        annual impairment tests of goodwill for three of its reporting units: CBR
        -
        Investigations and Litigation Support, Safir - Risk Management
        and Security, and Witt - Crisis Management and Corporate Governance, as
        required under SFAS 142. As a result of these tests, the Company determined
        that
        the amount of goodwill recorded in connection with two of the three reporting
        units was impaired or not fully recoverable, as the current performance and
        future expectations do not support the carrying value of goodwill for these
        reporting units. The impairment affects CBR - Investigations and Litigation
        Support and Safir - Risk Management Security. As a result, the Company recorded
        a $3,028,533 impairment charge during the year ended December 31, 2006 of
        which
        $1,134,765 is for CBR - Investigations and Litigation Support segment and
        $1,893,768 is for Safir - Risk Management and Security segment .
  A
        summary
        of goodwill is shown below for the year ended December 31, 2006:
  CBR
                  -Investigation
              
              JLWA
                  - Crisis Management
              
              Safir
                  -Security
              
              ConsolidatedBalance
                  as of January 1, 2006
              
              $
              4,324,620
              
              $
              -
              
              $
              -
              
              $
              4,324,620Acquisition
                  of JLWA
              
              
              -
              
              
              883,183
              
              
              -
              
              
              883,183Acquisition
                  of Safir
              
              
              -
              
              
              -
              
              
              11,534,765
              
              
              11,534,765Acquisition
                  of Secure Source
              
              
              -
              
              
              -
              
              
              2,107,867
              
              
              2,107,867Acquisition
                  of Hyperion Risk
              
              
              2,815,367
              
              
              -
              
              
              -
              
              
              2,963,894Purchase
                  price adjustments
              
              
              (60,008
              )
              
              -
              
              
              -
              
              
              (208,535
              )Impairment
                  charge
              
              
              (1,134,765
              )
              
              -
              
              
              (1,893,768
              )
              
              (3,028,533
              )Balance
                  as of December 31, 2006
              
              $
              5,945,214
              
              $
              883,183
              
              $
              11,748,864
              
              $
              18,577,261
  F-25
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **6. 
        Property and Equipment**
  At
        December 31, 2006, property and equipment is comprised of the following:
  Computer
                  and equipment
              
              $
              741,335Furniture
                  and fixtures
              
              
              261,160Vehicles
              
              
              162,029Leasehold
                  improvements
              
              
              217,7691,382,293Less:
                  accumulated depreciation and amortization
              
              
              (583,927
              )Property
                  and equipment, net
              
              $
              798,366
  Depreciation
        and amortization of property and equipment for the years ended December 31,
        2006
        and 2005 was $237,375 and $70,737, respectively. Included in property and
        equipment are vehicles held under capital leases with a net book value of
        $43,650 at December 31, 2006.
 
 **7.**  **Accrued Compensation and Related Benefits**
 
 At
        December 31, 2006, accrued compensation and related benefits is comprised
        of the
        following:
  Accrued
                  bonuses
              
              $
              1,769,852Accrued
                  payroll and commissions
              
              
              458,060Accrued
                  employee benefits
              
              
              298,600Total
                  accrued compensation and related benefits
              
              $
              2,526,512
 
 
 **8. 
        Line of Credit**
  During
        November 2003, GlobalOptions signed a $1,000,000 line of credit with a financial
        institution with an interest rate of prime plus 1.25%, secured by accounts
        receivable and subject to monthly covenants.
 
 In
        conjunction with the establishment of this line of credit, the financial
        institution was granted warrants to purchase 3,676 shares of the Company’s
        common stock at $4.80 per share.  The value of these warrants, computed
        using the Black-Scholes option pricing model was de-minimus.  These
        warrants were exercised on June 24, 2005 on a cashless basis, and were exchanged
        for 2,572 shares of the Company’s common stock.
  On
        May 4,
        2005, this line of credit agreement was amended to increase the facility
        amount
        to $1,875,000.  This line of credit was renewed on February 3, 2006 with an
        expiration date of February 3, 2007.   During March 2006, the Company
        entered into an agreement to guarantee the obligations of GlobalOptions under
        this line of credit.  Effective on October 12, 2006, the line of credit was
        amended to increase the facility amount to $5,000,000 and to extend the
        expiration date to October 11, 2007. There was no balance outstanding under
        the
        line of credit at December 31, 2006.
  F-26
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **9. 
        Notes Payable**
 
 On
        March
        10, 2006, the Company closed the private placement of an aggregate of
        $12,500,000 in principal amount of 8% promissory notes due on June 30,
        2006.  Pursuant to the promissory notes, as amended upon the consummation
        of a qualified follow-on financing, holders were required by August 31, 2006
        to
        exchange these promissory notes through the issuance of shares of the Company’s
        common stock equal to 115% of the principal amount of the notes being exchanged,
        plus accrued and unpaid principal, subject to the terms of the agreement. 
Under the promissory note agreements, the Company could extend the maturity
        for
        two successive 30 day periods. In connection with raising these funds, the
        Company incurred a total fee of approximately $416,000 to Burnham Hill Partners
        (“BHP”) (See Note 13) and others, for which $306,000 was paid in cash and
        $110,000 of which the Company issued additional 8% promissory notes. The
        holders
        of these promissory notes subordinated their interest to the Company’s
        obligations to the bank under the line of credit facility (See Note
        8).
 
 On
        May
        12, 2006, the Company closed on an additional $2,000,000 in principal amount
        of
        their 8% promissory notes which were due on June 30, 2006.  The terms of
        these notes required the holder to make the election to exchange the notes
        for
        the Company’s Series B Convertible Preferred Stock, subject to the terms of the
        agreement. In connection herewith, the Company incurred an obligation to
        BHP for
        financing costs aggregating $140,000, of which $100,000 was payable in
        cash.  The remaining $40,000 was payable in additional promissory
        notes.
 
 On
        June
        28, 2006, the Company closed on an additional $30,550,000 in principal amount
        of
        their 8% promissory notes which were due on June 30, 2006.  The Company
        could convert these promissory notes at a 115% conversion premium into common
        stock of the Company. In connection herewith, the Company incurred an obligation
        to BHP for financing costs aggregating $2,138,500, of which $1,527,500 was
        paid
        in cash.  The remaining $611,000 was paid in additional promissory
        notes.
 
 On
        June
        29, 2006, the notes issued on March 10, 2006, May 12, 2006 and June 28, 2006,
        with an aggregate principal amount of $45,811,000 and aggregate accrued interest
        of $339,731, were exchanged for 53,073 units of the Company’s Convertible
        Preferred Stock - Series B (See Note 14 -Stockholders’ Equity, Series B
        Convertible Preferred Stock).
  In
        accordance with EITF 00-27 “Application
        of
        Issue No. 98-5 to Certain Convertible Instruments” (“EITF
        00-27”), the
        notes
        issued on June 28, 2006 are considered to have a conversion premium feature
        as
        the premium is equal to 115% of the principal amount of the notes. The Company
        recorded a debt discount of $6,922,602 relating to the conversion premium.
        As
        per above, on June 29, 2006 these notes were exchanged for units of Series
        B
        Convertible Preferred Stock. The exchange of these notes caused the debt
        discount to be fully amortized.
  The
        Company incurred deferred financing costs in conjunction with the promissory
        notes payable issued on March 10, 2006, May 12, 2006 and June 28, 2006. Total
        cash fees associated with these note issuances were $1,933,500. In addition,
        $761,000 was paid in additional promissory notes. The aggregate of $2,694,500
        of
        deferred financing costs were amortized through June 29, 2006, the date the
        notes were exchanged for units of Series B Convertible Preferred Stock (See
        Note
        14).
   F-27
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **10. 
        Due to Former Members of JLWA for Earnout**
  In
        connection with the purchase of JLWA, the JLWA Agreement provides for JLWA
        to
        obtain up to an additional $15,400,000 in earnout payments upon the attainment
        of certain revenue goals subsequent to the closing of the transaction and
        the
        continued employment of James Lee Witt.
  As
        set
        forth in the JLWA Agreement, the Company has agreed to pay the former members
        of
        JLWA (the “Sellers”) an earnout (the “Earnout”), based upon the achievement of
        certain revenue goals subsequent to March 10, 2006 (the “Closing
        Date”).
  For
        the
        twelve (12) month periods ending on the first, second, third and fourth
        anniversaries of the Closing Date, the Sellers shall be paid such Earnout
        based
        upon the achievement of certain revenues, as set forth below.  The total
        amount of the Earnout shall be limited to a cumulative amount of $15,400,000.
  The
        Earnout shall be paid to Seller within sixty (60) days of the dates of the
        respective anniversaries of the Closing Date as described below:
  • the
        first $4,000,000 of the Earnout shall be paid in cash; and
  •
the
        remainder of the Earnout shall be paid 50% in cash and 50% in shares of common
        stock of the Company (which number of shares shall be calculated by dividing
        the
        total amount of the Earnout payable in shares of common stock by the closing
        price of the Company’s common stock on the last day of each of the respective
        Earnout periods).
  The
        Earnout is payable based upon revenue generated by the JLWA division of the
        Company, so long as such revenue generates a gross margin of at least 50%,
        and
        may include revenues generated by certain acquisitions of the JLWA division
        of
        the Company, as provided in the agreement.  Revenues of the JLWA division
        whereupon the gross margin falls below 50% are not eligible for the Earnout.
  The
        Earnout is computed by the application of the percentages to JLWA earned
        revenues according to the table, below:
 
 Percentage
                  AppliedRelated
                  Revenue Earnout Periods
              
              to
                  JLWA earned RevenuesMarch
                  10, 2006 - March 9, 2007Up
                  to $6,000,000
              
              0%Between
                  $6,000,000 and $16,000,000
              
              40%Greater
                  than $16,000,000
              
              10%March
                  10, 2007 - March 9, 2008Up
                  to $7,000,000
              
              0%Greater
                  than $7,000,000
              
              10%March
                  10, 2008 - March 9, 2009Up
                  to $8,000,000
              
              0%Greater
                  than $8,000,000
              
              10%March
                  10, 2009 - March 9, 2010Up
                  to $9,000,000
              
              0%Greater
                  than $9,000,000
              
              10%
  F-28
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **10. 
        Due to Former Members of JLWA for Earnout, continued**
  At
        December 31, 2006, the amount due to the former members of JLWA for the Earnout
        liability due under the Agr eement
        was approximately $5,228,000 and has been charged to expense and included
        in
        selling and marketing expenses in the accompanying consolidated statement
        of operations.
 
 **11.
        Income Taxes**
  The
        Company’s deferred tax asset of approximately $5,860,000 at December 31, 2006 is
        subject to a 100% valuation allowance because it is more likely than not
        that
        the deferred tax asset will not be realized. The valuation allowances related
        to
        the Company’s deferred tax asset increased by approximately $3,241,000 and
        $1,427,000 for the years ended December 31, 2006 and 2005,
        respectively.
 
