UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)




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




For the
Quarterly Period Ended March 31, 2009




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




For the
transition period from __________________ to __________________




Commission
file number: 001-33700




GLOBALOPTIONS GROUP,
INC


(Exact
name of registrant as specified in its charter)





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





(212)
445-6262


(Registrant’s
telephone number, including area code)




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





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




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes  ̈  No  ̈




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




Large
accelerated filer  ̈  Accelerated filer
 ̈




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




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




As of May
11, 2009, there were 13,667,347 shares of the issuer’s common stock
outstanding.





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Form
10-Q


March
31, 2009


TABLE
OF CONTENTS





PART
      IFINANCIAL
      INFORMATIONITEM
      1.
                            Financial
      Statements.Condensed
      Consolidated Balance Sheets as of March 31, 2009 (Unaudited) and December
      31, 2008
                            1Condensed
      Consolidated Statements of Operations for the Three Months
      EndedMarch
      31, 2009 and 2008 (Unaudited)
                            2Condensed
      Consolidated Statement of Stockholders’ Equity for the Three Months
      EndedMarch
      31, 2009 (Unaudited)
                            3Condensed
      Consolidated Statements of Cash Flows for the Three Months
      EndedMarch
      31, 2009 and 2008 (Unaudited)
                            4Notes
      to Condensed  Consolidated Financial Statements
      (Unaudited)
                            6ITEM
      2.
                            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                            19ITEM
      3.
                            Quantitative
      and Qualitative Disclosures About Market Risk.
                            26ITEM
      4T.
                            Controls
      and Procedures.
                            26PART
      IIOTHER
      INFORMATIONITEM
      1.
                            Legal
      Proceedings.
                            27ITEM
      1A.
                            Risk
      Factors.
                            28ITEM
      2.
                            Unregistered
      Sales of Equity Securities and Use of Proceeds.
                            28ITEM
      3.
                            Defaults
      Upon Senior Securities.
                            28ITEM
      4.
                            Submission
      of Matters to a Vote of Security Holders.
                            28ITEM
      5.
                            Other
      Information.
                            28ITEM
      6.
                            Exhibits.
                            29SIGNATURES.
                            30





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 
 Condensed
Consolidated Balance Sheets
 (dollars
in thousands, except per share amount)
 
 March 31,
                                        
                                        
                                        December 31,2009
                                        
                                        
                                        2008(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                                        
                                        $
                                        2,418
                                        
                                        
                                        $
                                        5,276Accounts
      receivable, net
                                        
                                        
                                        31,762
                                        
                                        
                                        
                                        27,485Inventories,
      net
                                        
                                        
                                        3,052
                                        
                                        
                                        
                                        2,522Prepaid
      expenses and other current assets
                                        
                                        
                                        692
                                        
                                        
                                        
                                        862Total
      current assets
                                        
                                        
                                        37,924
                                        
                                        
                                        
                                        36,145Property
      and equipment, net
                                        
                                        
                                        5,877
                                        
                                        
                                        
                                        5,834Intangible
      assets, net
                                        
                                        
                                        5,370
                                        
                                        
                                        
                                        5,981Goodwill
                                        
                                        
                                        19,968
                                        
                                        
                                        
                                        19,968Security
      deposits and other assets
                                        
                                        
                                        548
                                        
                                        
                                        
                                        553Total
      assets
                                        
                                        $
                                        69,687
                                        
                                        
                                        $
                                        68,481LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Line
      of credit
                                        
                                        $
                                        7,521
                                        
                                        
                                        $
                                        7,093Notes
      payable
                                        
                                        
                                        250
                                        
                                        
                                        
                                        400Accounts
      payable
                                        
                                        
                                        6,776
                                        
                                        
                                        
                                        6,199Deferred
      revenues
                                        
                                        
                                        519
                                        
                                        
                                        
                                        585Accrued
      compensation and related benefits
                                        
                                        
                                        4,431
                                        
                                        
                                        
                                        3,155Other
      current liabilities
                                        
                                        
                                        2,145
                                        
                                        
                                        
                                        1,966Total
      current liabilities
                                        
                                        
                                        21,642
                                        
                                        
                                        
                                        19,398Other
      long-term obligations
                                        
                                        
                                        829
                                        
                                        
                                        
                                        838Total
      liabilities
                                        
                                        
                                        22,471
                                        
                                        
                                        
                                        20,236Commitments
      and contingenciesStockholders'  equity:Preferred
      stock, $0.001 par value, 14,900,000 shares authorized, no shares issued or
      outstandingSeries
      D convertible preferred stock, non-voting, $0.001 par value, 100,000
      shares authorized, dividends do not accrue,  no anti-dilution
      protection, 13,129.84 and 55,388.37 shares issued
      and  outstanding, convertible into 875,317 and 3,692,743 shares
      of common stock, liquidation  preference of $0.001 per share or
      $0.
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Common
      stock, $0.001 par value; 100,000,000 shares authorized; 13,320,431 shares
      issued and 13,213,364 shares outstanding at March 31, 2009,
      and   10,486,935 shares issued and 10,379,868 shares
      outstanding at December 31, 2008
                                        
                                        
                                        13
                                        
                                        
                                        
                                        10Additional
      paid-in capital
                                        
                                        
                                        109,592
                                        
                                        
                                        
                                        108,989Accumulated
      deficit
                                        
                                        
                                        (62,181
                                        )
                                        
                                        
                                        (60,546
                                        )Treasury
      stock; at cost, 107,067 shares
                                        
                                        
                                        (208
                                        )
                                        
                                        
                                        (208
                                        )Total
      stockholders' equity
                                        
                                        
                                        47,216
                                        
                                        
                                        
                                        48,245Total
      liabilities and stockholders' equity
                                        
                                        $
                                        69,687
                                        
                                        
                                        $
                                        68,481
 
 See notes
to these condensed consolidated financial statements.
  1
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Condensed
Consolidated Statements of Operations
 (dollars
in thousands, except per share amounts)
 (Unaudited)
 
 For the Three Months Ended March 31,2009
                            
                            
                            2008Revenues
                            
                            $
                            25,514
                            
                            
                            $
                            21,499Cost
      of revenues
                            
                            
                            14,755
                            
                            
                            
                            12,366Gross
      profit
                            
                            
                            10,759
                            
                            
                            
                            9,133Operating
      expenses:Selling
      and marketing
                            
                            
                            3,056
                            
                            
                            
                            2,502General
      and administrative
                            
                            
                            9,148
                            
                            
                            
                            10,996Total
      operating expenses
                            
                            
                            12,204
                            
                            
                            
                            13,498Loss
      from operations
                            
                            
                            (1,445
                            )
                            
                            
                            (4,365
                            )Other
      income (expense):Interest
      income
                            
                            
                            1
                            
                            
                            
                            16Interest
      (expense)
                            
                            
                            (191
                            )
                            
                            
                            (24
                            )Other
      expense, net
                            
                            
                            (190
                            )
                            
                            
                            (8
                            )Net
      loss
                            
                            $
                            (1,635
                            )
                            
                            $
                            (4,373
                            )Basic
      and diluted net loss per share
                            
                            $
                            (0.15
                            )
                            
                            $
                            (0.45
                            )Weighted
      average number of common shares outstanding - basic and
      diluted
                            
                            
                            11,110,969
                            
                            
                            
                            9,641,684
 
 See notes
to these condensed consolidated financial statements.
  2
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Condensed
Consolidated Statement of Stockholders' Equity
 For
the Three Months Ended March 31, 2009
 (Unaudited)
 (dollars
in thousands)
 
