**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-QSB**




(Mark
      One)




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




For
      the
      quarterly period ended September 30, 2006




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




For
      the
      transition period from __________________ to __________________




Commission
      file number: 333-117495




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





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







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




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




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





As
      of
      November 14, 2006, there were 20,024,469 shares of the issuer’s common
      equity outstanding.





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

















**GLOBALOPTIONS
      GROUP, INC. AND SUBSIDIARIES**


**Form
      10-QSB**


**September
      30, 2006**


**Index
      to Unaudited Condensed Consolidated Financial Statements**





**PART
      I - FINANCIAL INFORMATION**





ITEM
                1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
            
            **Page(s)**Condensed
                Consolidated Balance Sheet as of September 30, 2006
            
            
            1Condensed
                Consolidated Statements of Operationsfor
                the Three Months and Nine Months Ended September 30, 2006 and
                2005
            
            
            2Condensed
                Consolidated Statements of Stockholders' Equityfor
                the Nine Months Ended September 30, 2006
            
            
            3Condensed
                Consolidated Statements of Cash Flows for theNine
                Months Ended September 30, 2006 and 2005
            
            
            4Notes
                to Condensed Consolidated Financial Statements
            
            
            8ITEM
                2. MANAGEMENT'S DISCUSSION AND ANALYSIS ORPLAN
                OF OPERATION
            
            
            39ITEM
                3. CONTROLS AND PROCEDURES
            
            
            51**PART
                II - OTHER INFORMATION**ITEM
                1. LEGAL PROCEEDINGS
            
            
            52ITEM
                2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OFPROCEEDS
            
            
            52ITEM
                3. DEFAULTS UPON SENIOR SECURITIES
            
            
            52ITEM
                4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            
            52ITEM
                5. OTHER INFORMATION
            
            
            52ITEM
                6. EXHIBITS
            
            
            52SIGNATURES
            
            
            53EXHIBITS
                31.1 and 31.2EXHIBITS
                32.1 and 32.2



















**GLOBALOPTIONS
        GROUP, INC. AND SUBSIDIARIES**
 **Condensed
        Consolidated Balance Sheet**
 **September
        30, 2006**
 **(Unaudited)**
 
 **ASSETS**
 
 Current
                  assets:Cash
              
              $
              22,326,956Accounts
                  receivable, net of allowance for doubtfulaccounts
                  of $1,113,000
              
              
              19,930,130Prepaid
                  expenses and other current assets
              
              
              494,214Total
                  current assets
              
              
              42,751,300Property
                  and equipment, net
              
              
              682,013Intangible
                  assets, net
              
              
              8,289,938Goodwill
              
              
              21,754,321Security
                  deposits and other assets
              
              
              316,586Total
                  assets
              
              $
              73,794,158**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  liabilities:Note
                  payable to seller for JLWA acquisition
              
              $
              400,000Notes
                  payable for Safir acquisition
              
              
              394,481Notes
                  payable for Source Source acquisition
              
              
              500,000Due
                  to former stockholders of CBR
              
              
              168,858Due
                  to former members of JLWA for earnout
              
              
              4,075,272Accounts
                  payable
              
              
              4,833,062Deferred
                  revenues
              
              
              37,176Accrued
                  compensation and related benefits
              
              
              2,571,015Other
                  current liabilities
              
              
              994,899Total
                  current liabilities
              
              
              13,974,763Long
                  term liabilities:Notes
                  payable for Secure Source acquistion, less current portion
              
              
              750,000Deferred
                  rent obligation
              
              
              155,617Total
                  long term liabilities
              
              
              905,617Total
                  liabilities
              
              
              14,880,380CommitmentsStockholders'
                  equity:Preferred
                  stock, $0.001 par value,14,968,000
                  shares authorized, no sharesissued
                  or outstanding
              
              
              -Series
                  A convertible preferred stock, voting, $0.001 parvalue,
                  16,000 shares authorized, 6,455 sharesissued
                  and outstanding, liquidation preference $6,455,000
              
              
              6Series
                  B convertible preferred stock, voting, $0.001 par value,60,000
                  shares authorized, 53,073 shares issued andoutstanding,
                  liquidation preference $53,073,000
              
              
              53Common
                  stock, $.001 par value; 85,000,000 shares authorized;19,986,969
                  shares issued and outstanding
              
              
              19,988Additional
                  paid-in capital
              
              
              77,473,016Accumulated
                  deficit
              
              
              (18,579,285
              )Total
                  stockholders' equity
              
              
              58,913,778Total
                  liabilities and stockholders' equity
              
              $
              73,794,158
 
 See
        notes
        to these condensed consolidated financial statements.
 
 
 1
 **GLOBALOPTIONS
        GROUP, INC. AND SUBSIDIARIES**
 **Condensed
        Consolidated Statements Of Operations**
 **(Unaudited)**
 
 For
                  the Three Months Ended
                September
                  30,
              
              For
                  the Nine Months Ended
                September
                  30,2006
              
              2005
              
              2006
              
              2005Revenues
              
              $
              21,017,262
              
              $
              2,509,693
              
              $
              44,611,876
              
              $
              4,762,268Cost
                  of revenues
              
              
              10,738,102
              
              
              1,483,786
              
              
              22,860,911
              
              
              2,572,431Gross
                  profit
              
              
              10,279,160
              
              
              1,025,907
              
              
              21,750,965
              
              
              2,189,837Operating
                  expenses:Selling
                  and marketing
              
              
              2,585,236
              
              
              232,912
              
              
              6,353,441
              
              
              519,172General
                  and administrative
              
              
              7,882,643
              
              
              2,037,202
              
              
              16,526,627
              
              
              4,383,676Total
                  operating expenses
              
              
              10,467,879
              
              
              2,270,114
              
              
              22,880,068
              
              
              4,902,848Loss
                  from operations
              
              
              (188,719
              )
              