 Significant
        components of the Company’s deferred tax assets at December 31, 2006 is as
        follows:
 
 Deferred
                  tax assets:Net
                  operating loss carryforwards
              
              $
              2,005,120Stock-based
                  compensation
              
              
              1,339,822Allowance
                  for doubtful accounts
              
              
              783,045Property
                  and equipment
              
              
              20,692Intangible
                  assets
              
              
              642,113Goodwill
              
              
              855,629Non-deductible
                  accruals
              
              
              213,328Total
                  deferred tax assets
              
              
              5,859,749Less:
                  valuation allowance
              
              
              (5,859,749
              )Deferred
                  tax assets, net
              
              $
              -
 
 As
        of
        December 31, 2006, the Company had available approximately $5,020,000 of
        federal
        and state net operating losses (“NOL”) available for income tax purposes that
        may be carried forward to offset future taxable income, if any. These
        carryforwards expire in years 2022 through 2026. The Company’s ability to use
        approximately $3,353,000 of its NOL carryforwards generated prior to June
        24,
        2005, the date of the reverse merger (see Note 1) is subject to an annual
        limitation of approximately $907,000 in future years pursuant to Section
        382 of
        the Internal Revenue Code (“IRC”) In addition, the Company’s ability to use its
        NOL carryforwards generated after the date of the reverse merger may be subject
        to an annual limitation in future years pursuant to section 382 of the
        IRC.
  F-29
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
 
 **11.
        Income Taxes, continued**
 
 As
        a
        result of the valuation allowance, no income tax benefit has been recorded
        at
        December 31, 2006 and 2005 related to the Company’s operating losses for
        book purposes. The provision for income taxes using the statutory federal
        tax
        rate as compared to the Company’s effective tax rate is summarized as follows:
 
 **December
                  31,****2006**
              
              **2005**Tax
                  benefit at federal statutory rate
              
              
              (34.0
              )%
              
              (34.0
              )%State
                  income taxes
              
              
              (6.0
              )
              
              (6.0
              )Permanent
                  differences
              
              
              24.2
              
              
              -Utilization
                  of operating loss carryforward
              
              
              (1.3
              )
              
              -Other
              
              
              (1.0
              )
              
              -Increase
                  in valuation allowance
              
              
              18.1
              
              
              40.0
              %Effective
                  income tax rate
              
              
              -
              %
              
              -
              %
 
 **12.
        Convertible Notes Payable - Stockholder**
 
 During
        August 2004, the Company received $250,000 in the form of a four year
        convertible note to QuanStar I, LLC (“QuanStar”), an existing stockholder. This
        convertible note bore interest at a rate of 10% per annum, with interest
        payable
        quarterly commencing October 1, 2004. The principal amount was due upon maturity
        in August 2009. On June 24, 2005, at the option of QuanStar, the $250,000
        convertible note and accrued interest of $17,083 was converted into 45,236
        shares of common stock.
  **13. 
        Commitments** **and
        Contingencies**
  *Employment
        Agreements*
 
 On
          January 29, 2004, GlobalOptions entered into an employment agreement with
          Harvey
          Schiller, its Chairman of the Board and Chief Executive Officer. This agreement
          provided for base compensation of $200,000 per annum. The agreement provided
          for
          a sign-on grant of an option to purchase 55,147 shares of common stock
          for which
          there is a 3 year vesting period and a one year bonus consisting of a grant
          of
          an option to purchase 55,147 shares of common stock that also vest over
          a 3 year
          period. For both stock option grants the exercise price is $4.80 per
          share.
 
 Dr.
        Schiller’s employment agreement was assigned to the Company effective as of June
        27, 2005. With the consummation of the reverse merger, the Company agreed
        to
        assume all of GlobalOptions’ rights and responsibilities under the employment
        agreement. Pursuant to the assignment, the following modifications, among
        others, were made to the employment agreement: (i) Dr. Schiller’s salary was
        increased to the annual rate of $300,000 retroactive to January 1, 2005,
        (ii)
        all 147,831 of Dr. Schiller’s stock options in GlobalOptions were confirmed to
        vest immediately upon the consummation of the reverse merger, (iii) Dr. Schiller
        agreed to forego receiving any 2005 annual bonus that he is entitled to under
        the employment agreement, and (iv) the Company and Dr. Schiller agree to
        negotiate in good faith bonus arrangements after December 31,
        2005.
  F-30
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  
 **13.**
              **Commitments
                  and Contingencies,
                  continued**
  ***Employment
        Agreements, continued***
  On
        December 19, 2006, the agreement was amended to extend the term through January
        31, 2010. The agreement is subject to automatic one-year extensions, unless
        either party provides 60 days notice to the other party of its intention
        not to
        renew the agreement. The amendment provides for an annual base salary of
        $375,000, $400,000 and $425,000 starting January 1 of 2007, 2008, and 2009
        respectively, as well as an annual performance bonus payable 50% in cash
        and 50%
        in restricted common stock which will vest upon the achievement of goals
        agreed
        upon mutually between Dr. Schiller and the Compensation Committee. In connection
        with the extension of the term of this employment agreement, Dr. Schiller
        was
        awarded a one-time grant of 100,000 shares of restricted common stock. The
        100,000 shares of restricted stock has been provided as a pool of eligible
        restricted common stock shares that will be earned (or vested) by Dr. Schiller
        pursuant solely to the achievement of the performance goals agreed upon between
        Dr. Schiller and 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 to exercise vested
        options; unvested options will be forfeited. If terminated for cause, Dr.
        Schiller will forfeit all unexercised options. In the event Dr. Schiller
        terminates for good reason or the employment agreement is terminated without
        cause, 50% of his unvested stock options will vest and all vested options
        will
        remain exercisable for a period of 90 days from termination. The employment
        agreement contains non-compete and non-solicitation provisions for 12 months
        following termination, as well confidentiality provisions. In the event of
        a
        change of control of the Company, the employment agreement provides for the
        vesting of all unvested options.
  F-31
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **13.**
              **Commitments
                  and Contingencies, 
continued**
  ***Employment
        Agreements, continued***
 
 Mr.
        Ondeck, President of the Global International division of the Company, entered
        into a five year employment agreement in January 2002. On October 17, 2006,
        this
        agreement was amended to extend the term through January 2010. The agreement
        is
        subject to automatic one year extensions unless either party provides 60
        days
        notice to the other party of its intention not to renew the agreement. The
        amended agreement provides for an annual base salary of $300,000 and an annual
        bonus of up to one hundred percent of base salary. The bonus amount is based
        upon the achievement of mutually agreed upon goals established by the
        Compensation Committee. Salary increases will be determined by the Compensation
        Committee and will be based upon the Company’s performance, as well as Mr.
        Ondeck’s contribution to that performance. Pursuant to the employment agreement,
        GlobalOptions maintains a “key-man” life insurance policy on the life of Mr.
        Ondeck, with a face amount of $500,000. The employment agreement may be
        terminated for cause by GlobalOptions upon the death or disability of Mr.
        Ondeck, or upon 30-days’ notice by either party. In the event GlobalOptions
        terminates the employment agreement without cause, it is required to pay
        Mr.
        Ondeck his current base salary and benefits for the lesser of 12 months,
        or the
        remaining term of the agreement.
 
 Concurrently
        with its acquisition of the assets and business of CBR on August 14, 2005,
        (See
        Note 4) GlobalOptions entered into a three-year employment and non-competition
        agreement with Halsey Fischer, the former president and chief executive officer
        of CBR. Pursuant to the agreement, Mr. Fischer became President of
        Investigations of GlobalOptions and agreed to perform such other duties and
        responsibilities as the Board of Directors may assign, and has agreed to
        devote
        his full business time to GlobalOptions at a salary of $200,000 per year
        and a
        discretionary annual bonus of up to $50,000. The employment agreement may
        be
        terminated for cause by GlobalOptions, upon the death or disability of the
        executive, or upon 30-days’ notice by either party after three years from the
        commencement date. In the event GlobalOptions terminates the employment
        agreement without cause, it is required to pay Mr. Fischer his base salary
        and
        certain benefits for six months following termination. The employment agreement
        also contains non-compete and non-solicitation provisions for 12 months
        following termination, as well as confidentiality provisions.
 
 Concurrently
        with our acquisition of JLWA in March 2006 (See Note 4), GlobalOptions entered
        into a four year employment agreement with James Lee Witt. Pursuant to the
        agreement, Mr. Witt became the Chief Executive Officer (“CEO”) of the
        GlobalOptions/James Lee Witt Division and agreed to perform such other duties
        and responsibilities as the Board of Directors may assign, and has agreed
        to
        devote his full time to GlobalOptions at a salary of $300,000 per year and
        a
        discretionary annual bonus. The employment agreement may be terminated for
        cause
        by GlobalOptions, upon the death or disability of the executive, or upon
        30-days’ notice by either party. In the event GlobalOptions terminates the
        employment agreement without cause, it is required to pay Mr. Witt his base
        salary and certain benefits for twelve months following termination. The
        employment agreement also contains non-compete and non-solicitation provisions
        for 12 months following termination, as well as confidentiality provisions.
 
 F-32
 **GLOBALOPTIONS
              GROUP, INC. AND SUBSIDIARIES**
 **Notes
              To Consolidated Financial Statements**
  **13.** **Commitments
          and Contingencies,  continued**
  ***Employment
        Agreements, continued***
 
 In
        May 2006, concurrently with the Company’s acquisition of Safir (See Note 4),
        GlobalOptions entered into a three year employment agreement with Howard
        Safir,
        the former CEO of Safir. Pursuant to the agreement, Mr. Safir became the
        Vice
        Chairman of the Company and Chief Executive Officer of the division known
        as
        GlobalOptions/Safir Rosetti and agreed to perform such other duties and
        responsibilities as the Board of Directors may assign, and has agreed to
        devote
        his full time to GlobalOptions at a salary of $300,000 per year and a
        discretionary annual bonus. The employment agreement may be terminated for
        cause
        by GlobalOptions, upon the death or disability of the executive, or upon
        30-days’ notice by either party. In the event GlobalOptions terminates the
        employment agreement without cause during the initial term, it is required
        to
        pay Mr. Safir his base salary and certain benefits through March 21, 2009.
        The
        employment agreement also contains non-compete and non-solicitation provisions
        for 12 months following termination, as well as confidentiality
        provisions.
 
 In
        May
        2006, concurrently with the Company’s acquisition of Safir (See Note 4),
        GlobalOptions entered into a three year employment agreement with Joseph
        Rosetti, the former President of Safir. Pursuant to the agreement, Mr. Rosetti
        became the President of the division known as GlobalOptions/Safir Rosetti
        and
        agreed to perform such other duties and responsibilities as the Board of
        Directors may assign, and has agreed to devote his full time to GlobalOptions
        at
        a salary of $200,000 per year and a discretionary annual bonus. The employment
        agreement may be terminated for cause by GlobalOptions, upon the death or
        disability of the executive, or upon 30-days’ notice by either party. In the
        event GlobalOptions terminates the employment agreement without cause during
        the
        initial term, it is required to pay Mr. Rosetti his base salary and certain
        benefits through March 21, 2009. The employment agreement also contains
        non-compete and non-solicitation provisions for 12 months following termination,
        as well as confidentiality provisions.
 
 In
        May
        2006, concurrently with the Company’s acquisition of Secure Source (See Note 4),
        GlobalOptions entered into a three year employment agreement with David W.
        Nicastro, the former President and CEO of Secure Source. Pursuant to the
        agreement, Mr. Nicastro became the Senior Executive Officer of the division
        known as Global Options/Secure Source and agreed to perform such other duties
        and responsibilities as the Board of Directors may assign, and has agreed
        to
        devote his full time to GlobalOptions at a salary of $180,000 per year and
        a
        discretionary annual bonus up to $50,000. The employment agreement may be
        terminated for cause by GlobalOptions, upon the death or disability of the
        executive, or upon 30-days’ notice by either party. In the event GlobalOptions
        terminates the employment agreement without cause, it is required to pay
        Mr.
        Nicastro his base salary and certain benefits for two months following
        termination. The employment agreement also contains non-compete and
        non-solicitation provisions for 12 months following termination, as well
        as
        confidentiality provisions.
  F-33
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
 
 **13. 
        Commitments and Contingencies,  continued**
  ***Employment
        Agreements, continued***
 
 In
        August
        2006, concurrently with the Company’s acquisition of Hyperion Risk (See Note 4),
        the Company entered into a three year employment agreement with Franklin
        B.
        Pinder III, the former President and CEO of Hyperion Risk. Pursuant to the
        agreement, Mr. Pinder became the Southeast Regional Vice President of
        GlobalOptions and agreed to perform such other duties and responsibilities
        as
        the Board of Directors may assign and has agreed to devote his full time
        to
        GlobalOptions at a salary of $170,000 per year and a discretionary annual
        bonus
        up to $60,000. The employment agreement may be terminated for cause by
        GlobalOptions, upon death or disability of the executive, or upon 30-day’s
        notice by either party. In the event GlobalOptions terminates the employment
        agreement without cause, it is required to pay Mr. Pinder his base salary
        and
        certain benefits for a period equal to 50% of the remaining amount due under
        the
        term of the employment agreement. The employment agreement also contains
        non-compete and non-solicitation provisions for 12 months following termination,
        as well as confidentiality provisions. In addition, Mr. Pinder is eligible
        for a
        separate special bonus for the years 2006, 2007 and 2008, during which the
        Company will pay Mr. Pinder 10% of the amount of certain revenue increases
        achieved over a defined revenue base, as defined in the agreement. The amount
        which Mr. Pinder may earn under this agreement over the full term is capped
        at
        $1,200,000 and is payable annually, 50% in cash and 50% in the common stock
        of
        the Company. At December 31, 2006, in connection with this obligation, the
        Company has recorded $21,000 as accrued compensation and benefits.  The
        maximum amounts payable under the special bonus are outlined below:
 
 Term
              
              Revenue
                  Base
              
              Revenue
                  Increase OverBase
                  Eligible for BonusYear
                  1
              