 Series DConvertible
                                    
                                    
                                    AdditionalCommon Stock
                                    
                                    
                                    Treasury Shares
                                    
                                    
                                    Preferred Stock
                                    
                                    
                                    Paid-in
                                    
                                    
                                    AccumulatedShares
                                    
                                    
                                    Amount
                                    
                                    
                                    Shares
                                    
                                    
                                    Amount
                                    
                                    
                                    Shares
                                    
                                    
                                    Amount
                                    
                                    
                                    Capital
                                    
                                    
                                    Deficit
                                    
                                    
                                    TotalBalance,
      January 1, 2009
                                    
                                    
                                    10,486,935
                                    
                                    
                                    $
                                    10
                                    
                                    
                                    
                                    107,067
                                    
                                    
                                    $
                                    (208
                                    )
                                    
                                    
                                    55,388.37
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    108,989
                                    
                                    
                                    $
                                    (60,546
                                    )
                                    
                                    $
                                    48,245Shares
      issued upon conversion of Series D convertible preferred
    stock
                                    
                                    
                                    2,817,235
                                    
                                    
                                    
                                    3
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (42,258.53
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (3
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Issuance
      of common stock under employee stock purchase plan
                                    
                                    
                                    16,261
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    20
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    20Stock
      based compensation - restricted stock vested
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    192
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    192Stock
      based compensation - employee stock purchase plan
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    7
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    7Amortization
      of consultant stock option costs
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    20
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    20Amortization
      of employee stock options costs
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    115
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    115Amortization
      of consultant restricted stock unit costs
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (2
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (2
                                    )Amortization
      of employee restricted stock unit costs
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    254
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    254Net
      loss
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1,635
                                    )
                                    
                                    
                                    (1,635
                                    )Balance,
      March 31, 2009
                                    
                                    
                                    13,320,431
                                    
                                    
                                    $
                                    13
                                    
                                    
                                    
                                    107,067
                                    
                                    
                                    $
                                    (208
                                    )
                                    
                                    
                                    13,129.84
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    109,592
                                    
                                    
                                    $
                                    (62,181
                                    )
                                    
                                    $
                                    47,216
 
 See notes
to these condensed consolidated financial statements.
  3
 
 GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
 Condensed
Consolidated Statements of Cash Flows
 (Unaudited)
 (dollars
in thousands)
 
 For the Three Months Ended March 31,2009
                  
                  
                  2008Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (1,635
                  )
                  
                  $
                  (4,373
                  )Adjustments
      to reconcile net loss to net cash (used in) provided by operating
      activities:Recovery
      of bad debts
                  
                  
                  (393
                  )
                  
                  
                  (115
                  )Depreciation
      and amortization
                  
                  
                  987
                  
                  
                  
                  1,014Deferred
      rent
                  
                  
                  13
                  
                  
                  
                  81Stock-based
      compensation
                  
                  
                  586
                  
                  
                  
                  1,092Loss
      on disposition of equipment
                  
                  
                  -
                  
                  
                  
                  21Changes
      in operating assets and liabilities:Accounts
      receivable
                  
                  
                  (3,884
                  )
                  
                  
                  3,928Inventories
                  
                  
                  (530
                  )
                  
                  
                  (105
                  )Prepaid
      expenses and other current assets
                  
                  
                  170
                  
                  
                  
                  167Security
      deposits and other assets
                  
                  
                  5
                  
                  
                  
                  19Accounts
      payable
                  
                  
                  577
                  
                  
                  
                  (1,133
                  )Deferred
      revenues
                  
                  
                  (66
                  )
                  
                  
                  (24
                  )Accrued
      compensation and related benefits
                  
                  
                  1,276
                  
                  
                  
                  (589
                  )Other
      current liabilities
                  
                  
                  172
                  
                  
                  
                  173Other
      long-term obligations
                  
                  
                  (15
                  )
                  
                  
                  (14
                  )Total
      adjustments
                  
                  
                  (1,102
                  )
                  
                  
                  4,515Net
      cash (used in) provided by operating activities
                  
                  
                  (2,737
                  )
                  
                  
                  142Cash
      flows from investing activities:Purchases
      of property and equipment
                  
                  
                  (413
                  )
                  
                  
                  (453
                  )Purchase
      of intangible assets
                  
                  
                  (6
                  )
                  
                  
                  (4
                  )Net
      cash used in investing activities
                  
                  
                  (419
                  )
                  
                  
                  (457
                  )
 
 See notes
to these condensed consolidated financial statements.
  4
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Condensed
Consolidated Statements of Cash Flows, continued
 (Unaudited)
 (dollars
in thousands)
 
 For the Three Months Ended March 31,2009
                  
                  
                  2008Cash
      flows from financing activities:Net  proceeds
      under line of credit
                  
                  $
                  428
                  
                  
                  $
                  -Repayment
      of notes payable
                  
                  
                  (150
                  )
                  
                  
                  (450
                  )Proceeds
      from issuance of stock in connection with ESPP
                  
                  
                  20
                  
                  
                  
                  -Repurchase
      of common stock
                  
                  
                  -
                  
                  
                  
                  (17
                  )Net
      cash provided by (used in) financing activities
                  
                  
                  298
                  
                  
                  
                  (467
                  )Net
      decrease  in cash and cash equivalents
                  
                  
                  (2,858
                  )
                  
                  
                  (782
                  )Cash
      and cash equivalents - beginning of period
                  
                  
                  5,276
                  
                  
                  
                  4,426Cash
      and cash equivalents - end of period
                  
                  $
                  2,418
                  
                  
                  $
                  3,644Supplemental
      disclosure of cash flow information:Cash
      paid during the period for interest
                  
                  $
                  109
                  
                  
                  $
                  50Supplemental
      disclosures of non-cash investing and financing
activities:Common
      stock issued in exchange for obligation to issue common
    stock
                  
                  $
                  -
                  
                  
                  $
                  2,160
 
 See notes
to these condensed consolidated financial statements.
  5
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 1. 
Nature of Operations
 
 GlobalOptions
Group, Inc. and Subsidiaries (collectively the “Company” or “GlobalOptions
Group”) is an integrated provider of risk mitigation and management services to
government entities, Fortune 1000 corporations and high net-worth and
high-profile individuals. The Company delivers these services through four
business units: Preparedness Services; Fraud and Special Investigative Unit
(“SIU”) Services; Security Consulting and Investigations; and International
Strategies. The Preparedness Services, Fraud and SIU Services, and Security
Consulting and Investigations units represent the Company’s three financial
reporting segments. The results of the International Strategies business unit,
on the basis of its relative materiality, are included in the Fraud and SIU
Services segment.
  References
herein to “GlobalOptions” refer to GlobalOptions, Inc., an operating subsidiary
of the Company.
 
 2.  Basis
of Presentation
  The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with United States generally accepted accounting
principles for interim financial information and the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by United States generally accepted accounting principles. In the opinion of
management, all adjustments (consisting of normal accruals) considered for a
fair presentation have been included. Operating results for the three months
ended March 31, 2009 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2009.  For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company’s Form 10-K filed on March 16, 2009 for the year ended December 31,
2008.
 
 3. 
Summary of Significant Accounting Policies
 
 Income
Taxes
 
 The
Company accounts for income taxes using the liability method as required by
Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for
Income Taxes” (“SFAS 109”). Under this method, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and income tax bases of the underlying assets and liabilities. The Company
establishes a valuation allowance for deferred tax assets when it determines
that it is more likely than not that the benefits of deferred tax assets will
not be realized in future periods.  The Company was not required to
provide for a provision for income taxes for the three months ended March 31,
2009 and 2008, respectively as a result of losses incurred during this
period.
 
 Net
Loss Per Common Share
  Basic net
loss per common share is computed based on the weighted average number of shares
of common stock outstanding, as adjusted, during the periods presented. Common
stock equivalents, consisting of stock options, restricted stock units (“RSUs”),
and Series D convertible preferred stock were not included in the calculation of
the diluted loss per share because their inclusion would have been
anti-dilutive.  The basic weighted average number of shares was reduced for
non-vested restricted stock awards and contingently returnable escrowed shares
issued in connection with acquisitions.
  6
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 3. 
Summary of Significant Accounting Policies, continued
 
 Net
Loss Per Common Share, continued
 
 Potentially
dilutive securities outlined in the table below have been excluded from the
computation of diluted net loss per share, because the effect of their inclusion
would have been anti-dilutive.
 