              (1,244,207
              )
              
              (1,129,103
              )
              
              (2,713,011
              )Other
                  income (expense):Interest
                  income
              
              
              193,980
              
              
              15,688
              
              
              210,517
              
              
              16,563Interest
                  expense
              
              
              (21,347
              )
              
              (18,493
              )
              
              (628,397
              )
              
              (81,497
              )Amortization
                  of debt discounts
              
              
              -
              
              
              -
              
              
              (7,522,602
              )
              
              -Amortization
                  of deferred financing costs
              
              
              -
              
              
              -
              
              
              (2,694,500
              )
              
              -Other
                  income (expense), net
              
              
              172,633
              
              
              (2,805
              )
              
              (10,634,982
              )
              
              (64,934
              )Net
                  loss
              
              
              (16,086
              )
              
              (1,247,012
              )
              
              (11,764,085
              )
              
              (2,777,945
              )Deemed
                  dividends to Series A and B convertiblepreferred
                  stockholders
              
              
              -
              
              
              (147,250
              )
              
              (24,413,362
              )
              
              (979,750
              )Net
                  loss applicable to common stockholders
              
              $
              (16,086
              )
              $
              (1,394,262
              )
              $
              (36,177,447
              )
              $
              (3,757,695
              )Basic
                  and diluted net loss per share applicable to common
                  stockholders
              
              $
              -
              
              $
              (0.10
              )
              $
              (2.11
              )
              $
              (0.34
              )Weighted
                  average number of common sharesoutstanding
                  - basic and diluted
              
              
              19,540,111
              
              
              14,433,266
              
              
              17,120,021
              
              
              11,181,480
 
 See
        notes
        to these condensed consolidated financial statements.
 
 2
 
 **GLOBALOPTIONS
        GROUP, INC. AND SUBSIDIARIES**
 **Condensed
        Consolidated Statement of Stockholders' Equity**
 **For
        the Nine Months Ended September 30, 2006**
 **(Unaudited)**
  **Series
                    A Convertible**
                
                **Series
                    B Convertible**
                
                **Additional**
                
                **Total****Common
                    Stock**
                
                **Preferred
                    Stock**
                
                **Preferred
                    Stock**
                
                **Paid-in**
                
                **Accumulated**
                
                **Stockholders'****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **Deficit**
                
                **Equity**Balance,
                    January 1, 2006
                
                
                14,490,582
                
                $
                14,490
                
                
                7,750
                
                $
                8
                
                
                -
                
                $
                -
                
                $
                11,587,140
                
                $
                (6,815,200
                )
                $
                4,786,438Issuance
                    of common stock inconnection
                    with the purchaseof
                    JLWA
                
                
                819,672
                
                
                820
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                1,999,180
                
                
                -
                
                
                2,000,000Issuance
                    of common stock for services
                
                
                145,600
                
                
                146
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                291,932
                
                
                -
                
                
                292,078Revaluation
                    of stock options granted toto
                    consultants
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (393,943
                )
                
                -
                
                
                (393,943
                )Amortization
                    of deferredconsulting
                    fees
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                692,636
                
                
                -
                
                
                692,636Issuance
                    of Series B convertible preferredpreferred
                    stock upon exchange ofconvertible
                    notes payable andaccrued
                    interest
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                53,073
                
                
                53
                
                
                46,150,678
                
                
                -
                
                
                46,150,731Issuance
                    of common stock inconnection
                    with purchase of Safir
                
                
                3,000,000
                
                
                3,000
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                5,997,000
                
                
                -
                
                
                6,000,000Issuance
                    of common stock inconnection
                    with purchase of Secure Source
                
                
                210,970
                
                
                211
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                499,789
                
                
                -
                
                
                500,000Issuance
                    of common stock inconnection
                    with purchase ofHyperion
                    Risk
                
                
                672,645
                
                
                673
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                1,499,327
                
                
                -
                
                
                1,500,000Amortization
                    of debt discounts onconvertible
                    notes payable
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                7,522,602
                
                
                -
                
                
                7,522,602Amortization
                    of stock options costs
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                1,627,321
                
                
                -
                
                
                1,627,321Issuance
                    of common stock in connectionwith
                    the conversion of shares of SeriesA
                    convertible preferred stock.
                
                
                647,500
                
                
                648
                
                
                (1,295
                )
                
                (2
                )
                
                -
                
                
                -
                
                
                (646
                )
                
                -
                
                
                -Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (11,764,085
                )
                
                (11,764,085
                )19,986,969
                
                $
                19,988
                
                
                6,455
                
                $
                6
                
                
                53,073
                
                $
                53
                
                $
                77,473,016
                
                $
                (18,579,285
                )
                $
                58,913,778
   See
        notes
        to these condensed consolidated financial statements.
 
 3
 
 **GLOBALOPTIONS
        GROUP, INC. AND SUBSIDIARIES**
 **Condensed
        Consolidated Statements of Cash Flows**
 **(Unaudited)**
 For
                  the Nine Months EndedSeptember
                  302006
              
              2005Cash
                  flows from operating activities:Net
                  loss
              
              $
              (11,764,085
              )
              $
              (2,777,945
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Provision
                  for bad debts
              
              
              187,532
              
              
              228,686Depreciation
                  and amortization
              
              
              1,356,707
              
              
              100,099Impairment
                  of intangible asset
              
              
              115,778
              
              
              -Stock
                  based compensation
              
              
              2,043,092
              
              
              38,500Amortization
                  of debt discounts
              
              
              7,522,602
              
              
              -Amortization
                  of deferred financing costs
              
              
              2,694,500
              
              
              -Reverse
                  merger expense paid with common stock
              
              
              -
              
              
              337,850Changes
                  in operating assets:Accounts
                  receivable
              
              
              (10,596,219
              )
              
              (266,655
              )Prepaid
                  expenses and other current assets
              