              $
              5,800,000
              
              $
              1,000,000Year
                  2
              
              $
              6,800,000
              
              $
              4,000,000Year
                  3
              
              $
              12,800,000
              
              $
              7,000,000
  *Consulting
        Agreement*
  GlobalOptions
          is a party to a consulting agreement with BKS Advisors, LLC (“BKS”) pursuant to
          which BKS Advisors provides GlobalOptions management with certain business,
          strategy and financial services. The agreement with BKS had a term which
          extended through October 2006 and provided for a monthly fee of
          $25,000 which could be adjusted based on the level of services provided. On
          June 1, 2005, BKS assigned its rights under this agreement to Jeffrey O.
          Nyweide, Chief Financial Officer and Executive Vice President of Corporate
          Development of GlobalOptions Group. On December 19, 2006 the Compensation
          Committee amended the term of this consulting agreement to extend through
          January 2010. In addition, the monthly fee provided for in this agreement
          was
          increased to $27,083, $29,167, and $31,250 for the years 2007, 2008 and
          2009,
          respectively, as well as an annual performance bonus payable 50% in cash
          and 50%
          in restricted common stock which will vest upon the achievement of goals
          agreed
          upon mutually between Mr. Nyweide and the Compensation Committee. In connection
          with the extension of the term of this consulting agreement, Mr. Nyweide
          was
          awarded a one-time grant of 75,000 shares of restricted common stock. The
          75,000
          shares of restricted common stock has been provided as a pool of eligible
          restricted stock shares that will be earned (or vested) by Mr. Nyweide
          pursuant
          solely to the achievement of the performance goals agreed upon between
          Mr.
          Nyweide and the Compensation Committee.
  ***Placement
        Agent Agreement***
  On
        March
        9, 2006, the Company entered into an agreement with BHP, a division of Pali
        Capital, Inc. to act as its placement agent in connection the private placement
        of certain promissory notes payable (See Note 9).   In connection with
        this agreement, the Company has agreed to pay BHP a fee of 7% of certain
        of the
        gross proceeds received in connection with the issuance of the promissory
        notes
        payable.
 
 In
        addition, on March 14, 2006, the Company entered into a financial advisory
        agreement with BHP, with a term of nine months.   Under this
        agreement, BHP agreed to advise the Company in regard to potential strategic
        transactions.   Under this agreement, the Company has agreed to issue
        to BHP a common stock warrant to purchase 31,250 shares, exercisable at $20.00
        per share to compensate BHP.  These warrants shall have a term of five
        years, a cashless exercise provision and standard weighted average anti-dilution
        protection and piggyback registration rights.  The value of these warrants
        was approximately $388,000 utilizing the Black Scholes option pricing model
        with
        the following assumptions: 0% dividend yield, 87% expected
        volatility, 4.77% risk-free rate and a five year expected life.  Stock
        based compensation expense of $388,000 has been recognized related to these
        warrants for the year ended December 31, 2006. For a period of twelve months
        from the date of this agreement, should the Company request the assistance
        of
        BHP, then in connection with certain transactions, the Company will pay to
        BHP a
        fee of 3% of the aggregate transaction value.
  F-34
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **13** ***.*** **Commitments
        and Contingencies , continued**
 
 ***Placement
        Agent Agreement, continued***
 
 Through
        December 31, 2006, BHP was paid aggregate consideration of $2,694,500 in
        connection with certain private placements of debt securities (See Note 9),
        consisting of cash and notes of $1,933,500 and $761,000, respectively.
 
 ***Operating
        Leases***
  In
        connection with the acqusitions of CBR, JLWA, Safir, Secure Source, and Hyperion
        Risk, GlobalOptions assumed the obligations for various office leases. Such
        lease obligations expire at various dates through June 2015.
 
 Future
        minimum lease payments under these leases are as follows:
 
 For
                  the Year Ending
                December
                  31,2007
              
              $
              1,454,7562008
              
              
              1,184,5942009
              
              
              1,054,3412010
              
              
              968,1212011
              
              
              718,838Thereafter
              
              
              1,184,895Total
              
              $
              6,565,545
 
 Rent
        expense charged to operations amounted to approximately $1,408,000 and $503,000
        for the years ended December 31, 2006 and 2005, respectively.
 
 The
        terms
        of certain of the Company’s lease obligations provide for scheduled escalations
        in the monthly rent. In accordance with SFAS No. 13, “Accounting for Leases,”
the non-contingent rent increases are being amortized over the life of the
        leases on a straight line basis. Deferred rent of $190,008 represents the
        long
        term unamortized rent adjustment amount at December 31, 2006 and is reflected
        as
        deferred rent obligations in the consolidated balance sheet. In addition,
        the
        current portion of deferred rent is $53,844 at December 31, 2006 and is
        reflected within other current liabilities in the consolidated balance
        sheet.
 
 ***Letters
        of Credit***
 
 In
        connection with the lease for its Washington D.C. office, the Company is
        required to maintain a standby letter of credit of $37,931 for the purpose
        of
        collateralizing future lease payments. During the year ended December 31,
        2005,
        the landlord drew upon the letter of credit and the security deposit in order
        to
        satisfy a portion of the Company’s obligations under the lease. Accordingly, at
        December 31, 2005, the Company was not in compliance with the standby letter
        of
        credit obligations under the lease. During March 2006, the Company reinstated
        the letter of credit and brought the Company back into compliance under the
        lease agreement. At December 31, 2006, the Company is in compliance under
        the
        terms of the lease.
  In
        connection with the lease for the former JLWA office in Washington D.C.,
        the
        Company established a standby letter of credit of $150,000 for the purpose
        of
        collateralizing future lease payments. The letter of credit obligation is
        collateralized through the Company’s line of credit with a bank (See Note 8).
        During January 2007, the underlying lease was terminated. The Company has
        applied to the former landlord for the release of the letter of
        credit.
  F-35
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  ****** **14.** ****** **Stockholders’
        Equity**
 
 ***Common
        Stock***
  The
        Company has authorized 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 which are legally available for
        distribution, after payment of or provision for all liabilities and the
        liquidation preference of any outstanding Series A and B convertible preferred
        stock. The holders of common stock have no preemptive, subscription, redemption
        or conversion rights.
 
 During
        August 2004, the Company issued 137,868 shares of common stock for proceeds
        of
        $750,000, and warrants to purchase 22,059 shares of common stock at $5.44
        per
        share to QuanStar I, LLC, who was a holder of a convertible note payable
        issued
        by GlobalOptions (See Note 12) and a compensated financial advisor to
        GlobalOptions (See Note 18). In June 2005, QuanStar I exercised the warrants
        and
        purchased 22,059 shares of common stock for $120,000.
 
 During
        the year ended December 31, 2006 the Company issued 85,625 shares of common
        stock in connection with the conversion of 1,370 shares of Series A convertible
        preferred stock.
 
 On
        June
        10, 2006, the Company issued 10,883 shares of common stock, valued at $175,000,
        to a service provider in connection with the acquisition of Safir (See Note
        4).
 
 ***GlobalOptions
        Shares Immediately Prior to the Reverse Merger***
 
 On
        June
        24, 2005, in anticipation of and in connection with the reverse merger
        agreement, each of the holders of its Series A, Series A-1 and Series A-2
        convertible preferred stock agreed to exchange the holders’ full rights,
        including accrued dividends of $1,381,099, in their convertible preferred
        shares
        on the basis of one share of the common stock of GlobalOptions Group for
        each
        13.6 shares of convertible preferred stock. This transaction resulted in
        the
        issuance of 824,504 shares of common stock of GlobalOptions Group in exchange
        for 11,213,254 shares of convertible preferred stock of GlobalOptions on
        June
        24, 2005.
 
 Pursuant
        to the Merger Agreement, stockholders of GlobalOptions received one share
        of GlobalOptions Group common stock for each 13.6 issued and outstanding
        shares
        of GlobalOptions common stock at closing for which 4,650,000 shares of
        GlobalOptions common stock was exchanged for 341,912 shares of common stock
        of
        GlobalOptions Group.
 
 The
        convertible preferred shares of GlobalOptions exchanged included the issuance
        of
        2,572 shares of common stock resulting from the cashless exercise in June
        2005
        of a warrant held by a financial institution for the purchase of 3,676 shares
        of
        stock of the Company (See Note 8), the issuance of 45,236 shares of common
        stock
        of the Company resulting from the surrender of QuanStar’s $250,000 Convertible
        Note and accrued interest of $17,083 (See Note 12) and the issuance of 22,059
        shares of common stock of the Company resulting from the exercise of a warrant
        to purchase 22,059 shares held by the QuanStar Group, LLC.
 
  F-36
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **14.
        Stockholders’ Equity, continued**
 
 ***Reverse
        Merger and Private Placement - Summary of
        Transactions***
 
 On
        June 24, 2005, the Company consummated a reverse merger transaction (See
        Note 1).
 
 At
        closing, GlobalOptions Group issued 1,236,283 shares of its common stock
        to the
        former common and convertible preferred stockholders of GlobalOptions, in
        exchange for 100% of their outstanding shares of GlobalOptions.
 
 GlobalOptions
        Group has assumed all of GlobalOption’s obligations under its outstanding stock
        option plan and has reserved initially reserved 812,500 shares of GlobalOptions
        Group’s common stock for stock options issuable under a newly adopted 2005 Stock
        Option Plan (See Note 15). At the time of the reverse merger, GlobalOptions
        had
        outstanding stock options to purchase 4,450,721 shares of common stock, which
        outstanding options became stock options to purchase 327,259 shares of common
        stock of GlobalOptions Group, after giving effect to the reverse merger exchange
        ratio and the March 2007 1 for 8 stock split. Neither GlobalOptions nor
        GlobalOptions Group had any warrants to purchase shares of common stock
        outstanding immediately prior to the closing of the reverse merger. The pricing
        of all stock options has been adjusted on a 13.6 to 1 basis.
 
 Simultaneous
        with closing of the reverse merger, GlobalOptions Group sold to its majority
        stockholders its historical art business operations, and they assumed the
        historical liabilities of those operations. After giving effect to the
        cancellation of 9,962,750 shares held by the former stockholders, there were
        549,750 shares of GlobalOptions Group common stock outstanding before
        giving effect to the stock issuances in the reverse merger and private
        placement.
 
 In
        connection with the reverse merger, GlobalOptions Group completed the closing
        of
        a private placement of a total of 7,500 units consisting of one share of
        the
        Company’s Series A convertible preferred stock, par value $.001 per share,
        and a detachable, transferable warrant to purchase shares of the Company’s
        common stock, at a purchase price of $1,000 per unit, to accredited investors
        pursuant to the terms of a Confidential Private Offering Memorandum, dated
        April 18, 2005, as supplemented. Each share of Series A convertible
        preferred stock was initially convertible into 63 shares of common stock at
        any time. Each warrant entitles the holder to purchase 16 shares of common
        stock
        at an exercise price of $20.00 per share through June 24, 2009, subject to
        certain redemption provisions. The Company received proceeds from the tranches
        of the private placement of approximately $7,041,000, net of offering costs
        of
        approximately $459,000.
 
 Brookshire
        Securities Corporation served as placement agent in connection with the private
        placement. The placement agent received a cash fee in the aggregate of $200,000,
        four-year warrants to purchase 18,750 shares of GlobalOptions Group’s common
        stock at an exercise price of $16.00 per share, and four-year warrants to
        purchase an additional 43,750 shares of the Company’s common stock at an
        exercise price of $20.00 per share on terms which are identical to those
        warrants included in the units.
 
 Under
        the
        terms of the private placement, the Company agreed to file a "resale"
        registration statement with the SEC covering the shares of common stock
        underlying the Series A convertible preferred stock and warrants issued in
        the
        private placement on or before October 28, 2005 (or 120 days after the closing).
        The Company is obligated to maintain the effectiveness of the "resale"
        registration statement from the effective date through and until 12 months
        after
        the date of closing of the merger, unless all securities registered under
        the
        registration statement have been sold or are otherwise able to be sold pursuant
        to Rule 144 under the Securities Act of 1933, provided the Company complies
        with
        their reporting obligations.
  F-37
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **14.** ****** **Stockholders’
        Equity, continued**
 ****
 ***Reverse
        Merger and Private Placement - Summary of Transactions,
        continued***
 
 In
        the
        event the "resale" registration statement was not filed with the SEC on or
        prior
        to the 180th day after the completion of the merger, each investor in the
        private placement was to receive an additional number of shares of Series
        A
        convertible preferred stock equal to 2% of the total number of shares of
        Series
        A preferred stock subscribed to by such investor in the private placement
        (which
        additional shares of underlying common stock will also be registered) for
        each
        month (or portion thereof) that the registration statement is not so filed,
        provided that the aggregate increase in such shares of Series A convertible
        preferred stock pursuant to this paragraph will in no event exceed 20% of
        the
        original number of shares of Series A convertible preferred stock subscribed
        for
        in the private placement.
 