 March 31,2009
                    
                    
                    2008Stock
      options
                    
                    
                    1,066,008
                    
                    
                    
                    1,709,353Restricted
      stock units
                    
                    
                    366,045
                    
                    
                    
                    -Convertible
      preferred stock
                    
                    
                    875,317
                    
                    
                    
                    3,732,808Potentially
      dilutive securities realizable from the vesting of performance based
      restricted stock
                    
                    
                    558,063
                    
                    
                    
                    164,063Contingently
      returnable shares related to the acquisitions of Facticon, Inc.
      (“Facticon”) and Hyperion Risk, Inc.
                    
                    
                    -
                    
                    
                    
                    167,865Total
      potentially dilutive securities
                    
                    
                    2,865,433
                    
                    
                    
                    5,774,089
 
 Recently
Implemented Accounting Pronouncements
 
 In
December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS
141R”), which establishes principles and requirements for how the acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree, goodwill acquired in the business combination or a gain from a bargain
purchase. SFAS 141R is effective for business combinations with an acquisition
date on or after the beginning of the first annual reporting period beginning on
or after December 15, 2008. The Company expects SFAS 141R to have an impact on
the accounting for any future business acquisitions.
 
 In December 2007, the FASB issued SFAS
No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an
amendment of ARB No. 51” (“SFAS 160”). SFAS 160 establishes accounting and
reporting standards for the noncontrolling interest (minority interest) in a
subsidiary and for the deconsolidation of a subsidiary. SFAS 160 requires (a)
the ownership interest in the subsidiary held by parties other than the parent
to be clearly identified and presented in the consolidated balance sheet within
equity, but separate from the parent’s equity, (b) the amount of consolidated
net income attributable to the parent and to the noncontrolling interest to be
clearly identified and presented on the face of the consolidated statement of
operations and (c) changes in a parent’s ownership interest while the parent
retains its controlling financial interest in its subsidiary to be accounted for
consistently. Entities must provide sufficient disclosures that clearly identify
and distinguish between the interests of the parent and the interests of the
noncontrolling owners. SFAS 160 is effective for financial statements issued for
fiscal years beginning on or after December 15, 2008, and interim periods within
those fiscal years. The Company expects SFAS 160 to have an impact on the
accounting for any future business acquisitions.
  7
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 3. 
Summary of Significant Accounting Policies, continued
 
 Recently
Implemented Accounting Pronouncements, continued
 
 In April
2008, the FASB issued FASB Staff Position (“FSP”) SFAS 142-3, “Determination of
the Useful Life of Intangible Assets” (“FSP 142-3”). The guidance of FSP 142-3
is intended to improve the consistency between the useful life of a recognized
intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”
(“SFAS 142”), and the period of expected cash flows used to measure the fair
value of the asset under SFAS 141R when the underlying arrangement includes
renewal or extension of terms that would require substantial costs or result in
a material modification to the asset upon renewal or extension. Companies
estimating the useful life of a recognized intangible asset must now consider
their historical experience in renewing or extending similar arrangements or, in
the absence of historical experience, must consider assumptions that market
participants would use about renewal or extension as adjusted for SFAS 142’s
entity-specific factors. FSP 142-3 is effective for financial statements issued
for fiscal years beginning on or after December 15, 2008, and interim periods
within those fiscal years.  The Company expects SFAS 142-3 to have an
impact on the accounting for any future business acquisitions.
 
 In June 2008, the FASB issued EITF
03-6-1, “Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities” (“EITF 03-6-1”). EITF 03-6-1
clarified that all outstanding unvested share-based payment awards that contain
rights to nonforfeitable dividends participate in undistributed earnings with
common shareholders. Awards of this nature are considered participating
securities and the two-class method of computing basic and diluted earnings per
share must be applied. EITF 03-6-1 is effective for financial statements issued
for fiscal years beginning on or after December 15, 2008, and interim periods
within those fiscal years. The adoption of EITF 03-6-1 did not have a material
effect on the consolidated financial statements.
 
 In June
2008, the FASB ratified EITF No. 07-5, "Determining Whether an Instrument (or an
Embedded Feature) is Indexed to an Entity's Own Stock" ("EITF 07-5"). EITF 07-5
provides that an entity should use a two-step approach to evaluate whether an
equity-linked financial instrument (or embedded feature) is indexed to its own
stock, including evaluating the instrument's contingent exercise and settlement
provisions. EITF 07-5 is effective for financial statements issued for fiscal
years beginning after December 15, 2008. Early application is not
permitted.  The adoption of EITF 07-5 did not have a material effect
on the consolidated financial statements.
 
 In
November 2008, the EITF issued EITF No. 08-6, “Equity Method Investment
Accounting Considerations” (“EITF 08-6”). This Issue addresses the impact that
SFAS 141R and SFAS 160 might have on the accounting for equity method
investments, including how the initial carrying value of an equity method
investment should be determined, how it should be tested for impairment, and how
changes in classification from equity method to cost method should be treated.
This Issue is effective on a prospective basis in fiscal years beginning on or
after December 15, 2008, and interim periods within those fiscal years,
consistent with the effective dates of SFAS 141R and SFAS 160. The Company
expects EITF 08-6 to have an impact on the accounting for any future business
acquisitions.
  8
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 4.   Acquisition
 
 Acquisition
of Omega Insurance Services, Inc. (d/b/a First Advantage Investigative Services)
(“FAIS”)
 
 On April
21, 2008, GlobalOptions Group acquired substantially all of the business and net
assets of FAIS. The aggregate purchase price paid for the assets and business
was $2,548, consisting of cash in the amount of $2,164, a broker fee of $350 and
acquisition and related legal expenses of $34.  The Company began
consolidating the results of operations of FAIS with its operations beginning
April 21, 2008.
 
 The
following presents the unaudited pro-forma combined results of operations for
the three months ended March 31, 2008 of the Company with FAIS, as if the
acquisition had occurred as of January 1, 2008.
 
 For the Three Months
                      Ended March 31,2008Revenues
                    
                    $
                    23,947Net
      loss
                    
                    $
                    (5,319
                    )Pro-forma
      basic and diluted net loss per common share (not rounded)
                    
                    $
                    (0.55
                    )Pro-forma
      weighted average common shares outstanding - basic and
    diluted
                    
                    
                    9,641,684
 
 The
pro-forma combined results of operations are not necessarily indicative of the
results of operations that actually would have occurred if the acquisition of
FAIS had been completed as of the beginning of 2008, nor are they necessarily
indicative of future consolidated results.
 