              
              (299,550
              )
              
              (93,476
              )Security
                  deposits and other assets
              
              
              102,511
              
              
              -Changes
                  in operating liabilites:Accounts
                  payable
              
              
              1,179,620
              
              
              (159,158
              )Deferred
                  revenue
              
              
              (79,741
              )
              
              -Accrued
                  compensation and related benefits
              
              
              1,556,507
              
              
              63,828Due
                  to former stockholder of CBR
              
              
              (426,462
              )
              
              (116,313
              )Due
                  to former members of JLWA for earnout
              
              
              4,075,272
              
              
              -Other
                  current liabilites
              
              
              602,789
              
              
              31,640Total
                  adjustments
              
              
              10,034,938
              
              
              165,001Net
                  cash used in operating activities
              
              
              (1,729,147
              )
              
              (2,612,944
              )Cash
                  flows from investing activities:Purchases
                  of property and equipment
              
              
              (77,195
              )
              
              (3,691
              )Purchase
                  of client list
              
              
              (65,000
              )
              
              -Acquisition
                  of CBR, less cash acquired of $26,086
              
              
              -
              
              
              (4,362,877
              )Acquisition
                  of Safir, less cash acquired of $447,115
              
              
              (1,693,534
              )
              
              -Acquisition
                  of JLWA
              
              
              (6,003,540
              )
              
              -Acquisition
                  of Hyperion Risk
              
              
              (2,281,626
              )
              
              -Net
                  cash used in investing activities
              
              
              (10,120,895
              )
              
              (4,366,568
              )
  See
        notes
        to these condensed consolidated financial statements.
 
 4
 
 **GLOBALOPTIONS
        GROUP, INC. AND SUBSIDIARIES**
 **Condensed
        Consolidated Statements of Cash Flows, continued**
 **(Unaudited)**
 
 For
                  the Nine Months EndedSeptember
                  30,2006
              
              2005Cash
                  flows from financing activities:Net
                  (repayments of ) proceeds from line of credit
              
              $
              (543,453
              )
              $
              37,236Proceeds
                  from issuance of Series A convertible preferred stock
              
              
              -
              
              
              7,750,000Proceeds
                  from convertible notes payable
              
              
              45,050,000
              
              
              -Repayment
                  of convertible notes payable
              
              
              (8,105,519
              )
              
              -Repayment
                  of notes payable
              
              
              (819,132
              )
              
              -Offering
                  costs in connection with private placementsof
                  Series A convertible preferred stock
              
              
              -
              
              
              (530,802
              )Deferred
                  financing costs
              
              
              (1,933,500
              )
              
              -Net
                  cash provided by financing activities
              
              
              33,648,396
              
              
              7,256,434Net
                  increase in cash
              
              
              21,798,354
              
              
              276,922Cash
                  - beginning of period
              
              
              528,602
              
              
              533,018Cash
                  - ending of period
              
              $
              22,326,956
              
              $
              809,940Supplemental
                  disclosure of cash flow information:Cash
                  paid during the period for interest
              
              $
              100,131
              
              $
              72,747Supplemental
                  discolsures of non-cash investing and financing
                  activities:Common
                  stock of GlobalOptions Inc. issued upon conversion ofSeries
                  A convertible prefered stock
              
              $
              648
              
              $
              -Common
                  stock of GlobalOptions, Inc. issued upon conversion ofconvertible
                  note payable - stockholder and related accrued interest
              
              $
              -
              
              $
              267,083Common
                  stock issued upon the cashless exercise of warrants
              
              $
              -
              
              $
              21Issuance
                  of Series B convertible preferred stock upon exchange ofof
                  notes payable and accrued interest
              
              $
              46,150,731
              
              $
              -Deferred
                  financing costs incurred through the issuance ofconvertible
                  notes payable
              
              $
              761,000
              
              $
              -Supplemental
                  non-cash investing and financial activity - acquisition of
                  JLWA:Assets
                  acquired and liabilities assumed:Current
                  assets
              
              $
              4,345,154Property
                  and equipment
              
              
              185,235Intangible
                  assets
              
              
              4,930,000Goodwill
                  recognized on purchase business combination
              
              
              883,766Security
                  deposits and prepaid expenses
              
              
              99,892Accounts
                  payable, accrued expenses and deferred revenues
              
              
              (2,040,507
              )Total
                  purchase price
              
              
              8,403,540Less:
                  Cash paid to acquire JLWA
              
              
              (6,003,540
              )Non-cash
                  consideration to seller
              
              $
              2,400,000Non-cash
                  consideration, consisting of:Common
                  stock issued to acquire JLWA
              
              $
              2,000,000Note
                  payable issued to seller
              
              
              400,000Total
                  non-cash consideration
              
              $
              2,400,000
 
 See
        notes
        to these condensed consolidated financial statements.
 
 5
 
 **GLOBALOPTIONS
        GROUP, INC. AND SUBSIDIARIES**
 **Condensed
        Consolidated Statements of Cash Flows, continued**
 **(Unaudited)**
 
 Supplemental
                  non-cash investing and financial activity - acquisition of
                  Safir:Assets
                  acquired and liabilities assumed:Current
                  assets
              
              $
              2,852,888Property
                  and equipment
              
              
              180,906Intangible
                  assets
              
              
              1,770,000Goodwill
                  recognized on purchase business combination
              
              
              11,534,765Security
                  deposits and prepaid expenses
              
              
              156,525Accounts
                  payable, accrued expenses and deferred revenues
              
              
              (1,179,435
              )Total
                  purchase price
              
              
              15,315,649Less:
                  Cash paid to acquire Safir
              
              
              (1,940,649
              )Less:
                  Cash paid as finders fee
              
              
              (200,000
              )Non-cash
                  consideration to seller
              
              $
              13,175,000Non-cash
                  consideration, consisting of:Common
                  stock issued to acquire Safir
              