 The
        Company agreed to use its best efforts to have the "resale" registration
        statement declared effective by the SEC as soon as possible after the initial
        filing and agreed to respond to all questions or comments by the SEC pertaining
        to such registration statement within 30 days of the receipt of such comments.
        In the event that the Company did not respond to questions or comments by
        the
        SEC pertaining to the registration statement within 30 days after the Company’s
        receipt of such comments, each investor in the private placement would receive
        an additional number of shares of Series A convertible preferred stock equal
        to
        2% of the total number of shares of Series A convertible preferred stock
        subscribed to by such investor in the private placement (which additional
        shares
        of underlying common stock will also be registered) for each month (or portion
        thereof) that the Company did respond to questions or comments by the SEC
        pertaining to such registration statement, provided that the aggregate increase
        in such shares of Series A convertible preferred stock pursuant to this
        paragraph will in no event exceed 20% of the original number of shares of
        Series
        A convertible preferred stock subscribed to in the private
        placement.
 
 Verus
        International Group (“Verus”) served as advisor to the Company on the
        structuring and execution of the reverse merger. In connection with the
        identification and structuring of the reverse merger and effective as of
        the
        closing of the reverse merger, the Company paid Verus or its designees a
        fee
        equal to 18,125 shares of common stock valued at $337,850 and a fee paid
        in
        warrants as an advisor for the private placement equal to 49,512 cashless
        four-year warrants to purchase the Company’s common stock exercisable at $16.00
        per share, and a fee paid in warrants equal to 131,738 warrants to purchase
        the
        Company’s common stock exercisable at $20.00 per share on terms which are
        identical to those warrants included in the units.
 
 The
        Company’s placement agent entered into a selected dealer agreement with
        Starboard Capital Markets, LLC (“Starboard Capital”), a registered broker-dealer
        for the sale of certain of the units. Pursuant to the form of selected dealer
        agreement, for units sold by the selected dealer which were received and
        accepted by the Company and the placement agent, Starboard Capital received
        (i)
        a cash fee of $7,500 and (ii) warrants to purchase 18,750 shares of the
        Company’s common stock. These warrants are comprised of (i) warrants to purchase
        5,250 shares of common stock with an exercise price equal to $16.00 per share,
        exercisable for a four-year period commencing on the date of issuance, with
        cashless exercise features, and (ii) warrants to purchase 13,500 shares of
        common stock with an exercise price equal to $20.00 per share, exercisable
        for a
        four-year period commencing on the date of issuance, with features otherwise
        identical to the warrants sold in the private placement.
 
  F-38
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **14.**  **Stockholders’
        Equity, continued**
 
 ***Reverse
        Merger and Private Placement - Summary of Transactions,
        continued***
 
 The
        Company agreed to engage Verus for a period of 24 months following the
        closing of the merger and private offering to provide capital markets advisory
        services at a monthly rate of $10,000, payable 50% in cash and 50% in common
        stock at the then-current market value. During the years ended December 31,
        2006
        and 2005, the Company issued 849 and 1,403 shares of common stock, valued
        at
        $15,000 and $30,000, respectively, in connection with this agreement.
 
 ***Series
        A Convertible Preferred Stock***
 
 The
        Company has authorized a total of 15,000,000 shares of preferred stock. In
        conjunction with the reverse merger, the Company designated 16,000 shares
        as
        authorized for Series A convertible preferred stock.
 
 Holders
        of Series A convertible preferred stock will be entitled at any time to convert
        their shares into common stock, without any further payment thereafter. Each
        share of Series A convertible preferred stock is initially convertible into
        63
        shares of common stock at a conversion price of $16.00 per common share and
        is
        immediately convertible into common stock.
 
 ***Series
        A Convertible Preferred Stock***
 
 On
        September 22, 2005, GlobalOptions Group closed out its initial private placement
        with the sale of 250 units, as detailed in the Company’s Confidential Private
        Offering Memorandum, dated April 18, 2005, as amended, consisting of one
        share
        of the Company’s Series A convertible preferred stock, par value $.001 per
        share, and a detachable, transferable warrant to purchase shares of the
        Company’s common stock. The
        Company received proceeds from the private placement of approximately $160,000,
        net of offering costs of $90,000. Each share of Series A convertible preferred
        stock was initially convertible into 63 shares of common stock at any time.
        Each warrant entitles the holder to purchase 16 shares of common stock at
        an
        exercise price of $20.00 per share through June 24, 2009, subject to certain
        redemption provisions. In connection with this offering, Series A warrants
        to
        purchase 3,906 shares of common stock were issued to investors, Series B
        warrants to purchase 1,513 shares of common stock were issued to the placement
        agent and advisors and Series C warrants to purchase 570 shares of the common
        stock were issued to the placement agent and advisors. In addition, in
        conjunction with the close out of the initial private placement, Series B
        warrants to purchase 43,874 shares of the common stock and Series C warrants
        to
        purchase 16,543 shares of common stock were issued to Verus.
  F-39
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **14.**  **Stockholders’
        Equity, continued**
 
 ***Series
        A Convertible Preferred Stock - Beneficial Conversion Feature and Deemed*** ***Dividends***
  At
        June
        24, 2005, the date of issuance, the fixed conversion price of the Series
        A
        convertible preferred stock of $16.00 represented a discount to the market
        value
        of the Company’s common stock, which was at a quoted market price of $16.80 per
        share. In accordance with EITF 00-27, and EITF 98-5, “Accounting for
        Convertible Securities with Beneficial Conversion Features or Contingently
        Adjusted Conversion Ratios”, the Company determined the relative fair value of
        the warrants and the Series A convertible preferred stock and allocated the
        proceeds received on a relative fair value basis. The fair value of the warrants
        was calculated using the Black-Scholes option pricing model with the following
        assumptions: dividend yield of 0%, expected volatility of 55%, risk-free
        interest rate of 3% and an expected term of two years. Based upon this
        calculation, the effective conversion price of the Series A convertible
        preferred stock was determined to be $15.04 per common share, resulting in
        a
        beneficial conversion feature of $832,500 at June 24, 2005.
 
 At
        September 22, 2005, the fixed conversion price of the Series A convertible
        preferred stock of $16.00 represented a discount to the market value of the
        Company’s common stock, which was at a quoted market price of $24.00 per share.
        The Company determined the relative fair value of the warrants and the Series
        A
        convertible preferred stock and allocated the proceeds received on a relative
        fair value basis. The fair value of the warrants was calculated using the
        Black-Scholes option pricing model with the following assumptions: dividend
        yield of 0%, expected volatility of 55%, risk-free interest rate of 3% and
        an
        expected term of two years. Based upon this calculation, the effective
        conversion price of the Series A convertible preferred stock was determined
        to
        be $9.44 per common share, resulting in a beneficial conversion feature of
        $147,250 at September 22, 2005.
 
 The
        Company has presented the beneficial conversion feature as a deemed dividend
        to
        the holders of the Series A convertiible preferred stock on the consolidated
        statements of operations of $979,750 for the year ended December 31, 2005.
 
 ***Series
        A Convertible Preferred Stock Features***
 
 The
        number of shares of common stock issuable upon conversion of the Series A
        convertible preferred stock is subject to adjustment upon the occurrence
        of
        certain events, including, among others, a stock split, reverse stock split
        or
        combination of the common stock; an issuance of common stock or other securities
        of the Company as a dividend or distribution on the common stock; a
        reclassification, exchange or substitution of the Company’s common stock; or a
        capital reorganization of the Company. In the event that the Company issues
        any
        shares of common stock or common stock equivalents in a private placement,
        secondary offering or shelf offering for cash consideration at a price less
        than
        $16.00 per share of common stock, the conversion rate will be that number
        of
        shares of common stock equal to $125 divided by the price per share at which
        the
        Company will issue common stock (the “Denominator”), but in no event will the
        Denominator be less than $6.12 per share.
 
  F-40
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **14.**  **Stockholders’
        Equity, continued**
 
 ***Series
        A Convertible Preferred Stock Features, continued***
 
 Holders
        of Series A convertible preferred stock are entitled to vote their shares
        on an
        as-if-converted to common stock basis, and will vote together with the holders
        of the common stock, and not as a separate class. Holders of Series A
        convertible preferred stock will also have any voting rights to which they
        are
        entitled by law.
 
 In
        the
        event of any voluntary or involuntary liquidation, dissolution or winding-up
        of
        the Company, holders of Series A convertible preferred stock will be entitled
        to
        receive out of assets of the Company available for distribution to its
        stockholders, before any distribution is made to holders of the common stock,
        liquidating distributions in an amount equal to $1,000 per share. After payment
        of the full amount of the liquidating distributions to which the holders
        of the
        Series A convertible preferred stock are entitled, holders of the Series
        A
        convertible preferred stock will receive liquidating distributions pro rata
        with
        holders of common stock, based on the number of shares of common stock into
        which the Series A convertible preferred stock is convertible at the conversion
        rate then in effect.
  The
        Series A convertible preferred stock may not be redeemed by the Company at
        any
        time.
 
 Holders
        of Series A convertible preferred stock will not be entitled to receive any
        dividends, except to the extent that any dividends are declared on the Company’s
        common stock, in which case holders of Series A convertible preferred stock
        will
        be entitled to receive such dividends on an as-if-converted basis.
 
 ***Warrants
        (Series A & B*** *)*
  Series
        A
        warrants to purchase 121,094 shares of common stock were issued to investors
        and
        Series B warrants to purchase 234,375 shares of common stock were issued
        to the
        placement agent and advisors, at an exercise price of $20.00 per share from
        the
        date of issuance until the fourth anniversary thereof. As a result of an
        adjustment pursuant to the anti-dilution protection associated with the
        warrants, for the Series A and Series B warrants the number of shares which
        may
        be purchased was increased to 151,367 and 292,969 respectively, and the warrant
        exercise price was reduced to $16.00 per share. The Company may call the
        warrants beginning 15 months after the closing of the private placement at
        a
        rate of 25% per quarter if at any time during such quarter the 30-day trailing
        average stock price is greater than $32.00 per share.
  ***Warrants
        (Series C)***
  Series
        C
        warrants to purchase 90,625 shares of common stock were issued to the placement
        agent and advisors at an exercise price of $16.00 per share from the date
        of
        issuance until the fourth anniversary thereof. These warrants may be exercised
        upon surrender of the certificate therefore, accompanied by payment of the
        full
        exercise price for the number of warrants being exercised. The holder may
        also
        alternatively exercise these warrants on a cashless basis by surrendering
        the
        warrant with an executed notice of cashless exercise attached thereto, in
        which
        event the Company will issue to the holder the number of shares of stock
        determined following the formula contained therein.
   F-41
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **14.**  **Stockholders’
        Equity, continued**
  ***Adjustments
        (applicable to Warrants - Series A, B and C)***
  In
        the
        event that the Company issues any shares of its common stock or common stock
        equivalents following in a private placement, secondary offering or shelf
        offering for cash consideration at a price less than $20.00 per share of
        common
        stock for Series A and B warrants or $16.00 per share of common stock for
        Series
        C warrants, respectively, (i) the number of shares of common stock for which
        each warrant is exercisable will be adjusted to equal that number which is
        the
        result of the original number of shares of common stock for which each warrant
        is exercisable multiplied by $20.00 per share of common stock for Series
        A and B
        warrants and $16.00 per share of common stock for Series C warrants, and
        divided
        by the price per share at which the Company will issue such common stock
        or
        common stock equivalents, but in no event will the denominator be less than
        $6.12 per share, and (ii) the exercise price of each warrant shall be reduced
        to
        equal the price per share at which GlobalOptions Group issues such common
        stock
        or common stock equivalents, but in no event will the exercise price be reduced
        to less than $6.12 per share. Additionally, the warrants contain provisions
        that
        protect the holders thereof against dilution by adjustment of the purchase
        price
        in certain events, such as stock dividends, stock splits, and other similar
        events. During the year ended December 31, 2006, in connection with these
        warrant adjustment provisions, holders received the right to purchase for
        the
        Series A and Series B warrants, additional shares of common stock aggregating
        30,272 and 58,595, respectively.
  The
        holders of any type of warrant will not possess any voting or other rights
        as a
        stockholder of the Company unless and until the holder exercises the
        warrant.
  A
        summary
        of the Company’s Series A, B, and C warrants outstanding and fully exercisable
        at December 31, 2006 is presented in the table below, after the effect of
        the dilutive adjustment during such year:
 