 5.
Inventories
 
 Inventories
are comprised of the following:
 
 As ofMarch
                      31, 2009
                    
                    
                    December
                      31, 2008Raw
      materials
                    
                    $
                    1,771
                    
                    
                    $
                    1,373Work
      in progress – DNA Analysis
                    
                    
                    323
                    
                    
                    
                    304Finished
      goods
                    
                    
                    968
                    
                    
                    
                    9003,062
                    
                    
                    
                    2,577Less:
      Reserve for obsolescence
                    
                    
                    (10
                    )
                    
                    
                    (55
                    )Total
                    
                    $
                    3,052
                    
                    
                    $
                    2,522
  9
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 6. 
Intangible Assets and Goodwill
 
 Intangible
Assets
 
 Intangible
assets are comprised of the following:
  Trade
                                            Names
                                          
                                          
                                          Developed
                                            Technology
                                          
                                          
                                          Non-Compete
                                            Agreements
                                          
                                          
                                          Client
                                            Relationships
                                          
                                          
                                          Patents
                                          
                                          
                                          
                                          Accumulated
                                            Amortization
                                          
                                          
                                          TotalBalance
      as of  January 1, 2009
                                          
                                          $
                                          2,560
                                          
                                          
                                          $
                                          440
                                          
                                          
                                          $
                                          1,660
                                          
                                          
                                          $
                                          8,715
                                          
                                          
                                          $
                                          115
                                          
                                          
                                          
                                          $
                                          (7,509
                                          )
                                          
                                          $
                                          5,981Additions:Costs
      of patents
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          6
                                          
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          6Amortization
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          
                                          (617
                                          )
                                          
                                          
                                          (617
                                          )Balance
      as of  March 31, 2009
                                          
                                          $
                                          2,560
                                          
                                          
                                          $
                                          440
                                          
                                          
                                          $
                                          1,660
                                          
                                          
                                          $
                                          8,715
                                          
                                          
                                          $
                                          121
                                          
                                          
                                          
                                          $
                                          (8,126
                                          )
                                          
                                          $
                                          5,370Weighted
      average amortization period at March 31, 2009 (in
    years)
                                          
                                          
                                          6.1
                                          
                                          
                                          
                                          0.7
                                          
                                          
                                          
                                          0.3
                                          
                                          
                                          
                                          2.3
                                          
                                          
                                          
                                          -
                                          
                                          (1)
  (1)  Patents
not yet approved and as such, the amortization period has not yet begun as of
March 31, 2009.
 
 The
Company recorded amortization expense related to the acquired amortizable
intangibles of $617 and $681 for the three months ended March 31, 2009 and 2008,
respectively.
  10
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 7.  Accrued Compensation and Related
Benefits
 
 A summary of accrued compensation and
related benefits is comprised of the following:
  As ofMarch 31,
                      2009
                    
                    
                    December 31,
                      2008Accrued
      performance based bonuses
                    
                    $
                    1,630
                    
                    
                    $
                    1,237Accrued
      payroll and commissions
                    
                    
                    1,929
                    
                    
                    
                    1,172Accrued
      employee benefits
                    
                    
                    872
                    
                    
                    
                    746Total
                    
                    $
                    4,431
                    
                    
                    $
                    3,155
 
 8. 
Line of Credit
 
 The
Company maintains a working capital line of credit (the “Facility”) which is
secured by accounts receivable and is subject to certain liquidity and earnings
financial covenants. The Company has granted a first priority security interest
in substantially all of its assets to the financial institution that provides
this Facility.
  Effective
as of March 30, 2009, the financial institution that provides the Facility
entered into an amendment to the Company’s working capital line of credit to (i)
reduce the maximum amount available under the Facility to $10,000 (ii) increase
the range of the applicable interest rate with respect to the amount outstanding
under the line of credit  to 1.00% to 1.75% based upon the Company’s
liquidity, plus the greater of 6.25% or the lender’s most recently announced
“prime rate”, and (iii) extend the maturity of the Facility to March 29,
2010.  The Company paid a one-time fee of $55 in connection with the
March 30, 2009 modification, which is included in general and administrative
expenses.  The interest rate on the line of credit at March 31, 2009
was 7%.  As of March 31, 2009, the Company’s net borrowings were
$7,521 under the line of credit and based upon the amount of qualifying accounts
receivables, the Company was eligible to draw up to a total of $10,000 under the
Facility.
  11
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 9. 
Notes Payable
 
 Notes
payable, which mature at various dates through 2009, consisted of the
following:
 
 As ofMarch31,
                      2009
                    
                    
                    December31,
                      2008Note
      payable to seller for acquisition of Secure Source, Inc. (“Secure
      Source”)
                    
                    $
                    250
                    
                    
                    $
                    250Notes
      payable to seller for acquisition of SPZ Oakland Corporation dba On Line
      Consulting Service, Inc. (“On Line Consulting”)
                    
                    
                    -
                    
                    
                    
                    150Total
                    
                    $
                    250
                    
                    
                    $
                    400
 
 On
January 6, 2009, the Company repaid $150 in satisfaction of a note payable
issued in connection with the purchase of On Line Consulting.
 
 10.  Commitments
and Contingencies
 
 Operating
Leases
 
 The
Company has obligations for various office and laboratory
leases.  Such lease obligations expire at various dates through August
2016.
 
 Rent
expense charged to operations amounted to $874 and $930, for the three months
ended March 31, 2009 and 2008, 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 $789 and $784 represents the
long-term unamortized rent adjustment amount at March 31, 2009 and at December
31, 2008 and is reflected within other long-term obligations in the condensed
consolidated balance sheet. In addition, the current portion of deferred rent
was $47 and $41 as of March 31, 2009 and December 31, 2008, respectively, and is
reflected within other current liabilities in the condensed consolidated balance
sheets.
 
 Litigation,
Claims and Assessments
 
 From time
to time, in the normal course of business, the Company may be involved in
litigation.  Except for certain claims as described below, the
Company’s management has determined any asserted or unasserted claims to be
immaterial to the consolidated financial statements.
 
 The
Company was added as a defendant in federal and state litigation matters related
to Facticon, which were initially filed by the plaintiffs prior to the
Company’s acquisition of the assets of
 Facticon.  On December 22, 2008, the Federal matter was
settled in full with a cash payment of $657.
  12
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 10.  Commitments
and Contingencies, continued
 
 Litigation,
Claims and Assessments, continued
 
 In the
State Court matter, Wonsch, et al. vs.
FacticonInc. and
GlobalOptions Group, Inc., filed in the State Court for the Central
District of California, the plaintiffs in a class action (the “State
Plaintiffs”), alleged that Facticon failed to pay overtime wages under the
California Civil Code. This action was similar to the Anchondo case, but was
limited to the state laws of California. Subsequent to the acquisition, the
Company was added as a defendant in said case, under the successor liability
theory.  On December 30, 2008, the Company and the State
Plaintiffs tentatively agreed to settle this matter.  As of March 31,
2009, the Company has established a reserve in the amount of $118 to cover the
Company for the expected cash settlement of the remaining Facticon State Court
matter, included in other current liabilities.  This amount was paid on May
8, 2009.
 
 11. 
Stockholders’
Equity
 
 Common
Stock Issued
 
 On
February 17, 2009, the Company issued 2,817,235 shares of its common stock upon
the conversion of 42,258.53 shares of Series D convertible preferred
stock.
  During
the three months ended March 31, 2009, the Company issued 16,261 shares of its
common stock under the Amended and Restated 2006 Employee Stock Purchase Plan
(the “Stock Purchase Plan”).  The Company realized proceeds of $20 and
recognized stock based compensation of $7 in connection with the issuance of
these shares.
 
 Restricted
Stock Issued Under Performance Based Executive Bonus Plan
  On
December 19, 2006, the Company awarded 100,000 and 75,000 shares of unvested
restricted stock to its Chief  Executive Officer and Chief Financial
Officer, respectively, in connection with the extension of their respective
employment and consulting agreements. On July 24, 2008 the Company awarded an
additional 250,000 and 187,500 shares of unvested restricted stock to its Chief
Executive Office and Chief Financial Officer, respectively, in connection with
the 2006 Executive Compensation Performance Bonus Plan.
  At March
31, 2009, an aggregate of 558,063 of the restricted shares awarded to these
executives remain subject to vesting based on certain performance and stock
price targets that have been established by the Compensation
Committee.
  13
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 12.  Stock
Based Compensation
 