              $
              6,000,000Common
                  stock issued as finders fee
              
              
              175,000Note
                  payable issued to seller
              
              
              7,000,000Total
                  non-cash consideration
              
              $
              13,175,000Supplemental
                  non-cash investing and financial activity - acquisition of Secure
                  Source:Assets
                  acquired and liabilities assumed:Property
                  and equipment
              
              $
              101,459Intangible
                  assets
              
              
              1,111,000Goodwill
                  recognized on purchase business combination
              
              
              2,070,366Other
                  assets
              
              
              1,795Accounts
                  payable, accrued expenses and deferred revenues
              
              
              (72,120
              )Non-cash
                  consideration to seller
              
              $
              3,212,500Non-cash
                  consideration, consisting of:Common
                  stock issued to acquire Secure Source
              
              $
              500,000Note
                  payable issued to seller
              
              
              2,712,500Total
                  non-cash consideration
              
              $
              3,212,500
 
 See
        notes
        to these condensed consolidated financial statements.
 
 6
 **GLOBALOPTIONS
        GROUP, INC. AND SUBSIDIARIES**
 **Condensed
        Consolidated Statements of Cash Flows, continued**
 **(Unaudited)**
 
 Supplemental
                  non-cash investing and financial activity - acquisition of Hyperion
                  Risk:Assets
                  acquired and liabilities assumed:Current
                  assets
              
              $
              631,653Property
                  and equipment
              
              
              60,958Intangible
                  assets
              
              
              687,690Goodwill
                  recognized on purchase business combination
              
              
              2,963,894Other
                  assets
              
              
              14,100Accounts
                  payable, accrued expenses and deferred revenues
              
              
              (576,669
              )Total
                  purchase price
              
              $
              3,781,626Less:Cash
                  paid to acquire Hyperion Risk
                Total
                  non-cash consideration:
              
              $
              2,281,626Common
                  stock issued to acquire Hyperion Risk
              
              $
              1,500,000
 
 See
        notes
        to these condensed consolidated financial statements.


7


**GLOBALOPTIONS
        GROUP, INC. AND SUBSIDIARIES**
 **Notes
        To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 
 **1. 
        Nature of Operations**
  GlobalOptions,
        LLC was formed in November 1998 as a limited liability company (“LLC”) in the
        state of Delaware.  On January 24, 2002, with the approval of the members
        of the LLC, the LLC converted to a corporation under Delaware law with the
        name
        GlobalOptions, Inc. (“GlobalOptions”)
  On
        June
        24, 2005, GlobalOptions consummated a “reverse merger” transaction, with
        Creative Solutions with Art, Inc., (“Creative Solutions”) a Nevada corporation,
        and the newly formed GlobalOptions Acquisition Corp., (“GlobalOptions
        Acquisition”) a Delaware corporation, a wholly-owned subsidiary of Creative
        Solutions.  GlobalOptions Acquisition merged with and into GlobalOptions
        with the result that on June 24, 2005, GlobalOptions became the subsidiary
        of a
        public company.
  Following
        the merger, Creative Solutions changed its name to GlobalOptions Group, Inc.
        (“GlobalOptions Group” or the “Company”) and began trading on the OTC (over the
        counter) Bulletin Board under the new symbol “GLOI.OB.”  As a result of the
        reverse merger, GlobalOptions became the wholly-owned subsidiary of the newly
        renamed GlobalOptions Group, with GlobalOptions’ former stockholders acquiring a
        majority of the outstanding shares of the Company’s common stock, par value
        $.001 per share, and GlobalOption’s officers and directors replaced the officers
        and directors of Creative Solutions.  The reverse merger was consummated
        under Delaware law and pursuant to an Agreement and Plan of Merger, dated
        June 24, 2005 (the “Merger Agreement”).  For accounting purposes, the
        reverse merger has been treated as an acquisition of Creative Solutions by
        GlobalOptions and a recapitalization of GlobalOptions.  The historical
        condensed consolidated financial statements prior to June 24, 2005 are those
        of
        GlobalOptions.  Pursuant to the reverse merger, GlobalOptions has restated
        its statements of stockholders’ equity on a recapitalization basis, so that all
        accounts are now presented as if the reverse merger had occurred at the
        beginning of the earliest period presented.
  The
        Company is a provider of risk mitigation services to Fortune 500 corporations,
        governmental organizations and high-profile individuals throughout the
        world.  The Company’s risk mitigation services currently include (1) risk
        management and security, (2) investigations and litigation support, and (3)
        crisis management and corporate governance.
 On
        August
        14, 2005, the Company acquired Confidential Business Resources (“CBR”), a
        privately-held nationwide investigations firm based in Nashville,
        Tennessee.
  On
        March
        10, 2006, the Company acquired James Lee Witt Associates, LLC (“JLWA”), a
        nationwide crisis and emergency management consulting firm headquartered
        in
        Washington, D.C. with three additional offices nationwide (See Note
        4).
  On
        May
        12, 2006 the Company acquired Safir Rosetti, LLC (“Safir”) and Secure Source,
        Inc. (“Secure Source”). Safir is a security consulting, investigative and
        intelligence firm headquartered in New York City. Secure Source is an
        international risk consulting firm with offices in the Dallas and Washington
        D.C. areas (See Note 4).
 