  Exercise
                  Price
                $16.00Series
                  A
              
              
              151,367Series
                  B
              
              
              292,969Series
                  C
              
              
              90,625Outstanding
                  and Exercisable
              
              
              534,961
 
 ***Series
        B Convertible Preferred Stock***
  On
        June
        29, 2006, the Company authorized the designation of a total of 7,500 shares
        as
        Series B convertible preferred stock.
  On
        June
        29, 2006, in a private placement, notes in the amount of $45,811,000 and
        accrued
        interest of $339,731 were exchanged for 53,073 units, valued at $1,000 per
        unit
        for a total value of approximately $53,073,000.  Each unit consisted of one
        share of Series B convertible preferred stock and a detachable, transferable
        series B-1 warrant to purchase 22 shares of common stock at $17.20 per
        share and a detachable, transferable warrant series B-2 to purchase 22
        shares at $22.80 per share.
   F-42
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **14.** ****** **Stockholders’
        Equity, continued**
 
 ***Series
        B Convertible Preferred Stock, continued***
 
 ***Optional
        Conversion***
  Holders
        of Series B convertible preferred stock will be entitled at any time to convert
        their shares into the Company’s common stock, without any further payment. Each
        share of Series B convertible preferred stock is initially convertible into
        63
        shares of common stock at a conversion price of $16.00. The number of shares
        of
        the Company’s common stock issuable upon conversion of the Series B convertible
        preferred stock is subject to adjustment upon the occurrence of certain events,
        including, among others, a stock split, reverse stock split or combination
        of
        the Company’s common stock; an issuance of common stock or other securities of
        the Company as a dividend or distribution on the Company’s common stock; a
        reclassification, exchange or substitution of the Company’s common stock; or a
        capital reorganization of the Company. In the event that the Company issues
        any
        shares of common stock or common stock equivalents in a private placement,
        secondary offering or shelf offering for cash consideration at a price less
        than
        $16.00 per share of common stock, the conversion price will be reduced based
        on
        weighted average anti-dilution protections subject to customary carve outs,
        but
        in no event will the conversion price be less than $6.12 per share.
 
 ***Mandatory
        Conversion***
  Subject
        to an effective Registration Statement, beginning 12 months from the closing
        date of the offering of the Series B convertible preferred stock, if the
        closing
        bid price of the common stock exceeds $36.00 and trading volume of the Company’s
        common stock is not less than 12,500 shares for at least fifteen trading
        days
        out of a period of twenty (20) consecutive trading days, the Company may
        require
        the conversion of the Series B convertible preferred stock into shares of
        common
        stock at the applicable conversion price. In the event a holder of Series
        B
        convertible preferred stock is prohibited from converting into common stock
        under this provision due to the 4.99% ownership limitation discussed below,
        the
        excess portion of the Series B convertible preferred stock shall remain
        outstanding, but shall cease to accrue a dividend.
 
 ***Registration
        Rights***
 
 EITF
        Issue No. 05-4 “The Effect of a Liquidated Damages Clause on a Freestanding
        Financial Instrument Subject to EITF Issue No. 00-19”, “Accounting for
        Derivative Financial Instruments Indexed to, and Potentially Settled in,
        a
        Company’s Own Stock” (“EITF No. 05-4”) addresses financial instruments, such as
        stock purchase warrants, which are accounted for under EITF 00-19 that may
        be
        issued at the same time and in contemplation of a registration rights agreement
        that includes a liquidated damages clause. The consensus of EITF No. 05-4
        has
        not been finalized. On June 29, 2006, the Company completed a private placement
        of convertible notes and entered into registration rights and warrant agreement
        in connection with and following the private placement. The Company views
        its
        registration rights agreement as a free standing financial instrument that
        includes liquidated damages which could be deemed substantial. Accordingly
        the
        Company views that the interpretive guidance in EITF Issue No. 05-4, view
        C,
        provided the most appropriate measure and would require a company, in certain
        circumstances to record a derivative liability. However due to various factors
        including the good filing history of the Company, the lower likelihood of
        a
        penalty for liquidated damages relating to the requirement by the Company
        to
        file the registration statement related to the warrants, to have the
        registration statement declared effective (registration statement was declared
        effective, see below) and remain effective, the exposure to this registration
        rights damages was deemed to be de-minimus and therefore no liability was
        recorded in the consolidated financial statements.
  F-43
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **14.**
              **Stockholders’
                  Equity, continued**
 
 ***Series
        B Convertible Preferred Stock, continued***
 
 ***Investor
        Rights Agreement***
  On
        October 23, 2006, the Company and holders of a majority interest of the
        Company's Series B convertible preferred stock amended the Company's Investor
        Rights Agreement dated as of June 28, 2006 to amend and restate the definition
        of "Effectiveness Date" in the Investor Rights Agreement to read as follows:
        "Effectiveness Date” means the date that is one hundred and twenty (120) days
        following the closing date, provided that such date shall be tolled (i) for
        the
        duration of any blackout period, (ii) for periods of regulatory review exceeding
        customary periods, and (iii) for periods of regulatory review the resolution
        of
        which is outside the full control, power or authority of the Company or its
        agents, provided the Company has met comment response deadlines applicable
        to it
        (to the extent within its or its agents' full control, power or authority)
        and
        is using its reasonable best efforts to cause the registration statement
        to be
        declared effective under the Securities Act. On February 21, 2007, the Company
        entered into agreements with three holders of Series B convertible preferred
        stock acknowledging the Company's obligation under the Investor Rights Agreement
        to prepare and file with the SEC an additional registration statement (the
        “Additional Registration Statement”) to register shares that were not covered by
        the Company’s registration statement on Form SB-2 (File No. 333-136468) (the
“Existing Registration Statement”). The Company acknowledged that, as a result
        of its failure to file and cause a registration statement to become effective
        as
        to the Remaining Securities, liquidated damages have accrued and continue
        to
        accrue, on and after February 2, 2007, the date on which the Existing
        Registration Statement was declared effective as outlined in the Investor
        Rights
        Agreement.
  Such
        holders have agreed to waive, subject to the conditions set forth below,
        their
        right to payment of such liquidated damages resulting solely from the omission
        of the Remaining Securities from the Existing Registration Statement and
        any
        failure to file, or have declared effective, a registration statement with
        respect to the remaining Securities by the Filing Date or the Effectiveness
        Date, as the case may be. Such waiver shall continue in force and effect
        so long
        as the Company uses its reasonable best efforts to file as promptly as
        practicable and cause to be declared effective as promptly as practicable,
        the
        Additional Registration Statement with respect to the remaining Securities
        as
        and to the extent permitted by applicable federal securities laws, rules,
        regulations and interpretations thereof. At such time as the Company fails
        to so
        use its reasonable best efforts, as and to the extent permitted by applicable
        federal securities laws, rules, regulations and interpretations thereof,
        the
        waiver in the first sentence of this paragraph shall be null and void and
        all
        payment obligations of the Company with respect to the Remaining Securities
        Liquidated Damages (but not Liquidated Damages with respect to the Investors
        Registered Note Amount) and rights and remedies of the Investor shall be
        reviewed as if such waiver were not given.
  F-44
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **14.** ****** **Stockholders’
        Equity, continued**
 
 ***Series
        B Convertible Preferred Stock, continued***
  ***Limitations
        on Conversion*** **
  Each
        holder of Series B convertible preferred stock may not convert his shares
        into
        the Company’s common stock such that the number of shares of the Company’s
        common stock issued after the conversion would exceed, when aggregated with
        all
        other shares of the Company’s common stock owned by such holder at such time, in
        excess of 4.99% of the then issued and outstanding shares of the Company’s
        common stock.
 
 ***Voting
        Rights***
  Holders
        of Series B convertible preferred stock are entitled to vote their shares
        on an
        as-if-converted to common stock basis, up to a 4.99% of the then issued and
        outstanding shares of the Company's common stock, and will vote together
        with
        the holders of the common stock, and not as a separate class. Holders of
        Series
        B convertible preferred stock will also have any voting rights to which they
        are
        entitled by law.
 
 ***Liquidation
        Rights***
  In
        the
        event of any voluntary or involuntary liquidation, dissolution or winding-up
        of
        the Company, holders of Series B convertible preferred stock will be entitled
        to
        receive out of assets of the Company available for distribution to the Company’s
        stockholders, before any distribution is made to holders of the common
        stock, liquidating distributions in an amount equal to $1,000 per share.
        After payment of the full amount of the liquidating distributions to which
        the
        holders of the Series B convertible preferred stock are entitled, holders
        of the
        Series B convertible preferred stock will receive liquidating distributions
        pro
        rata with holders of the Company’s Series A convertible preferred stock and
        holders of the common stock, based on the number of shares of common stock
        into
        which the Series B convertible preferred stock is convertible at the conversion
        price then in effect.
  ***Dividends***
  Commencing
        18 months from the issuance date of June 29, 2006, dividends accumulate at
        the
        rate of 6% per annum for the first 12 months and 8% per annum thereafter.
        Dividends are payable in cash or in shares of common stock at the holder’s
        election. To the extent that any dividends are declared on the common stock,
        holders of Series B convertible preferred stock will be entitled to receive
        such
        dividends on an as-if-converted basis. No dividends may be declared or paid
        on
        junior securities until the dividend on the Series B convertible preferred
        stock
        is paid in full.
 
 ***Adjustments***
  In
        the
        event that the Company issues any shares of common stock or common stock
        equivalents in a private placement, secondary offering or shelf offering
        for
        cash consideration at a price less than the current warrant exercise price
        then
        in effect, the warrant exercise price will be reduced based on weighted average
        anti-dilution protections subject to customary carve outs. Additionally,
        the
        warrants contain provisions that protect the holders thereof against dilution
        by
        adjustment of the purchase price in certain events, such as stock dividends,
        stock splits, and other similar events.
  The
        holders of any type of warrant will not possess any voting or other rights
        as a
        stockholder of the Company unless and until the holder exercises the
        warrant.
 
  F-45
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **14.** ****** **Stockholders’
        Equity, continued**
 
 ***Series
        B Convertible Preferred Stock, continued***
 
 ***Beneficial
        Conversion Feature and Deemed Dividends***
 
 At
        June
        29, 2006, the date of issuance, the fixed conversion price of the Series
        B
        convertible preferred stock of $16.00 represented a discount to the market
        value
        of the Company’s common stock, which was at a quoted market price of $17.60 per
        share. In accordance with EITF 00-27 and EITF 98-5, the Company determined
        the
        relative fair value of the warrants and the Series B convertible preferred
        stock
        and allocated the proceeds received on a relative fair value basis. The fair
        value of the warrants was calculated using the Black-Scholes option pricing
        model with the following assumptions: dividend yield of 0%, expected volatility
        of 87%, risk-free interest rate of 5.21% and an expected term of two and
        a half
        years. Based upon this calculation, the effective conversion price of the
        Series
        B convertible preferred stock was determined to be $10.24 per common share,
        resulting in a beneficial conversion feature for a deemed dividend of
        $24,413,362 for the year ended December 31, 2006.
 
 ***Warrants
        (Series B-1 and Series B-2)***
  Each
        Series B-1 warrant, of which 1,160,906 were issued in the closing of the
        Company’s Series B convertible preferred stock offering, entitles the holder
        thereof to purchase shares of the Company’s common stock at an exercise price of
        $17.20 per share from the date of issuance until the fifth anniversary thereof.
        Each Series B-2 warrant, of which 1,160,906 were also issued in the closing
        of
        the Company’s Series B convertible preferred stock offering, entitled the holder
        thereof to purchase shares of the Company’s common stock at an exercise price of
        $22.80 per share from the date of issuance until the fifth anniversary thereof.
        As a result of an adjustment with regard to anti-dilution protection, the
        number
        of outstanding Series B-2 warrants was increased to 1,169,111 and the warrant
        exercise price was reduced to $22.64. In the aggregate, these warrants have
        a
        fair value of approximately $20,800,000 utilizing the Black-Scholes option
        pricing model with the following assumptions used: expected life 2.5 years,
        volatility 87%, 0% dividends and a risk-free interest rate 5.21%.
 