 Amended and Restated 2006 Long-Term
Incentive Plan
  Under the Company’s Amended and
Restated 2006 Long-Term Incentive Plan (the “Incentive Plan”), the Company may
issue up to 3,000,000 shares of the Company’s common stock.  The
Compensation Committee has the authority to determine the amount, type and terms
of each award, but may not grant awards under the Incentive Plan, in any
combination, for more than 625,000 shares of the Company’s common stock to any
individual during any calendar year, increased from 312,500 under the Company’s
original 2006 Long-Term Incentive Plan.
  As of
March 31, 2009, 964,787 shares of common stock remain eligible to be issued
under the Incentive Plan.
  Amended
and Restated 2006 Employee Stock Purchase Plan
  Under the
Company’s Amended and Restated Employee Stock Purchase Plan (the “Stock Purchase
Plan”), eligible employees of the Company are permitted to automatically
purchase at the end of each month at a discounted price, a certain number of
shares of the Company’s common stock by having the effective purchase price of
such shares withheld from their base pay.  The Stock Purchase Plan
provides for the issuance of up to 2,000,000 shares of the Company’s common
stock.
  As of
March 31, 2009, 1,961,621 shares of common stock remain unissued under the Stock
Purchase Plan.
  Stock Based Compensation
  Stock
based compensation for employees accounted for under SFAS No. 123R “Share-Based
Payment” (“SFAS 123R”) was approximately $568 and $896 for the three months
ended March 31, 2009 and 2008, respectively.   For the three
months ended March 31, 2009 and 2008, $48 and $-, respectively, of stock based
compensation under SFAS 123R was reflected in selling and marketing expenses,
and $520 and $896, respectively, was reflected in general and administrative
expenses.
  The
Company accounts for equity instruments issued to non-employees in accordance
with 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 $18 and $28 for
the three months ended March 31, 2009 and 2008, respectively, and is reflected
within general and administrative expenses.
 
 The
following table summarizes total stock based compensation costs recognized under
SFAS 123R and EITF 96-18 for the three months ended March 31, 2009 and 2008,
respectively.
  For the Three Months Ended March 31,2009
                    
                    
                    2008SFAS
                      123R
                    
                    
                    EITF
                      96-18
                    
                    
                    Total
                    
                    
                    SFAS
                      123R
                    
                    
                    EITF
                      96-18
                    
                    
                    TotalStock
      options
                    
                    $
                    115
                    
                    
                    $
                    20
                    
                    
                    $
                    135
                    
                    
                    $
                    727
                    
                    
                    $
                    28
                    
                    
                    $
                    755RSUs
                    
                    
                    254
                    
                    
                    
                    (2
                    )
                    
                    
                    252
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Stock
      purchase plan
                    
                    
                    7
                    
                    
                    
                    -
                    
                    
                    
                    7
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Vesting
      of restricted shares under performance based executive bonus
      award
                    
                    
                    192
                    
                    
                    
                    
                    
                    
                    
                    192
                    
                    
                    
                    169
                    
                    
                    
                    -
                    
                    
                    
                    169Shares
      issued to consultants for services
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    168
                    
                    
                    
                    168Total
                    
                    $
                    568
                    
                    
                    $
                    18
                    
                    
                    $
                    586
                    
                    
                    $
                    896
                    
                    
                    $
                    196
                    
                    
                    $
                    1,092
  14
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 12.
Stock Based Compensation, continued
 
 Stock Options
 
 The fair
value of each option grant during the three months ended March 31, 2009 and 2008
was estimated on the date of grant using the Black-Scholes option pricing
model.  The weighted average assumptions used to compute the grant
date value of the options granted during the three months ended March 31, 2009
and 2008 were as follows:
 
 Three Months Ended March 31,2009
                  
                  2008Dividend
      yield
                  0%
                  
                  0%Expected
      volatility
                  104%
                  
                  87%Risk-free
      interest rate
                  1.86%
                  
                  2.95%Expected
      lives
                  3.6
      years
                  
                  5
      years
 
 The
Company has determined that the expected life of options granted is the same as
the contractual term for options granted prior to July 1, 2008, because the
employees were expected to remain with the Company for the full term of the
option award.  The expected life of options granted after June 30,
2008 was calculated using the simplified method set out in SEC Staff Accounting
Bulleting No. 110 calculating the expected life as the average of the
contractual term and the vesting period.
 
 The
weighted average fair value of the options on the date of grant, using the fair
value based methodology for the three months ended March 31, 2009 and 2008 was
$1.24 and $1.85 per share, respectively.
 
 On
January 1, 2009, the Company granted, in the aggregate, options for the purchase
of 75,000 shares of its common stock at an exercise price of $1.99 per share,
under the Incentive Plan, to three members of the Board of Directors. The
options have a five year term and vest ratably at the end of each of the four
quarterly periods following the date of grant.  In the aggregate,
these options have a value of approximately $96 utilizing the Black-Scholes
option pricing model with the following assumptions used: expected life of three
years, volatility of 104%, dividends of 0%, and a risk free interest rate of
1.55%.
 
 On
January 1, 2009, the Company granted, in the aggregate, options for the purchase
of 100,000 shares of its common stock at an exercise price of $1.99 per share,
under the Incentive Plan, to certain members of its advisory boards for their
advisory services to the Company.  The options have a five year term and
vest ratably at the end of each of the four quarterly periods following the date
of grant.  In the aggregate, these options have a value of
approximately $128 utilizing the Black-Scholes option pricing model with the
following assumptions used: expected life of three years, volatility of 104%,
dividends of 0%, and a risk free interest rate of 1.55%.
 
 On
February 25, 2009, the Company granted, in the aggregate, options for the
purchase of 267,500 shares of its common stock at an exercise price of $1.70 per
share, under the Incentive Plan, to certain officers and employees.  The
options have a five year term and vest ratably upon the first, second and third
anniversaries of the date of grant.  In the aggregate, these options
have a value of approximately $325 utilizing the Black-Scholes option pricing
model with the following assumptions used: expected life of four years,
volatility of 104%, dividends of 0%, and a risk free interest rate of
2.06%.
  15
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 12.
Stock Based Compensation, continued
 
 Stock Options,
continued
 
 At March
31, 2009, the unamortized value of stock options held by employees under
SFAS123R was approximately $637.  The unamortized portion will be
expensed over a weighted average period of 1.6 years.
 
 A
summary of the status of the Company’s stock option plans and the changes during
the three months ended March
31, 2009, is presented in the table below:
 
 Number of
                      Options
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                      (per share)
                    
                    
                    Weighted
                      Average
                      Remaining
                      Contractual
                      Life
                      (in years)
                    
                    
                    Intrinsic
                      ValueOptions
      outstanding at December 31, 2008
                    
                    
                    634,687
                    
                    
                    $
                    3.62
                    
                    
                    
                    4.1Granted
                    
                    
                    442,500Forfeited
                    
                    
                    (11,179
                    )Options
      outstanding at March 31, 2009
                    
                    
                    1,066,008
                    
                    
                    $
                    2.58
                    
                    
                    
                    4.2
                    
                    
                    
                    -Exercisable
      March 31, 2009
                    
                    
                    340,141
                    
                    
                    $
                    3.85
                    
                    
                    
                    3.9
                    
                    
                    
                    -
 
 Restricted
Stock Units (“RSUs”)
 
 At March
31, 2009, the unamortized value of RSUs held by employees under SFAS 123R was
approximately $2,072. The unamortized portion will be expensed over a weighted
average period of 2.1 years.
 
 A summary of the activity related to
RSUs for the three months ended March 31, 2009 is presented
below:
  Total
              
              
              Weighted
                Average
                Grant
                Date
                Fair ValueNonvested
      at January 1, 2009
              
              
              366,087
              
              
              $
              2.12RSUs
      vested
              
              
              -RSUs
      forfeited
              
              
              (42
              )Nonvested
      at March 31, 2009
              
              
              366,045
              
              
              $
              2.12
  16
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 12.
Stock Based Compensation, continued
 
 Stock Purchase Plan
 
 The Stock
Purchase Plan was established for eligible employees to purchase shares of the
Company’s common stock on a monthly basis at 85% of the lower of the market
value of the Company’s common stock on the first or last business day of each
month. Under the Stock Purchase Plan, employees may authorize the Company to
withhold up to 15% of their compensation during any monthly offering period for
common stock purchases, subject to certain limitations. The Stock Purchase Plan
was implemented during July 2008 and is qualified under Section 423 of the
Internal Revenue Code. For the three months ended March 31, 2009, 16,261 shares
were issued under the Stock Purchase Plan. Stock based compensation recognized
in connection with the issuance of these shares was $7 for the three months
ended March 31, 2009.
 