 On
        August
        10, 2006, the Company acquired substantially all of the business and assets
        of
        Hyperion Risk, Inc. (“Hyperion Risk”), a Florida corporation.  
Hyperion Risk is a security consulting, investigative and intelligence firm
        with
        its central corporate office located in Orlando, Florida.   (See Note
        4).
  8
 **GLOBALOPTIONS
          GROUP, INC. AND SUBSIDIARIES**
 **Notes
          To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **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 with the instructions to
        Form
        10-QSB. 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 and nine months ended September 30, 2006 are not necessarily indicative
        of
        the results that may be expected for the year ending December 31, 2006.
 For further information, refer to the consolidated financial statements
        and footnotes thereto for GlobalOptions Group, Inc., included in the Company’s
        Form 10-KSB filed on April 17, 2006 for the year ended December 31,
        2005.
  **3. 
        Summary of Significant Accounting Policies**
 
 ***Net
        Loss Per Common Share***
  Basic
        net
        loss per common share is computed based on the weighted average number of
        shares
        of common stock outstanding during the periods presented on a recapitalization
        basis in accordance with the reverse merger.  Common stock equivalents,
        consisting of stock options, convertible preferred stock and warrants, as
        further discussed in the notes to the condensed consolidated financial
        statements, were not included in the calculation of the diluted loss per
        share
        because their inclusion would have been anti-dilutive.  The total common
        shares issuable upon the exercise of stock options, warrants, and the Series
        A
        and B convertible preferred stock as of September 30, 2006 and 2005 was
        60,421,726 and 10,061,821, respectively.
 
 ***Stock
        Based Compensation/Stock Options***
  On
        January 24, 2002, the Board of Directors and stockholders of GlobalOptions
        approved the 2002 Stock Option Plan (the “2002 Plan”). The Plan is administered
        by the Board of Directors (“the Board”) of GlobalOptions. Directors and
        stockholders, officers, employees, and consultants of the Company were
        eligible to participate.  The Plan provided for the awards of incentive and
        nonstatutory stock options.  The Plan initially provided for 1,685,000
        shares of common stock to be reserved for issuance under
        the Plan.  On August 4, 2004, the Company authorized an
        additional 1,585,095 shares of common stock to be reserved for
        issuance under the Plan.  The Committee determined the vesting
        schedule to be up to five years at the time of grant of any
        options under the Plan, and unexercised options will expire in ten
        years.  The exercise price was equal to at least 100% of the fair
        market value of a share of common stock, as determined by the Committee,
        on the grant date.
  On
        August
        5, 2005, the Board of Directors and stockholders of the
        Company approved the 2005 Stock Option Plan (the
“2005 Plan”), which replaced the 2002 Plan. The 2005 Plan is
        administered by the Company’s compensation committee and provides for 6,500,000
        shares of common stock to be reserved for issuance under the 2005 Plan. 
Directors, officers, employees, and consultants of the Company are
        eligible to participate.  The 2005 Plan provides for the awards
        of incentive and nonstatutory stock options.    The Committee
        determined the vesting schedule to be up to five years at the
        time of grant of any options under the Plan, and unexercised options will
        expire in ten years.  The exercise price is to be equal to at least
        100% of the fair market value of a share of common stock, as determined by
        the
        Committee, on the grant date.
 
 
 9
 **GLOBALOPTIONS
          GROUP, INC. AND SUBSIDIARIES**
 **Notes
          To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **3.**
            **Summary
                of Significant Accounting Policies, continued** 
 ***Stock
        Based Compensation/Stock Options, continued***
 
 Prior
        to
        January 1, 2006, the Company accounted for the stock option plans under the
        recognition and measurement provisions of Accounting Principles Board Opinion
        No. 25 ("APB 25"). Accordingly, the Company would recognize employee stock
        based
        compensation expense only if it granted options at a price lower than the
        closing price on the date of grant. Any resulting compensation expense would
        then have been recognized ratably over the associated service period.  No
        stock-based employee compensation expense relating to the Company’s stock option
        plans was reflected in net loss for the three and nine months ended September
        30, 2005, as all options granted under its plans had an exercise price equal
        to
        or greater than the market value of the underlying common stock on the date
        of
        grant. Prior to January 1, 2006, the Company provided pro-forma disclosure
        amounts in accordance with Statement of Financial
        Accounting Standards No. 148, "Accounting for Stock-Based
        Compensation-Transition and Disclosure" ("SFAS 148"), as if the fair value
        method defined by SFAS 123 had been applied to its stock-based
        compensation.
  Effective
        January 1, 2006, the Company adopted the fair value recognition provisions
        of
        SFAS 123R, using the modified prospective transition method and therefore
        has
        not restated prior periods' results. Under this transition method, employee
        stock-based compensation expense for the three and nine months ended September
        30, 2006 included compensation expense for all stock-based compensation awards
        granted, but not yet fully vested, prior to January 1, 2006.  The fair
        value of the options granted was determined at the original grant date in
        accordance with the provisions of SFAS 123R.  Stock-based compensation
        expense for all share-based payment awards granted after December 31, 2005
        is
        based on the grant-date fair value estimated in accordance with the provisions
        of SFAS 123R. The Company recognizes these compensation costs over the requisite
        service period of the award, which is generally the vesting term of the options
        associated with the underlying employment agreement, where
        applicable.
 
 As
        a
        result of adopting SFAS 123R, the impact to the condensed consolidated financial
        statements for the three and nine months ended September 30, 2006 was $646,000
        and $1,627,000, respectively, greater than if the Company had continued to
        account for stock-based compensation under APB 25 and is reflected within
        general and administrative expenses. The impact of the adoption of SFAS 123R
        on
        both basic and diluted net loss per share for the three and nine months ended
        September 30, 2006 was $.03 and $.10 per share, respectively. At September
        30,
        2006, the unamortized value of employee stock options under SFAS 123R was
        approximately $5,377,000. The unamortized portion will be expensed over a
        weighted average period of approximately 2.4 years.
  The
        Company accounts for equity instruments issued to non-employees in accordance
        with the provisions of SFAS 123 and the Emerging Issues Task Force (“EITF”)
        Issue No.  96-18,  “Accounting  for  Equity 
Instruments  That Are Issued to Other Than  Employees  for 
Acquiring,  or In  Conjunction  with Selling,  Goods or
        Services” (“EITF 96-18”) which requires that such equity instruments are
        recorded at their fair value on the measurement  date, which is typically
        the date the services are performed.  Stock based compensation for
        non-employees accounted for under EITF 96-18 was $316,216 and $884,432 for
        the
        three and nine months ended September 30, 2006, respectively, and is reflected
        within general and administrative expenses.
  Option
        valuation models require the input of highly subjective assumptions including
        the expected life of the option. Because the Company's employee stock options
        have characteristics significantly different from those of traded options,
        and
        because changes in the subjective input assumptions can materially affect
        the
        fair value estimate, in management's opinion, the existing models do not
        necessarily provide a reliable single measure of the fair value of its employee
        stock options.
  10
 **GLOBALOPTIONS
          GROUP, INC. AND SUBSIDIARIES**
 **Notes
          To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **3. 
        Summary of Significant Accounting Policies, continued**
 