 A
        summary
        of the Company’s Series B-1 and B-2 warrants outstanding and fully exercisable
        at December 31, 2006 is presented in the table below, after the effect of
        the
        dilutive adjustment during such year:
 
 Exercise
                  Prices$17.20
              
              $22.64
              
              TotalSeries
                  B-1
              
              
              1,160,906
              
              
              
              
              
              1,160.906Series
                  B-2
              
              
              -
              
              
              1,169,111
              
              
              1,169,111Outstanding
                  and exercisable
              
              
              1,160,906
              
              
              1,169,111
              
              
              2,330,017
  F-46
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
 
 **14.
        Stockholders’ Equity, continued**
 
 ***Series
        B Convertible Preferred Stock, continued***
 
 ***Transfer,
        Exchange and Exercise***
  The
        warrants may be exercised upon surrender of the certificate therefore on
        or
        prior to the expiration date (as explained below) at the Company’s offices with
        the form of “Election to Purchase” section of the warrant filled out and
        executed as indicated, accompanied by payment (in the form of certified or
        cashier’s check payable to the order of GlobalOptions Group, Inc.) of the full
        exercise price for the number of warrants being exercised.
 ******
 ***Registration
        Statements***
  On
        May 8,
        2006, the Company filed a Form SB-2 to register 948,750 shares of common
        stock
        in connection with Series A convertible preferred stock. On May 10,
        2006 this registration statement was declared effective. On January 30,
        2007, the Company filed a supplement on Form 424 (b)(3) to its registration
        statement on Form SB-2 dated May 8, 2006.
 
 On
        January 30, 2007, the Company filed a Form SB-2 to register 5,419,938 shares
        in
        connection with Series B convertible preferred stock and warrants issued
        on June
        29, 2006. On February 2, 2007, this registration statement was declared
        effective.
 
 **15.
        Stock Options**
 
 ***2002
        Stock Option Plan***
 
 On
        January 24, 2002, the Board of Directors and stockholders of GlobalOptions
        approved the 2002 Stock Option Plan (the “2002 Plan”). The Plan is administered
        by the Board of Directors (“the Board”) of GlobalOptions. Directors and
        stockholders, officers, employees, and consultants of the Company were eligible
        to participate. The Plan provided for the awards of incentive and non-statutory
        stock options. The Plan initially provided for 1,685,000 shares of common
        stock
        to be reserved for issuance under the Plan. On August 4, 2004, the Company
        authorized an additional 1,585,000 shares of common stock to be reserved for
        issuance under the Plan. The Committee determined the vesting schedule to
        be up
        to five years at the time of grant of any options under the Plan, and
        unexercised options will expire in ten years. The exercise price was equal
        to at
        least 100% of the fair market value of a share of common stock, as determined
        by
        the Committee, on the grant date.
 
 At
        the
        time of the reverse merger, GlobalOptions had outstanding stock options to
        purchase 4,450,721 shares of common stock, which outstanding options became
        stock options to purchase 327,259 shares of common stock of the Company after
        giving effect to the reverse merger exchange ratio and the March 6, 2007
        1 for 8
        stock split. The Company has assumed the stock options to purchase a total
        of
        327,259 shares of common stock, with exercise prices at the fair market value
        or
        in excess of the fair market value on the date of grant, under the 2005 Stock
        Option Plan.
 
  F-47
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **15.**
              **Stock
                  Options, continued**
 
 ***2005
        Stock Option Plan***
 
 On
        August
        5, 2005, the Board of Directors and stockholders of the Company approved
        the
        2005 Stock Option Plan (the “2005 Plan”), which replaced the 2002 Plan. The 2005
        Plan is administered by the Company’s compensation committee which originally
        provided for 812,500 shares of common stock to be reserved for issuance under
        the 2005 Plan, representing the number of options outstanding under that
        plan
        (see below). Directors, officers, employees, and consultants of the Company
        are
        eligible to participate. The 2005 Plan provides for the awards of incentive
        and
        non-statutory stock options. The Committee determined the vesting schedule
        to be
        up to five years at the time of grant of any options under the Plan, and
        unexercised options will expire in ten years. The exercise price is to be
        equal
        to at least 100% of the fair market value of a share of common stock, as
        determined by the Committee, on the grant date. The Board of Directors
        determined that the remaining shares reserved, but unissued, with respect
        to any
        awards under the Company’s 2005 Stock Option Plan were unreserved and no new
        awards shall be issued pursuant to the Company’s 2005 Stock Option Plan.
 
 ***2006
        Stock Option Plan***
 
 On
        June
        12, 2006, the Board of Directors, and stockholders of the Company approved
        the
        adoption of the 2006 Stock Option Plan (the “2006 Plan”). The 2006 Plan is
        administered by the Company’s compensation committee (the Committee), and
        provides for up to 1,062,500 of the Company’s common stock to be reserved for
        issuance to directors, employees and consultants of the company and its
        subsidiaries, representing the number of options outstanding under that plan
        (see below). The 2006 Plan provides for the awards of incentive and
        non-qualified stock options. The exercise is to be not less than 100% of
        the
        fair market value of a share of common stock on the date the option is granted.
        Options expire in ten years, and are subject to the terms and conditions
        determined by the Committee at the time of grant. The Board of Directors
        determined that the remaining shares reserved, but unissued with respect
        to any
        awards under the Company’s 2006 Stock Option Plan were unreserved and no new
        awards shall be issued pursuant to the Company’s 2006 Stock Option Plan.
 On
          August
          9, 2006, the Company filed form S-8 to register an aggregate of 6,500,000
          and
          8,500,000 shares of the Company’s common stock, $0.001 par value per share,
          issuable under the 2005 Plan and the 2006 Plan, respectively.
 ***2006
        Long-Term Incentive Plan***
 
 On
        December 5, 2006 the stockholders adopted the 2006 Long-Term Incentive
        Plan (the "2006 Long-Term Incentive Plan").  The shares that may be
        issued under such plan shall not exceed an aggregate of 12,000,000 shares
        of
        common stock and the Board of Directors delegated to the compensation committee
        of the Board of Directors (the “Compensation Committee”) the authority to
        administer the 2006 Long-Term Incentive Plan. At December 31, 2006, there
        remains 11,825,000 reserved but unissued shares under the 2006 Long Term
        Incentive Plan.
 
 During
        December 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.
  F-48
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **15.
        Stock Options, continued**
 
 ***2006
        Long-Term Incentive Plan, continued***
 
 On
        December 15, 2006, the Company filed a registration statement on Form S-8
        under
        the Securities Act covering 12,000,000 shares of common stock reserved for
        issuance under the 2006 Long-Term Incentive Plan. The Form S-8 registration
        became effective immediately upon filing. Subject to the satisfaction of
        applicable exercise periods and Rule 144 volume limitations applicable to
        affiliates, shares of the Company common stock to be issued upon exercise
        of
        outstanding stock options granted pursuant to the Company’s 2006 Long Term
        Incentive Plan are available for immediate resale in the public market.
 
 ***2006*** **** ***Employee
        Stock Purchase Plan***
 
 On
        December 5, 2006 the stockholders adopted the 2006 Employee Stock Purchase
        Plan
        (the “Employee Stock Purchase Plan”). The shares that may be issued under such
        plan shall not exceed an aggregate of 2,000,000 shares of common stock and
        that
        the Board of Directors have delegated to the Compensation Committee the
        authority to administer the Employee Stock Plan.
  On
        December 15, 2006, the Company filed a registration statement on Form S-8
        covering 12,000,000 and 2,000,000 shares of common stock reserved for issuance
        under the Company’s 2006 Long Term Incentive Plan and the Employee Stock
        Purchase Plan.
  ***Stock-Based
        Compensation***
 
 On
        June
        24, 2005, the Company issued 18,125 shares of common stock at a value of
        $337,850 to an advisor for its services related to the reverse merger. This
        cost
        is reflected in general and administrative expenses in the consolidated
        statements of operations for the year ended December 31, 2005.
 
 On
        November 18, 2005, the Company granted an option to a consultant who also
        serves
        as the Company’s Chief Financial Officer, to purchase 62,500 shares of common
        stock at $20.00 per share. This option has a term of five years, is
        non-forfeitable and vests over three years. This option was initially valued
        at
        $865,000 utilizing the Black-Scholes option pricing model and is being amortized
        to stock-based compensation over the three year vesting period in accordance
        with Emerging Issues Task Force pronouncement No. 96-18 - “Accounting for Equity
        Instruments That are Issued to Other than Employees for Acquiring, or in
        Conjunction with Selling, Goods or Services” (“EITF 96-18”). On a quarterly
        basis, the Company adjusts the unvested value on a mark-to-market basis,
        and the
        cumulative effect of the adjustment amount on amortization, since inception,
        is
        reflected in current period amortization. During the years ended December
        31,
        2006 and 2005, approximately, $132,000 and $17,000 respectively was amortized
        to
        stock-based compensation expense related to this option and recorded within
        general and administrative expenses. At December 31, 2006, the fair value
        of the
        option was approximately $449,000 and the unamortized value was approximately
        $300,000.
  F-49
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **15.
        Stock Options, continued**
 
 ***Stock-Based
        Compensation, continued***
 
 ****** On
        June
        12, 2006, the Company granted an option to its consultant who also serves
        as the
        Company’s Chief Financial Officer, to purchase 62,500 shares of common stock at
        $17.60 per share. This option has a term of five years, is non-forfeitable
        and
        vests over three years. This option was initially valued at $779,000 utilizing
        the Black-Scholes option pricing model and is being amortized to stock-based
        compensation over the three year vesting period in accordance with EITF 96-18.
        On a quarterly basis, the Company adjusts the unvested value on a mark-to-market
        basis, and the cumulative effect of the adjustment amount on amortization,
        since
        inception, is reflected in current period amortization. During the year ended
        December 31, 2006, approximately $77,000 was amortized to stock-based
        compensation expense related to this option and recorded within general and
        administrative expenses. At December 31, 2006, the fair value of the option
        was
        approximately $457,000 and the unamortized value was approximately $380,000.
  During
        the years ended December 31, 2006 and 2005, the Company issued stock options
        to
        certain members of its advisory boards in exchange for their advisory services
        to the Company valued at $186,560 and $119,000, respectively. The fair value
        of
        the option granted during the year ended December 31, 2006 was calculated
        using
        the Black-Scholes option pricing model with the following assumptions: dividend
        yield of 0%, expected volatility of 87%, risk-free interest rate of 4.95%
        and an
        expected term of five years. The options granted during the year ended December
        31, 2005 were valued under EITF No. 96-18 at the arm’s length cash equivalent
        value of the related compensation. During April 2006 and June 2006, the Company
        issued 7,317 shares of common stock valued at $117,078 to consultants who
        have
        provided prior services to the Company.
  Prior
        to
        January 1, 2006, the Company accounted for the stock option plans under the
        recognition and measurement provisions of Accounting Principles Board Opinion
        No. 25 ("APB 25"). Accordingly, the Company would recognize employee stock
        based
        compensation expense only if it granted options at a price lower than the
        closing price on the date of grant. Any resulting compensation expense would
        then have been recognized ratably over the associated service period.  No
        stock-based employee compensation expense relating to the Company’s stock option
        plans was reflected in net loss available to common stockholders for the
        year
        ended December 31, 2005, as all options granted under its plans had an exercise
        price equal to or greater than the market value of the underlying common
        stock
        on the date of grant. Prior to January 1, 2006, the Company provided pro-forma
        disclosure amounts in accordance with Statement of Financial Accounting
        Standards No. 148, "Accounting for Stock-Based Compensation-Transition and
        Disclosure" ("SFAS 148"), as if the fair value method defined by SFAS 123
        had
        been applied to its stock-based compensation.
 
 Effective
        January 1, 2006, the Company adopted the fair value recognition provisions
        of
        SFAS 123R, using the modified prospective transition method and therefore
        has
        not restated prior years results. Under this transition method, employee
        stock-based compensation expense for the year ended December 31, 2006 included
        compensation expense for all stock-based compensation awards granted, but
        not
        yet fully vested, prior to January 1, 2006.  The fair value of the options
        granted was determined at the original grant date in accordance with the
        provisions of SFAS 123R.  Stock-based compensation expense for all
        share-based payment awards granted after December 31, 2005 is based on the
        grant-date fair value estimated in accordance with the provisions of SFAS
        123R.
        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.
 