 13.   Client
and Segment Data
  The
Company’s reportable operating segments consist of the following three
business segments: Preparedness Services, Fraud and SIU Services, and Security
Consulting and Investigations. The Company’s reportable segments are
organized, managed and operated along key product and service lines. These
product and service lines provided to similar clients are offered together as
packaged offerings, generally produce similar margins and are managed under a
consolidated operations management.
 
 The
Preparedness Services segment develops and implements crisis management and
emergency response plans for disaster mitigation, continuity of operations and
other emergency management issues for governments, corporations and
individuals.
 
 The Fraud
and SIU Services segment provides investigative surveillance, anti-fraud
solutions and business intelligence services to the insurance industry, law
firms and multinational organizations. The results of the Company’s
International Strategies business unit, on the basis of its relative
materiality, are included in the Fraud and SIU Services segment.
 
 The
Security Consulting and Investigations segment delivers specialized security and
investigative services to governments, corporations and
individuals.
 
 Total
revenues by segment include revenues to unaffiliated clients. The Company
evaluates performance based on income (loss) from operations. Operating
income (loss) is gross profit less operating expenses.
 
 The
following tables summarize financial information about the Company’s business
segments for the three months ended March 31, 2009 and
2008.
 
 For the Three Months Ended
March 31, 2009
 
 Preparedness
                          Services
                        
                        
                        Fraud & SIU
                          Services-
                        
                        
                        Security
                          Consulting &
                          Investigations
                        
                        
                        Corporate
                        
                        
                        ConsolidatedRevenues
                        
                        $
                        10,958
                        
                        
                        $
                        6,899
                        
                        
                        $
                        7,657
                        
                        
                        $
                        -
                        
                        
                        $
                        25,514Income
      (Loss) from Operations
                        
                        $
                        741
                        
                        
                        $
                        (1,165
                        )
                        
                        $
                        (1,021
                        )
                        
                        $
                        -
                        
                        
                        $
                        (1,445
                        )Depreciation
      and Amortization
                        
                        $
                        251
                        
                        
                        $
                        288
                        
                        
                        $
                        448
                        
                        
                        $
                        -
                        
                        
                        $
                        987Interest
      Expense , net
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        (190
                        )
                        
                        $
                        (190
                        )
  17
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 13.   Client
and Segment Data, continued
 
 For the Three Months Ended
March 31, 2008
 
 Preparedness
                      Services
                    
                    
                    Fraud & SIU
                      Services-
                    
                    
                    Security
                      Consulting &
                      Investigations
                    
                    
                    Corporate
                    
                    
                    ConsolidatedRevenues
                    
                    $
                    7,142
                    
                    
                    $
                    6,240
                    
                    
                    $
                    8,117
                    
                    
                    $
                    -
                    
                    
                    $
                    21,499Loss
      from Operations
                    
                    $
                    (443
                    )
                    
                    $
                    (1,443
                    )
                    
                    $
                    (2,479
                    )
                    
                    $
                    -
                    
                    
                    $
                    (4,365
                    )Depreciation
      and Amortization
                    
                    $
                    312
                    
                    
                    $
                    283
                    
                    
                    $
                    419
                    
                    
                    $
                    -
                    
                    
                    $
                    1,014Interest
      Expense, net
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    24
                    
                    
                    $
                    24
 
 14.  Major
Clients/Customers
  Revenues
from the Company’s services to a limited number of clients have accounted for a
substantial percentage of the Company’s total revenues. The Company’s largest
client, which is within the Preparedness Services segment and represents work
performed under government contracts, accounted for approximately 27% and 25% of
the Company’s revenues for the three months ended March 31, 2009 and 2008,
respectively.
 
 For the
three months ended March 31, 2009 and 2008, work performed under government
contracts represented 55% and 46% of the Company’s revenues, respectively, the
most significant of which, in 2009 and 2008, represented 62% and 82%,
respectively, of the Company’s revenues within the Preparedness Services
segment.
 
 15.  Subsequent
Events
 
 On April
1, 2009, the Company entered into an amendment of an employment
agreement with one of its key executives, at an annual salary of $375,
expiring March 31, 2010. The agreement provides, among other things, for the
payment of an annual performance bonus.
  On April
14, 2009, the Company issued 36,900 shares valued at $75 for services rendered
during 2008, and 12,900 shares valued at $23 for services rendered during the
three months ended March 31, 2009, to Lippert/Heilshorn and
Associates.
  On April
30, 2009, the Company issued 6,183 shares of its common stock under the stock
purchase plan.  The Company realized proceeds of $7 and recognized
stock based compensation of $2 in connection with the issuance of these
shares.
  On May 1,
2009, the Company issued 398,000 shares of its common stock upon the conversion
of 5,970 shares of  Series D convertible preferred stock.
  On May 6,
2009, the Company repaid $288, consisting of $250 and $38 of principal and
interest, respectively, in satisfaction of a note payable issued in connection
with the purchase of Secure Source.
  18




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


(Amounts
contained in this Item 2 are in thousands, except share and per share
amounts).





The
following discussion of results of operations and financial condition is based
upon, and should be read in conjunction with, our condensed consolidated
financial statements and accompanying notes thereto included elsewhere
herein.





Forward-Looking
Statements





Information
included or incorporated by reference in this Quarterly Report on Form 10-Q 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.




Overview




GlobalOptions
Group, Inc. and Subsidiaries (collectively the “Company” or “GlobalOptions
Group”) is an integrated provider of risk mitigation and risk management
services to government entities, Fortune 1000 corporations and high net-worth
and high-profile individuals. We enable clients to identify, assess and
prevent natural and man-made threats to the well-being of individuals and the
operations of governments and corporations. In addition, we assist our
clients in recovering from the damages or losses resulting from the occurrence
of acts of terror, natural disasters, fraud and other risks. We have
established operating platforms for each of our business units that leverage our
experienced senior management team and our proprietary business processes and
technology solutions.  We have an established base of key clients,
forming a base upon which we intend to grow both vertically and
horizontally.




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




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




•
            Preparedness
      Servicesdevelops
      and implements crisis management and emergency response plans for disaster
      mitigation, continuity of operations and other emergency management issues
      for governments, corporations and individuals. Services we provide include
      preparedness, response and recovery services, threat and impact
      assessments, business continuity plans and emergency exercises and
      training programs. The Preparedness Services unit is led by former Federal
      Emergency Management Agency Director James Lee
  Witt.




•
            Fraud and
      Special Investigative Unit (“SIU”) Servicesprovides investigative
      surveillance, anti-fraud solutions and business intelligence services to
      the insurance industry, law firms and multinational organizations.
      Services we provide include fraud reporting, anti-fraud training,
      insurance claims investigations, surveillance, background investigations,
      corporate investigations for liability, on-scene accident investigations
      and regulatory compliance. The Fraud and SIU Services unit is led by
      Halsey Fischer, an 19-year industry veteran and former President and Chief
      Executive Officer of Confidential Business Resources
      (“CBR”).




•
            SecurityConsulting
      and Investigationsdelivers specialized security and investigative services to governments,
      corporations and individuals. Services we provide include forensic DNA
      analysis, facilities and IT security, litigation support, business
      intelligence, IT and accounting forensics, executive protection,
      independent monitoring and regulatory compliance. The Security Consulting
      and Investigations unit is led by Howard Safir, former New York City
      Police Commissioner.