 ***Stock
        Based Compensation/Stock Options, continued***
 
 The
        fair
        value of each option grant during the three and nine months ended September
        30,
        2006 was estimated on the date of grant using the Black-Scholes option pricing
        model with the following assumptions used:
  For
                  the Three MonthsEnded
                  September 30, 2006
              
              For
                  the Nine MonthsEnded
                  September 30, 2006Dividend
                  yield
              
              
              0%
              
              
              0%Expected
                  volatility
              
              
              87%
              
              
              87%Risk-free
                  interest rate
              
              
              4.8%
              
              
              4.9%Expected
                  lives
              
              
              5
                  years
              
              
              5
                  years
 
 The
        weighted average fair value of the options on the date of grant, using the
        fair
        value based methodology for the three and nine months ended September 30,
        2006
        was $1.36 and $1.52, respectively
 
 For
        the
        three and nine months ended September 30, 2005, under APB 25, no stock-based
        employee compensation expense relating to the Company’s stock option plans was
        reflected in net loss, as all options granted under its plan had an exercise
        price equal to or greater than the market value of the underlying common
        stock
        on the date of grant.
 
 The
        following table illustrates the effect on net loss and net loss per
        share if the Company had applied the fair value recognition method under
        the
        provisions of SFAS 123.
 
 
 (All
                  numbers in 000’s except per share data.)
              
              For
                  the Three
                Months
                  Ended September 30, 2005
              
              For
                  the Nine Months Ended September 30, 2005Net
                  loss applicable to common stockholders, as reported
              
              $
              (1,394
              )
              $
              (3,758
              )Deduct:
                  total stock-based employee compensation expense determined under
                  fair
                  value based method
                for
                  all awards, net of related tax effects, if any
              
              
              12
              
              
              112Pro-forma
                  net loss
              
              $
              (1,406
              )
              $
              (
                  3,870
              )Net
                  loss per share applicable to common stockholders - basic and
                  diluted:As
                  reported
              
              $
              (0.10
              )
              $
              (0.34
              )Pro
                  forma
              
              $
              (0.10
              )
              $
              (0.35
              )
 
 
 11
 **GLOBALOPTIONS
          GROUP, INC. AND SUBSIDIARIES**
 **Notes
          To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **3. 
        Summary of Significant Accounting Policies, continued**
 
 ***Stock
        Based Compensation/Stock Options, continued***
 
 A
        summary
        of the status of the options under the Company’s stock option plans and the
        changes during the nine months ended September 30, 2006 is presented in the
        table below:
  Number
                  ofOptions
              
              Weighted
                  Average
                Exercise
                  PriceBalance,
                  December 31, 2005
              
              
              4,977,472
              
              $
              1.42Granted
              
              
              3,287,334
              
              
              2.14Exercised
              
              
              -
              
              
              -Balance,
                  September 30, 2006
              
              
              8,264,806
              
              $
              1.71
 
  A
        summary
        of the Company’s stock options outstanding and exercisable at September 30, 2006
        is presented in the table below:
  Total
              
              
              Intrinsic
ValueOption
                  Exercise Price
              
              $
              .068
              
              $
              0.600
              
              $
              0.68
              
              $
              0.85
              
              $
              2.01-$2.50Outstanding
              
              
              708,659
              
              
              1,193,824
              
              
              641,471
              
              
              58,824
              
              
              5,659,652
              
              
              8,264,806
              
              $
              3,831,817Weighted
                  average remaining contractual life of options outstanding (in
                  years)
              
              
              0.4
              
              
              0.4
              
              
              0.6
              
              
              6.8
              
              
              4.4
              
              
              3.2Exercisable
              
              
              708,659
              
              
              1,092,901
              
              
              415,904
              
              
              58,824
              
              
              272,496
              
              
              2,548,784
              
              $
              3,402,854
  The
        Company has determined that shares of common stock for future exercises shall
        be
        newly issued shares of stock.
 12
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **3. 
        Summary of Significant Accounting Policies, continued**
 
 ***Stock
        Based Compensation/Stock Options, continued***
 
 A
        summary
        of non-vested options at September 30, 2006 is shown below:
  Non-VestedOptions
              
              Weighted
                  Average
                Grant
                  Date
                Fair
                  ValueNon-vested
                  at January 1, 2006
              
              
              2,723,029
              
              $
              1.47Granted
              
              
              3,287,334
              
              
              1.52Vested
              
              
              (294,341
              )
              