  F-50
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **15.
        Stock Options, continued**
 
 ***Stock-Based
        Compensation, continued***
 
 As
        a
        result of adopting SFAS 123R, the impact to the consolidated financial
        statements for the year ended December 31, 2006 was to record an expense
        of
        approximately $2,258,000 greater than if the Company had continued to account
        for stock-based compensation under APB 25 and is reflected within general
        and
        administrative expenses. The impact of the adoption of SFAS 123R on both
        basic
        and diluted net loss per share for the year ended December 31, 2006 was $1.01
        per share. At December 31, 2006, the unamortized value of employee stock
        options
        under SFAS 123R was approximately $4,718,000. The unamortized portion will
        be
        expensed over a weighted average period of 1.9 years. For the year ended
        December 31, 2006, costs of approximately $2,258,000 were recognized in
        connection with the vesting of these stock options.
  The
        Company accounts for equity instruments issued to non-employees in accordance
        with the provisions of SFAS 123 and the Emerging Issues Task Force (“EITF”)
        Issue No.  96-18,  “Accounting  for  Equity 
Instruments  That Are Issued to Other Than  Employees  for 
Acquiring,  or In  Conjunction  with Selling,  Goods or
        Services” (“EITF 96-18”) 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 accounted for under EITF 96-18 was approximately $853,000 and
        $662,000 for the years ended December 31, 2006 and 2005, respectively, and
        is
        reflected within general and administrative expenses.
  Option
        valuation models require the input of highly subjective assumptions including
        the expected life of the option. Because the Company's employee stock options
        have characteristics significantly different from those of traded options,
        and
        because changes in the subjective input assumptions can materially affect
        the
        fair value estimate, in management's opinion, the existing models do not
        necessarily provide a reliable single measure of the fair value of its employee
        stock options.
 
 The
        fair
        value of each option grant during the years ended December 31, 2006 and 2005
        was
        estimated on the date of grant using the Black-Scholes option pricing model
        with
        the following assumptions used:
  Year
                  Ended December 31,2006
              
              2005Dividend
                  yield
              
              0%
              
              0%Expected
                  volatility
              
              87%
              
              87%Risk-free
                  interest rate
              
              5.0%
              
              3.0%Expected
                  lives
              
              5
                  years
              
              3
                  years
 
 The
        weighted average fair value of the options on the date of grant, using the
        fair
        value based methodology for years ended December 31, 2006 and 2005 was $12.16
        and $13.84, respectively.
   F-51
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **15.
        Stock Options, continued**
 
 ***Stock-Based
        Compensation, continued***
 
 For
        the
        year ended December 31, 2005, under APB 25, no stock-based employee compensation
        expense relating to the Company’s stock option plans was reflected in net loss
        available to common stockholders, as all options granted under its plan had
        an
        exercise price equal to or greater than the market value of the underlying
        common stock on the date of grant.
 
 The
        following table illustrates the effect on net loss available to common
        stockholders and net loss per share available to common stockholders
        for the year ended December 31, 2005 if the Company had applied the fair
        value
        recognition method under the provisions of SFAS 123.
 
 (All
                  numbers in 000’s except per share data.)
              
              For
                  the
                Year
                  Ended December 31,2005Net
                  loss available to common stockholders, as reported
              
              $
              (4,550
              )Deduct:
                  total stock-based employee compensation expense determined under
                  fair
                  value based method for all awards, net of related tax effects,
                  if
                  any
              
              
              377Pro-forma
                  net loss
              
              $
              (4,927
              )Net
                  loss per share available to common stockholders - basic and
                  diluted:As
                  reported
              
              $
              (3.03
              )Pro
                  forma
              
              $
              (3.28
              )
 
  F-52
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
 
 **15.
        Stock Options, continued**
 
 ***Stock-Based
        Compensation, continued***
 
 A
        summary
        of non-vested options for the year ended December 31, 2006 is shown
        below:
  Number
                  of Non-Vested
                  Options
              
              Weighted
                  Average
                Grant
                  Date
                Fair
                  ValueNon-vested
                  at January 1, 2006
              
              
              341,102
              
              $
              11.70Granted
              
              
              410,917
              
              
              12.15Vested
              
              
              (190,773
              )
              
              (11.54
              )Forfeited
              
              
              (2,541
              )
              
              (11.41
              )Non-vested
                  at December 31, 2006
              
              
              558,705
              
              $
              12.08
  On
        March
        10, 2006, in connection with the Company’s purchase of JLWA, the Company issued
        102,459 shares of common stock, valued at $2,000,000 (See Note 4) and granted
        27,778 options for the purchase of common stock at an exercise price of $18.00
        per share to various former employees of JLWA. The options have a five year
        term, vest ratably upon the first, second and third anniversary of the date
        of
        grant and have a value of approximately $351,000 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
        4.95%.   Of the total option value, $95,271 was amortized during the
        year ended December 31, 2006.
 
 On
        April
        27, 2006, GlobalOptions Group granted, in the aggregate, options for the
        purchase of 15,375 shares of GlobalOptions Group common stock at an exercise
        price of $17.60 per share, consisting of options for the purchase of 2,125
        shares granted to certain employees of GlobalOptions and options for the
        purchase of 13,250 shares granted to certain members of the Company’s advisory
        boards in exchange for services. The options granted to employees have a
        five
        year term and vest ratably upon the first, second and third anniversary of
        the
        date of grant. The options granted to the members of the advisory boards
        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 $213,000 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 4.95%.
        Of
        the total option value, $127,000 was amortized during the year ended December
        31, 2006.
  On
        May
        12, 2006, GlobalOptions Group granted, in the aggregate, options for the
        purchase of 60,634 and 46,642 shares of GlobalOptions Group common stock
        at an
        exercise price of $16.08 per share, from the 2005 Plan, to employees and
        officers of Safir and Secure Source, respectively.  These options have a
        five year term and for Safir, vest ratably upon the first, second, third
        and
        fourth anniversaries of the date of grant and for Secure Source, vest ratably
        upon the first, second and third anniversaries of the date of grant.  In
        the aggregate, these options have a value of approximately $1,224,000 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 5.08%. Of the total option value, $218,953 was amortized
        during
        the year ended December 31, 2006. In addition, on May 12, 2006, GlobalOptions
        Group issued 375,000 and 26,371 shares of GlobalOptions Group common stock
        to
        the sellers of Safir and Secure Source, which were valued at $6,000,000 and
        $500,000, respectively (See Note 4).
 
  F-53
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **15.
        Stock Options, continued**
 
 ***Stock-Based
        Compensation, continued***
 
 On
        June
        12, 2006, GlobalOptions Group granted, in the aggregate, from the 2006 Plan,
        options for the purchase of 167,500 shares of GlobalOptions Group common
        stock
        at an exercise price of $17.60 per share, consisting of options for the purchase
        of an aggregate of 125,000 shares granted to the Company’s Chief Executive
        Officer and 42,500 shares to members of the Company’s Board of Directors. 
The options granted to the Company’s officer have a five year term and vest
        ratably upon the first, second and third anniversary of the date of
        grant.   The options granted to the members of the officer and
        the Board of Directors 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, the options for the chief executive officer and the board of
        directors, had a value of approximately $2,091,000 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
        4.95%. Of the total option value, approximately $568,000 was amortized during
        the year ended December 31, 2006, resulting in an unamortized portion of
        $1,523,000 at December 31, 2006.
 
 On
        August
        10, 2006, the Company granted, in the aggregate, options for the purchase
        of  30,488
        shares of common stock at an exercise price of $16.40 per share, from the
        2006
        Plan, to employees and officers of Hyperion Risk.  These 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 $332,000 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 4.86%. Of the total
        option
        value, $39,000 was amortized during the year ended December 31,
        2006.
 
 A
        summary
        of the status of the Company’s stock option plans and the changes during the
        years ended December 31, 2006 and 2005 is presented in the table below:
  **Weighted
                  Average****Number
                  of Options**
              
              **Exercise
                  Price**Options
                  outstanding at January 1, 2005
              
              
              324,097
              
              $
              3.84Granted
              
              
              300,035
              
              
              19.52Forfeited
              
              
              (1,948
              )
              
              5.44Options
                  outstanding at December 31, 2005
              
              
              622,184
              
              $
              11.36Granted
              
              
              410,917
              
              
              17.12Forfeited
              
              
              (2,541
              )
              
              16.97Options
                  outstanding at December 31, 2006
              
              
              1,030,560
              
              $
              13.65
 
  F-54
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **15.
        Stock Options, continued**
 
 ***Stock-Based
        Compensation, continued***
 
 A
        summary
        of the Company’s stock options outstanding and exercisable at December 31,
        2006 is presented in the table below:
 
 Total
              
              Aggregate
                  IntrinsicValueOption
                  Exercise
                Price
              
              $
              .54
              
              $
              4.80
              
              $
              5.44
              
              $
              6.80
              
              $
              16.08
                  -$ 20.00Outstanding
              
              
              88,582
              
              
              149,228
              
              
              80,184
              
              
              7,353
              
              
              705,213
              
              
              1,030,560
              
              $
              2,649,214Weighted
                  average
                remaining
                contractual
                  life of
                options
                  outstanding
                (in
                  years)
              
              
              .1
              
              
              2.0
              
              
              2.7
              
              
              6.6
              
              
              4.0Exercisable
              
              
              88,582
              
              
              138,191
              
              
              64,616
              
              
              7,353
              
              
              173,113
              
              
              471,855
              
              $
              2,467,523
 
  F-55
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **16.   Client
        and Segment Data**
 
 The
        Company’s reportable operating segments services consisted of the following
        three business segments: CBR – Investigations and Litigation Support,
        JLWA-Crisis Management and Corporate Governance and Safir – Risk
        Management and Security.   The Company’s reportable segments
        are organized, managed and operated along key product lines. These product
        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
        CBR -
        Investigations and Litigation Support segment includes activities from
        litigation support, due diligence, inventory control, asset recovery, and
        business intelligence.
 
 The
        JLWA
        - Crisis Management and Corporate Governance segment includes activities
        related to risk planning and response to natural disasters, kidnappings,
        labor
        disputes, bombings, product tampering and industrial espionage.
  The
        Safir
        - Risk Management and Security segment includes activities from threat and
        vulnerability assessments; fraud prevention; IT security, and technical
        systems/counter-measures both nationally and
        internationally.
 
 The
        Company’s reportable segments have changed from the prior year, to accommodate
        the acquisitions made.
 
 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.
 
  F-56
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **16.   Client
        and Segment Data, continued**
  The
        following tables summarize financial information about the Company’s business
        segments for the years ended December 31, 2006 and 2005 (in thousands) The
        Company’s segment information for the year ended December 31, 2006 is presented
        on a basis different then for the year ended December
        31, 2005:
 
 **For
                  the Year Ended December 31,
                  2006**
 **CBR
                    - Investigations and Litigation Support**
                
                **JLWA
                    - Crisis Management and Corporate Governance**
                
                **Safir
                    - Risk Management and Security**
                
                **Corporate**
                
                **Consolidated**Revenues
                
                $
                16,550
                
                $
                37,556
                
                $
                7,818
                
                $
                -
                
                $
                61,924(Loss)
                    Income from Operations
                
                $
                (12,409
                )
                $
                7,631
                
                $
                (2,675
                )
                $
                -
                
                $
                (7,453
                )Identifiable
                    Assets
                
                $
                3,280
                
                $
                13,150
                
                $
                3,489
                
                $
                49,307
                
                $
                69,226Depreciation
                    and Amortization
                
                $
                604
                
                $
                1,025
                
                $
                481
                
                $
                -
                
                $
                2,110Interest
                    Expense
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                653
                
                $
                653Amortization
                    of Debt Discounts on Convertible Notes Payable
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                7,523
                
                $
                7,523Amortization
                    of Deferred Financing Costs
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                2,695
                
                $
                2,695Capital
                    Expenditures
                
                $
                291
                
                $
                25
                
                $
                36
                
                $
                -
                
                $
                352
  F-57
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **16.   Client
        and Segment Data, continued**
  **For
                  the Year Ended December 31,
                  2005**
 
 **CBR
                  - Investigations and Litigation Support**
              
              **JLWA
                  - Crisis Management and Corporate Governance**
              
              **Safir
                  - Risk Management and Security**
              
              **Corporate**
              
              **Consolidated**Revenues
              
              $
              6,970
              
              $
              1261
              
              $
              798
              
              $
              -
              
              $
              9,028Loss
                  from Operations
              
              $
              (2,635
              )
              $
              (687
              )
              $
              (201
              )
              $
              -
              
              $
              (3,523
              )Depreciation
                  and Amortization
              
              $
              161
              
              $
              29
              
              $
              18
              
              $
              -
              
              $
              208Interest
                  Expense
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              65
              
              $
              65Capital
                  Expenditures
              
              $
              23
              
              $
              4
              
              $
              3
              
              $
              0
              
              $
              30
  **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 three
          largest clients accounted for approximately 51%, 11%, and 4% of revenues
          for the
          year ended December 31, 2006, of which the 51% and 4% of revenue clients
          represented work performed under government contracts. The Company’s three
          largest clients also accounted for approximately 27%, 11% and 7% of the
          Company’s revenues for the year ended December 31, 2005.
 