•
            International
      Strategies provides multidisciplinary, international risk
      management and business solutions to foreign and domestic governments,
      corporations and individuals. Services we provide include crisis
      management, facilities security, investigations and litigation support,
      global business intelligence, corporate governance compliance, personal
      protection and emerging market services. The International Strategies unit
      is led by Thomas Ondeck, a founder of GlobalOptions,
  Inc.


19




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





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




For the Three Months
                          Ended March 31,Segment
                        
                        2009
                        
                        
                        2008Preparedness
      Services
                        
                        
                        43.0
                        %
                        
                        
                        33.2
                        %Fraud
      and SIU Services
                        
                        
                        27.0
                        
                        
                        
                        29.0Security
      Consulting and Investigations
                        
                        
                        30.0
                        
                        
                        
                        37.8Total
                        
                        
                        100.0
                        %
                        
                        
                        100.0
                        %




Growth
Strategy




Our goal
is to build a company with the risk mitigation industry’s most comprehensive
solutions offering through a balance of organic growth and acquisitions. We
intend to grow our business in the following manner.




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




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




Selectively Acquire
Companies. We will continue to pursue complementary acquisitions of
companies that enable us to increase our share of those markets in which we
already operate and to enter new markets and service segments. We believe there
are numerous opportunities to acquire quality companies because of the
fragmented nature of our industry and that our past acquisitions track record
will assist us in executing this strategy. We expect these acquisitions to be
geographically diverse, provide synergies within units and allow for
cross-selling opportunities across all of our business units. We structure our
acquisitions to ensure that key selected individuals from the acquired company
are retained and integrated after the transaction is consummated.




Develop New Solutions. We
will continue to develop and seek solutions to meet unique client and dynamic
market segment needs by expanding and bundling our product and service
offerings. As we continue to grow both organically and through acquisitions, we
expect to meet additional needs of our clients. Evidence of this strategy is our
enterprise-oriented solution, GlobalTrak, and the DNA technology service we
offer as a result of our acquisition of The Bode Technology Group, Inc.
(“Bode”).




Expand Internationally. We
intend to pursue additional opportunities to offer our services outside the
United States. We believe international markets provide a substantial
opportunity for growth given the increasing risks that businesses and
governments face around the world. We expect that by expanding our offerings to
other countries we will also enhance our ability to compete in the United States
for the business of global organizations.


20




Corporate
Developments




Modification to the Line of Credit
Agreement





Effective
March 30, 2009, GlobalOptions, Inc., an operating subsidiary of the company and
Bode entered into an extension and modification extension, the agreement with
the financial institution that provides the line of credit, for which we
provided an unconditional guarantee (“Loan Agreement”).




The Loan
Agreement provides a working capital line of credit (the
“Facility”).  The Modification Agreement amended the terms of the Loan
Agreement to (i) reduce the maximum amount available under the Facility to
$10,000 (ii) increase the range of applicable interest rates for amounts
outstanding under the Facility (the exact rate based upon the Borrowers’
Liquidity (as defined in the Loan Agreement)) to 1.00% to 1.75%, plus the
greater of 6.25% or the Bank’s most recently announced “prime rate”, (iii)
change the Maturity Date (as defined in the Loan Agreement) from March 30, 2009
to March 29, 2010, and (iv) decrease the early termination fee under the Loan
Agreement to $50.  The Borrowers paid the Bank a one-time fee of $55
and agreed to reimburse the Bank for certain other fees and expenses in
connection with the Modification Agreement.




Conversion of
Series D Convertible Preferred Stock





On
February 17, 2009, the Company issued 2,817,235 shares of its common stock upon
the conversion of 42,258.53 shares of Series D convertible preferred
stock.





On May 1,
2009, the Company issued 398,000 shares of its common stock upon the conversion
of 5,970 shares of Series D convertible preferred stock.




Statements
of Operations




Revenues




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




Gross Profit




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


21




Operating
Expenses




Our
selling and marketing expenses primarily include salaries, commissions, stock
based compensation, as well as travel and other expenses, incurred by our
employees who are involved in selling and promoting our services. Our general
and administrative expenses consist primarily of salaries, bonuses and
stock-based compensation for our employees not performing work directly for our
clients, as well as depreciation expense of facilities and amortization of
intangible assets. Also included in general and administrative expenses are
corporate support expenses such as legal and professional fees, investor
relations, human resources, facilities, telecommunication support services,
information technology, and impairment losses recognized on goodwill and
intangibles.




Results
of Operations




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




For the Three Months
                  Ended March 31,2009
                
                
                2008Revenues
                
                
                100
                %
                
                
                100
                %Cost
      of revenues
                
                
                58
                
                
                
                58Gross
      profit
                
                
                42
                
                
                
                42Operating
      expenses:Selling
      and marketing expenses
                
                
                12
                
                
                
                11General
      and administrative
                
                
                36
                
                
                
                51Total
      operating expenses
                
                
                48
                
                
                
                62Loss
      from operations
                
                
                (6
                )
                
                
                (20
                )Other
      income (expense), net
                
                
                (1
                )
                
                
                -Net
      loss
                
                
                (7
                )%
                
                
                (20
                )%




GlobalOptions
Group Three Months Ended March 31, 2009 Compared to the Three Months Ended March
31, 2008




Revenues




We had
overall revenues of $25,514 for the three months ended March 31, 2009, as
compared to revenues of $21,499 for the three months ended March 31, 2008, for
an overall increase of $4,015 or 19%.





Preparedness Services revenues were
$10,958 for the three months ended March 31, 2009, as compared to $7,142 for the
three months ended March 31, 2008.  Of the $3,816 or 53% increase in
revenues, $3,268 was primarily attributable to our relief and recovery efforts
in Louisiana and Texas.





Fraud and SIU Services revenues were
$6,899 for the three months ended March 31, 2009, as compared to $6,240 for the
three months ended March 31, 2008.  The increase of $659 or 11% was
primarily attributable to expansion of our client base and growth in our
contract account relationships.




Security
Consulting and Investigations revenues were $7,657 for the three months ended
March 31, 2009, as compared to $8,117 for the three months ended March 31,
2008.  The decrease of $460, or 6%, was primarily attributable to a
decline in our investigations business resulting from lighter demand for
litigation support services.


22




Gross
Profit




Our
consolidated gross profit for the three months ended March 31, 2009 and 2008 was
$10,759 and $9,133, respectively, reflecting an increase of $1,626 or
18%.  This increase was principally due to an increase in revenue, as
discussed above.  For the three months ended March 31, 2009 and 2008,
our gross profit margins were 42%.




Preparedness
Services gross profit was $4,975 or 45% of this segment’s revenues for the three
months ended March 31, 2009, as compared to $3,251 or 46% of this segment’s
revenues for the three months ended March 31, 2008.  Fraud and SIU
Services gross profit was $2,673 or 39% of this segment’s revenues for the three
months ended March 31, 2009, as compared to $2,748 or 44% of this segment’s
revenues for the three months ended March 31, 2008.  The decrease in
gross profit margin in this segment was primarily due to increased use of third
party consultants. Security Consulting and Investigations gross profit was
$3,111 or 41% of this segment’s revenues for the three months ended March 31,
2009, as compared to $3,134 or 39% of this segment’s revenues for the three
months ended March 31, 2008.  The increase in profit margin was
primarily a result of decreased use of third party consultants at this
segment.




Operating
Expenses




Selling
and marketing expenses were $3,056 or 12% of revenues for the three months ended
March 31, 2009, as compared to $2,502 or 12% of revenues for the three months
ended March 31, 2008. The increase in selling expenses for the three months
ended March 31, 2009 related to an increased emphasis on our selling and
marketing activities and, in particular, the additional costs incurred during
2009 related to an expansion of the scope of the Company’s client forum
marketing event.  General and administrative expenses were $9,148 or
36% of revenues for the three months ended March 31, 2009, as compared to
$10,996 or 51% of revenues for the three months ended March 31,
2008.  The decrease of $1,848 or 17% is attributable to a $506
reduction in stock based compensation, improved efficiencies resulting from
headcount reductions and the further integration of operations.