              0.83Forfeited
              
              
              -
              
              
              -Non-vested
                  at September 30, 2006
              
              
              5,716,022
              
              $
              1.51
  
 ***Revenue
        Recognition***
  Revenue
        is recognized as the services are performed pursuant to the applicable
        contractual arrangements. Revenue related to time and materials arrangements
        is
        recognized in the period in which the services are performed. Revenue related
        to
        fixed price arrangements are recognized based upon the achievement of certain
        milestones or progress points within the project plan. The impact of any
        revisions in estimated total revenue and direct contract costs is recognized
        in
        the period in which they become known. Expenses incurred by professional
        staff
        in the generation of revenue are billed to the client and recorded as revenue
        when incurred. For certain foreign accounts, revenues are recognized and
        the
        related expenses are recorded only after the receipt in cash of the revenue
        amounts. The Company incurs no obligations to third parties for expenses
        related
        to these certain foreign accounts until such time that invoiced revenues
        are
        received in cash. Revenues received in advance of when earned are credited
        to
        the deferred revenues account.
 ******
 ***Intangible
        Assets***
  In
        accordance with the requirements of SFAS No. 141 (“SFAS No. 141”), “Business
        Combinations”, the Company recognizes certain intangible assets acquired in
        acquisitions, primarily goodwill, trade names, covenants not to compete,
        and
        client relationships.  In accordance with the provisions of SFAS No.
        142, “Goodwill and Other Intangible Assets”, on a regular basis, the Company
        performs impairment analysis of the carrying value of goodwill and certain
        other
        intangible assets by assessing the recoverability when there are indications
        of
        potential impairment based on estimates of undiscounted future cash flows.
        The
        amount of impairment is calculated by comparing anticipated discounted future
        cash flows with the carrying value of the related asset. In performing this
        analysis, management considers such factors as current results, trends, and
        future prospects, in addition to other economic factors.
 13
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **3. 
        Summary of Significant Accounting Policies, continued**
  ***Deferred
        Financing Costs***
  The
        costs
        incurred in connection with issuance of certain notes payable (See Note 9)
        was
        capitalized to deferred financing costs and was amortized over the term of
        the
        related debt.
 
 ***Recent
        Accounting Pronouncements***
  In
        February 2006, the Financial Accounting Standards Board (“FASB”) issued
        SFAS No. 155 - Accounting for Certain Hybrid Financial Instruments (“SFAS 155”),
        which eliminates the exemption from applying SFAS 133 to interests in
        securitized financial assets so that similar instruments are accounted for
        similarly regardless of the form of the instruments. SFAS 155 also allows
        the
        election of fair value measurement at acquisition, at issuance, or when a
        previously recognized financial instrument is subject to a remeasurement
        event.
        Adoption is effective for all financial instruments acquired or issued after
        the
        beginning of the first fiscal year that begins after September 15, 2006.
        Early adoption is permitted. The adoption of SFAS 155 is not expected to
        have a
        material effect on the Company’s consolidated financial position, results of
        operations or cash flows. ****
  In
        March 2006, the FASB issued SFAS No. 156 - Accounting for Servicing of
        Financial Assets (“SFAS 156”), which requires all separately recognized
        servicing assets and servicing liabilities be initially measured at fair
        value.
        SFAS 156 permits, but does not require, the subsequent measurement of servicing
        assets and servicing liabilities at fair value. Adoption is required as of
        the
        beginning of the first fiscal year that begins after September 15, 2006.
        Early adoption is permitted. The adoption of SFAS 156 is not expected to
        have a
        material effect on the Company’s consolidated financial position, results of
        operations or cash flows.
 
 In
        July
        2006,  the FASB  issued  FASB  Interpretation  No.
        48,  "Accounting  for Uncertainty in Income Taxes - an 
interpretation  of FASB Statement No. 109" ("FIN 48"),  which 
clarifies the accounting  for  uncertainty  in tax
        positions.  This Interpretation  requires  that the Company
        recognize  in its financial  statements,  the impact of a
        tax  position,  if that  position  is more  likely than
        not of being sustained  on  audit,  based  on 
the  technical  merits  of the  position.  The
        provisions of FIN 48 are effective as of the beginning of the
        Company's 2007 fiscal year, with the cumulative effect of the change in
        accounting principle recorded as an adjustment to opening retained
        earnings.  The Company is currently evaluating the impact of adopting
        FIN 48 on its consolidated financial statements.
 
 In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
        No. 157”).  This Statement defines fair value, establishes a framework for
        measuring fair value and expands disclosure of fair value measurements. 
SFAS No. 157 applies under other accounting pronouncements that require or
        permit fair value measurements and accordingly, does not require any new
        fair
        value measurements.  SFAS No. 157 is effective for financial statements
        issued for fiscal years beginning after November 15, 2007.  The
        Company is in the process of evaluating the impact that the adoption of SFAS
        No.
        157 will have on its consolidated results of operations and financial
        condition.
  In
          September 2006, the staff of the SEC issued Staff Accounting Bulletin No.
          108
          ("SAB 108") which provides interpretive guidance on how the effects of
          the
          carryover or reversal of prior year misstatements should be considered
          in
          quantifying a current year misstatement. SAB 108 becomes effective in fiscal
          2007. Adoption of SAB 108 is not expected to have a material impact on
          the
          Company's consolidated financial position, results of operations or cash
          flows.
  ***Reclassification***
  In
            the
            current quarter we have reclassified certain components of our stockholders’
equity section to reflect the elimination of deferred compensation arising
            from
            unvested share-based compensation pursuant to the requirements of Staff
            Accounting Bulletin No. 107, regarding Statement of Financial Accounting
            Standards No. 123(R), “Share-Based Payment.” This deferred compensation was
            previously recorded as an increase to additional paid-in capital with
            a
            corresponding reduction to stockholders’ equity for such deferred compensation.
            This reclassification has no effect on net income or total stockholders’ equity
            as previously reported. The Company will record an increase to additional
            paid-in capital as the share-based payments vest.
 14
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **4.
        Acquisition** **s**
 