 For
          the
          year ended December 31, 2006, within the JLWA-Crisis Management and Corporate
          Governance segment, the three largest clients within the segment represent
          51%, 4% and 1% of the Company’s overall revenue.   Within the
          CBR-Investigations and Litigation Support segment, the two largest clients
          with the segment represented 11% and 2% of the Company’s overall
          revenues.   Within the Safir-Risk Management and Security
          segment, the largest client represented 1% of the Company’s overall
          revenue.
  For
            the
            years ended December 31, 2006 and 2005, respectively, government contracts
            represented 57% and 0% of the Company’s net revenues, the most significant of
            which represented 94% of the Company’s net revenues within the JLWA-Crisis
            Management and Corporate Governance segment.
 
 During
          the year ended December 31, 2006, a client that represented approximately
          19% of
          revenues for the year ended December 31, 2005 has elected not to renew
          its
          relationship with the Company
 
 Revenue
          from foreign clients represent 1% and 24% of total revenue for the years
          ended
          December 31, 2006 and 2005, respectively.   These foreign clients
          operate primarily in Russia and the Caribbean.   For each of
          these foreign clients, the Company is paid in U.S. dollars.
  **18.**
              **Related
                  Party Transactions**
 
 The
        Company was a party to an advisory agreement with the QuanStar Group, LLC
        ("QuanStar Group), pursuant to which QuanStar Group rendered strategic and
        consulting services to the Company, particularly in the areas of corporate
        finance and strategic acquisitions, and was paid a monthly retainer of $15,000.
        During the year ended December 31, 2005 under this agreement, the Company
        incurred costs of $165,000.  The amount due to the QuanStar Group included
        in accounts payable at December 31, 2005 amounted to approximately $34,500.
        The
        advisory agreement was entered into as of August 2004 and was terminated
        during
        November 2005. Harvey W. Schiller, Ph.D., the Company's Chairman and Chief
        Executive Officer is a partner in the QuanStar Group. Per Olof Loof, the
        Company's Vice Chairman of the Bard is a former partner of the Quanstar
        Group.
  The
          Company also had a rental agreement with the QuanStar Group which expired
          during
          2006. The company incurred rent with the QuanStar Group of approximately
          $27,100
          and $77,400 for the years ended December 31, 2006 and 2005, respectively,
          for
          the Company’s administration headquarters.
 **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 $120,000 and
        $18,000
        for the years ended December 31, 2006 and 2005, respectively.
  F-58
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  **20.   Subsequent
        Events**
 
 ***Acquisition
        of On-Line Consulting***
 
 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. 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 for On Line Consulting’s business and assets was $2,658,000 plus
        the acquisition of certain liabilities, and consisted of $1,308,000 in cash
        and
        84,375 shares of common stock of GlobalOptions Group valued at $16.00 per
        share
        for a total value of $1,350,000. At closing, the Company paid $750,000 of
        the
        cash portion of the purchase price, and issued promissory notes for $417,000
        due
        January 9, 2008, and $141,000 due on January 9, 2009. Further, at closing
        the
        Company delivered to the seller 46,875 shares of GlobalOptions common stock,
        with 37,500 shares to be held in escrow and to be delivered to the seller,
        18,750 shares on January 9, 2008, and 18,750 shares on January 9, 2009,
        respectively. The purchase price is subject to certain working capital purchase
        price adjustments.
 
 All
        of
        the promissory notes issued in connection with the acquisition of On Line
        Consulting bear no stated interest rate. Each of the promissory note obligations
        were discounted at a market interest rate of 6% per annum, and are shown
        above
        at their discounted values.
 
 Through
        the acquisition of On Line Consulting, the Company assumed the operating
        lease
        for office space located in Oakland, California.   The lease is
        for approximately $5,000 per month and extends through September
        2011.
 ******
 In
        January 2007, concurrently with the Company’s acquisition of On Line Consulting,
        GlobalOptions entered into a three year employment agreement with Sandor
        P.
        Zirulnik, the founder of On Line Consulting. Pursuant to the agreement, Mr.
        Zirulnik became the Senior Executive Officer of the division known as
        GlobalOptions/Safir Rosetti Security Division and agreed to perform such
        other
        duties and responsibilities as the Chief Executive Officer of the Company
        or his
        designee shall from time to time reasonably assign to him.   Mr.
        Zirulnik has agreed to devote his full time to GlobalOptions at a salary
        of
        $200,000 per annum for the first year; $210,000 per annum for the second
        year;
        and $225,000 for the third year and shall be eligible for a discretionary
        bonus
        up to $100,000. The employment agreement may be terminated for cause by
        GlobalOptions, upon the death or disability of the executive, or upon 30-days’
notice by either party. In the event GlobalOptions terminates the employment
        agreement without cause during the initial term, it is required to pay Mr.
        Zurulnik his current base salary, bonus and certain benefits through January
        31,
        2010. The employment agreement also contains non-compete and non-solicitation
        provisions for 12 months following termination, as well as confidentiality
        provisions.
  F-59
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
 
 **20.**
              **Subsequent
                  Events, continued**
 
 ***Acquisition
        of The Bode Technology Group***
  On
          February 28, 2007, the Company acquired the common stock of The Bode Technology
          Group, Inc. ("Bode"), a Virginia corporation. 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 (the "Bode Agreement"), between ChoicePoint
          Government Services Inc., ChoicePoint and the Company. The aggregate purchase
          price paid was $12.5 million in cash and is subject to certain purchase
          price
          adjustments, as defined in the Bode Agreement. On March 8, 2007, Bode was
          reincorporated into Delaware.
 Through
        the acquisition of Bode, the Company assumed the operating lease for office
        space, located in Lorton, Virginia.   The lease is for
        approximately 39,000 square feet of rentable space at a cost of approximately
        $59,000 per month and has a remaining term of 116
        months.
 
 In
        March
        2007, concurrently with the Company’s acquisition of
        Bode,   GlobalOptions entered into a two year employment
        agreement with Maureen M. Loftus.   Pursuant to the agreement,
        Ms. Loftus became the President of the division known as GlobalOptions/Bode
        and
        agreed to other duties and responsibilities as the Chief Executive Officer
        of
        the Company or his designee, shall from time to time reasonably assign to
        her.   She has agreed to devote her full time to GlobalOptions at
        a salary of   $190,992 per annum and she shall be eligible for a
        bonus based upon approved goals.      The
        employment agreement may be terminated for cause by GlobalOptions, upon the
        death or disability of the executive, or upon 30-days’ notice by either party.
        In the event GlobalOptions terminates the employment agreement without cause
        during the initial term, it is required to pay Ms. Loftus her current base
        salary and certain benefits through March 2009. The employment agreement
        also
        contains non-compete and non-solicitation provisions for 12 months following
        termination, as well as confidentiality provisions.
 
 In
        March
        2007, concurrently with the Company’s acquisition of
        Bode,   GlobalOptions entered into a two year employment
        agreement with Phillip E. Crowther.   Pursuant to the agreement,
        Mr. Crowther became the Controller of the division known as GlobalOptions/Bode
        and agreed to other duties and responsibilities as the Chief Financial Officer
        of the Company or his designee, shall from time to time reasonably assign
        to
        him.   He has agreed to devote his full time to GlobalOptions at
        a salary of $106,046 per annum and he shall be eligible for a bonus based
        upon
        approved goals. The employment agreement may be terminated for cause by
        GlobalOptions, upon the death or disability of the executive, or upon 30-days’
notice by either party. In the event GlobalOptions terminates the employment
        agreement without cause during the initial term, it is required to pay Mr.
        Crowther his current base salary and certain benefits through March 2009.
        The
        employment agreement also contains non-compete and non-solicitation provisions
        for 12 months following termination, as well as confidentiality
        provisions.
 
  F-60
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
 
 ***2*** **0** **.** ****** **Subsequent
        Events, continued**
 
 ***Acquisition
        of Facticon, Inc.***
 
 On
        February 28, 2007, the GlobalOptions Group purchased substantially all of
        the
        business and assets of Facticon, Inc. ("Facticon"), a Pennsylvania
        corporation.   Facticon is a surveillance, investigative and
        intelligence firm located in Chadds Ford, Pennsylvania.
 
 The
        acquisition was made pursuant to a certain Asset Purchase Agreement, dated
        February 28, 2007 (the "Agreement"), between the GlobalOptions Group and
        Facticon. The aggregate purchase price paid was $2,800,000, which consisted
        of
        $1,400,000 in cash and 87,500 shares of common stock
        in   GlobalOptions Group, valued at $1,400,000 and the assumption
        of certain liabilities.
 
 In
        March
        2007, concurrently with the Company’s acquisition of
        Facticon,   GlobalOptions entered into a 3 year employment
        agreement with Jim Jensen.   Pursuant to the agreement, Mr.
        Jensen became the Northeast Regional Vice President of the division known
        as
        GlobalOptions/Facticon and agreed to other duties and responsibilities as
        the
        Board of Directors shall from time to time reasonably assign to
        him.   He has agreed to devote his full time to GlobalOptions at
        a salary of $100,000 per annum for the year 2007 (pro-rated), $110,000, per
        annum for the year 2008, and $120,000, per annum for the year
        2009.    He shall be eligible for a bonus based upon approved
        goals.   The employment agreement may be terminated for cause by
        GlobalOptions, upon the death or disability of the executive, or upon 30-days’
notice by either party. In the event GlobalOptions terminates the employment
        agreement without cause during the initial term, it is required to pay Mr.
        Jensen his current base salary and certain benefits through March 2009. The
        employment agreement also contains non-compete and non-solicitation provisions
        for 12 months following termination, as well as confidentiality
        provisions.
 
 In
        March
        2007, concurrently with the Company’s acquisition of
        Facticon,   GlobalOptions entered into a 3 year employment
        agreement with John Bullock.   Pursuant to the agreement, Mr.
        Bullock became the Northeast Regional Vice President of the division known
        as
        GlobalOptions/Facticon and agreed to other duties and responsibilities as
        the
        Board of Directors shall from time to time reasonably assign to
        him.   He has agreed to devote his full time to GlobalOptions at
        a salary of $100,000 per annum for the year 2007 (pro-rated), $110,000, per
        annum for the year 2008, and $120,000, per annum for the year
        2009.    He shall be eligible for a bonus based upon approved
        goals.   The employment agreement may be terminated for cause by
        GlobalOptions, upon the death or disability of the executive, or upon 30-days’
notice by either party. In the event GlobalOptions terminates the employment
        agreement without cause during the initial term, it is required to pay Mr.
        Bullock his current base salary and certain benefits through March 2009.
        The
        employment agreement also contains non-compete and non-solicitation provisions
        for 12 months following termination, as well as confidentiality
        provisions.
 
 ***2006
        Long-Term Incentive Plan***
 
 On
        January 1, 2007, the Company issued 100 shares of its Company common stock
        to
        267 full time employees under the 2006 Long-Term Incentive Plan.
 
  F-61
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Consolidated Financial Statements**
  ***2*** **0** **.** ****** **Subsequent
        Events, continued**
 
 ***Stock
        Options***
 
 On
        January 1, 2007, the Company granted, in the aggregate, options for the purchase
        of 18,750 shares of its common stock at an exercise price of $11.36 per share,
        under the 2006 Long Term 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.
 
 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 $11.36 per share, under
        the
        2006 Long Term Incentive Plan to certain members of its advisory boards in
        exchange 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.
 
 On
        January 9, 2007, the Company granted, in the aggregate, options for the purchase
        of 26,410 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.
 
 On
        February 1, 2007, February 7, 2007 and February 21, 2007, the Company
        issued 39,706, 44,118 and 44,118 shares of common stock in connection with
        the
        exercise of stock options resulting in total proceeds of approximately
        $48,000.
 
 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.
 
 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.
 
 ***Conversion
        of Series A Convertible Preferred Stock***
 
 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-62