Liquidity
and Capital Resources




For
the Three Months Ended March 31, 2009




We had a
cash and cash equivalent balance of $2,418 as of March 31, 2009.




Cash
(used in) provided by operating activities was approximately $(2,737) and $142
for the three months ended March 31, 2009 and 2008,
respectively.  Cash used in operating activities for the three months
ended March 31, 2009 resulted primarily from our net loss $1,635 as well as an
increase in the funds required to finance accounts receivable of $3,884, offset
by a decrease in accrued compensation of $1,276 as well as non-cash charges for
depreciation and amortization of $987 and for stock based compensation of
$586.




Cash used
in investing activities was $419 and $457 for the three months ended March 31,
2009 and 2008, respectively.  Of the cash used in investing activities
for the three months ended March 31, 2009, $413 represented purchases of
property, plant and equipment.




Financing
activities provided net funds of $298 and used net funds of $467 for the three
months ended March 31, 2009 and 2008, respectively.  The net cash
provided for the three months ended March 31, 2009 is primarily due to proceeds
from the line of credit of $428, less repayment of notes payable for
acquisitions of $150.




Effective
March 31, 2009, the financial institution that provides a line of credit for us
and our wholly owned subsidiaries entered into an amendment to our working
capital line of credit, reducing the applicable interest rate range with respect
to the line of credit to 1.00% to 1.75%, based on our liquidity, plus the
greater of 6.25% or the lender’s most recently announced “prime
rate.”  As of March 31, 2009 our net borrowings were $7,521 under the
line of credit, and based upon the amount of qualifying accounts receivable, we
were eligible to draw up to a total of $10,000 under the line of
credit.  The line of credit and all obligations outstanding thereunder
are due and payable not later than March 29, 2010.


23




For the
three months ended March 31, 2009, we have met our cash needs through operating
cash flows, reduction of our cash balance and through borrowings under our line
of credit arrangement. At March 31, 2009, we had working capital of $16,282. We
believe that a combination of cost reductions that we have implemented to date,
and will continue to implement, an acceleration of the collection of certain of
our government receivables, along with anticipated revenue improvements
resulting from both new products and from new relationships generated from our
February 2009 client forum marketing event, will allow us to generate
improvements in cash flows from operations. Furthermore, we believe that these
improved operating cash flows, along with the proceeds from our line of credit
arrangement will be sufficient to finance our operations through March 31,
2010.




Off-Balance
Sheet Arrangements




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





Critical
Accounting Policies




Our
significant accounting policies, including the assumptions and judgments
underlying them, are more fully described in our “Notes to Consolidated
Financial Statements” included in the Annual Report on Form 10-K for the year
ended December 31, 2008. Some of our accounting policies require the application
of significant judgment by management in the preparation of the consolidated
financial statements and, as a result, they are subject to a greater degree of
uncertainty. In applying these policies, management uses its judgment to
determine the appropriate assumptions to be used in calculating estimates that
affect the reported amounts of assets, liabilities, revenues and expenses.
Management bases its estimates and assumptions on historical experience and on
various other factors that are believed to be reasonable under the
circumstances. We have identified certain of our accounting policies as the ones
that are most important to the portrayal of our consolidated financial condition
and results of operations and which require management to make its most
difficult and subjective judgments, often as a result of the need to make
estimates of matters that are inherently uncertain. Our critical accounting
policies include the following:




Revenue Recognition and Related
Costs




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




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




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




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


24




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




Intangible Assets, Goodwill and
Impairment




In
accordance with the requirements of Statement of Financial Accounting Standards
(“SFAS”) No. 141 “Business Combinations” (“SFAS  141”), we
recognize 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” (“SFAS 142”), on a regular basis, we perform impairment
analysis of the carrying value of goodwill and certain other intangible assets
by assessing the recoverability when there are indications of potential
impairment based on estimates of undiscounted future cash flows.




Allowance for Doubtful
Accounts




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




Stock-Based Compensation




The
Company has adopted the fair value recognition provisions of SFAS No. 123R,
“Share Based Payment” (“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.




SFAS 123R
also requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates. Forfeitures were estimated based on historical experience. Prior to
the adoption of SFAS 123R, the Company accounted for forfeitures as they
occurred.




We
account for equity instruments issued to non-employees in accordance with the
provisions of SFAS 123R 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 that such equity instruments be recorded at their
fair value on the measurement date, which is typically the date the services are
performed. Stock-based compensation for non-employees is accounted for under
EITF 96-18 and is reflected within general and administrative
expenses.


25




Item 3. Quantitative and Qualitative
Disclosures About Market Risk.




Not
applicable.





Item
4T. Controls and Procedures.





Disclosure
Controls and Procedures





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





In
connection with the preparation of this Quarterly Report on Form 10-Q for the
quarter ended March 31, 2009, management, with the participation of our Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of our disclosure controls and procedures pursuant to Rule 13a-15 under the
Exchange Act and have determined that such controls and procedures were
effective as of March 31, 2009.





Changes
in Internal Control Over Financial Reporting




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


26


PART
II




OTHER
INFORMATION




Item
1. Legal Proceedings.





(Amounts
contained in this Item 1 are in thousands, except for share
amounts).




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





The
Company was added as a defendant in federal and state litigation matters related
to Facticon, which were initially filed by the plaintiffs prior to the Company’s
acquisition of the assets of  Facticon.  On December 22,
2008, the Federal matter was settled in full with a cash payment of
$657.





In the
State Court matter, Wonsch, et
al. vs. FacticonInc.
and GlobalOptions Group, Inc., filed in the State Court for the Central
District of California, the plaintiffs in a class action (the “State
Plaintiffs”), alleged that Facticon failed to pay overtime wages under the
California Civil Code.  Subsequent to the acquisition, the Company was
added as a defendant in said case, under the successor liability
theory.  On December 30, 2008, the Company and the State Plaintiffs
tentatively agreed to settle this matter.  As of March 31, 2009, the
Company has established a reserve in the amount of $118 to cover the Company for
the expected cash settlement of the remaining Facticon State Court matter,
included in other current liabilities.   This amount was paid on
May 8, 2009.


27




Item
1A. Risk Factors.





Not Applicable.





Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds.





None.





Item
3. Default Upon Senior Securities.




None.




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




None.




Item
5. Other Information.




There are
no items required to be disclosed on Current Report on Form 8-K during the three
months ended March 31, 2009 that were not so reported.


28




Item
6. Exhibits.




The
exhibits listed in the following Exhibit Index are filed as part of this
Report.




EXHIBIT
INDEX





Exhibit
                    No.
                  
                  Description31.1
                  
                  Certification
      of Principal Executive Officer pursuant to Section 302 of The
      Sarbanes-Oxley Act of 200231.2
                  
                  Certification
      of Principal Financial Officer pursuant to Section 302 of The
      Sarbanes-Oxley Act of
                    200232.1
                  
                  Certification
      of Principal Executive Officer pursuant to Section 906 of The
      Sarbanes-Oxley Act of 200232.2
                  
                  Certification
      of Principal Financial Officer pursuant to Section 906 of The
      Sarbanes-Oxley Act of
2002


29





SIGNATURES




Pursuant to the requirements 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: May 11,
    2009
                      By:
                      /s/ Harvey W. SchillerHarvey
      W. Schiller
                        Chairman,
      Chief Executive Officer
                        and
      Director
                        (Principal
      Executive
Officer)




Dated:
        May 11, 2009
                By:
                /s/ Jeffrey O. NyweideJeffrey
      O. Nyweide
                  Executive
      Vice President-Corporate Development,
                  Chief
      Financial Officer, Secretary
                  (Principal
      Financial Officer and Principal
                  Accounting
      Officer)




30