 **Acquisition
        of JLWA**
  The
        acquisition of JLWA was made pursuant to a certain Asset Purchase Agreement
        (the
“JLWA Agreement”) dated January 13, 2006, as amended, between GlobalOptions
        Group and JLWA. The aggregate purchase price paid for JLWA’s assets and business
        was $8,404,000, after finalization and payment of the purchase price adjustment
        of $546,000 on June 9, 2006. The aggregate purchase price consisted of a
        cash payment at closing of $3,600,000, a cash payment of $1,857,000 to pay
        off
        JLWA’s line of credit balance and related accrued interest, the issuance of
        819,672 shares of common stock of GlobalOptions Group, valued at $2,000,000,
        a
        4.6% note payable to JLWA of $400,000 due March 9, 2007, and a non-interest
        bearing working capital purchase price adjustment obligation of $546,244.
  The
        assets and liabilities of JLWA have been recorded in the Company’s condensed
        consolidated balance sheet at their fair values at the date of
        acquisition.  As part of the purchase of JLWA on March 10, 2006, the
        Company acquired identifiable intangible assets of approximately
        $4,930,000.  Of the identifiable intangibles acquired, $1,870,000 has been
        assigned to trade names and $3,060,000 to client relationships. The amounts
        of
        these intangibles have been estimated based upon information available to
        management and is subject to change based upon an outside appraisal being
        performed. The acquired intangibles have been assigned definite lives and
        are
        subject to amortization, as described in the table below.
  The
        following table details amortization periods for the identifiable, amortizable
        intangibles:
 
 Intangible
                  Asset Category
              
              Amortization
                  PeriodTrade
                  names
              
              
              10
                  yearsClient
                  relationships
              
              
              3
                  years
 
 The
        following table details the allocation of the final purchase price for the
        acquisition of JLWA, after purchase price adjustment recorded on June 9,
        2006:
  Fair
                  ValueAccounts
                  receivable
              
              $
              4,345,154Prepaid
                  expenses
              
              
              35,154Property
                  and equipment
              
              
              185,235Security
                  deposits
              
              
              64,738Intangible
                  asset - trade names
              
              
              1,870,000Intangible
                  asset - client relationships
              
              
              3,060,000Accounts
                  payable
              
              
              (1,830,599
              )Deferred
                  revenues
              
              
              (116,917
              )Accrued
                  expenses
              
              
              (92,991
              )Net
                  fair values assigned to assets acquired andliabilities assumed
              
              
              7,519,774Goodwill
              
              
              883,766Total
              
              $
              8,403,540
  The
        following presents a summary of the purchase price consideration for the
        purchase of JLWA.
 
 Cash
              
              $
              5,457,296Note
                  payable
              
              
              400,000Working
                  capital purchase price adjustment
              
              
              546,244Value
                  of common stock issued
              
              
              2,000,000Total
                  Purchase Price Consideration
              
              $
              8,403,540
 15
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **4.** **Acquisitions,
        continued**
 
 **Acquisition
        of JLWA, continued**
 
 The
        note
        payable of $400,000 is due March 9, 2007 and bears interest at a rate of
        4.6%
        per annum and is subordinated to the Company’s line of credit (See Note
        8).   On June 8, 2006, in connection with the finalization of the
        working capital adjustment for the purchase of JLWA, the Company recorded
        an
        adjustment of approximately $1,779,000, primarily related to uncollected
        accounts receivable, to reduce the total purchase price to $8,404,000 and
        paid
        the final adjusted note and obligation payable of $546,244. In addition,
        the
        agreement provides for JLWA to obtain up to an additional $15,400,000 in
        earnout
        payments upon the attainment of certain revenue goals subsequent to the closing
        of the transaction and the continued employment of James Lee Witt, the former
        president and chief executive officer or JLWA (See Note 10).
 
 The
        results of operations for JLWA for the period from March 10, 2006 to September
        30, 2006, are reflected in the Company’s results for the three and nine month
        periods ended September 30, 2006 in the accompanying condensed consolidated
        statement of operations.
 
 **Acquisition
        of Safir**
 
 On
        May
        12, 2006 GlobalOptions, a wholly-owned subsidiary of the Company, acquired
        substantially all of the business and assets of Safir, a Delaware limited
        liability company. Safir is a security consulting, investigative and
        intelligence firm headquartered in New York City with seven additional offices
        nationwide.
 
 The
        acquisition was made pursuant to a certain Asset Purchase Agreement (the
“Safir
        Agreement”) dated January 27, 2006, as amended on May 12, 2006. The aggregate
        purchase price paid for Safir’s assets and business was approximately
        $15,300,000 consisting of $6,000,000 in 8% convertible promissory notes paid
        on
        June 29, 2006, $1,000,000 in 4% promissory notes of the Company due on May
        12,
        2007, $6,000,000 in the common stock of GlobalOptions Group, consisting of
        3,000,000 shares at $2.00 per share, payments to retire certain indebtedness
        of
        $1,940,649 of Safir previously advanced and a finders fee of $375,000 paid
        to a
        related party.
 
 The
        $6,000,000 8% convertible promissory note contained a feature that allowed,
        upon
        the election of the conversion option by the holder, for the holder to receive
        a
        premium of 10% of the note, just prior to conversion of the note into common
        stock. The Company has recorded for $600,000 the value of this beneficial
        conversion premium feature as a conversion option liability in accordance
        with
        EITF 00-19 as the number of shares of common stock required to repay the
        note
        were not fixed and determinable. The debt discount was amortized to expense
        over
        the term of the note. As of June 29, 2006, the Company had recorded $367,500
        of
        amortization of the debt discount. On June 29, 2006, the Company repaid this
        debt in full. Upon extinguishment, the Company reclassified the conversion
        option liability to additional paid-in capital and the unamortized debt discount
        $232,500 was adjusted to loss on extinguishment of debt and classified as
        amortization of debt discount on the accompanying condensed consolidated
        statement of operations for the nine months ended September 30, 2006.
  The
        assets and liabilities of Safir have been recorded in the Company’s condensed
        consolidated balance sheet at their fair values at the date of
        acquisition.  As part of the purchase of Safir on May 12, 2006, the Company
        acquired identifiable intangible assets of approximately $1,770,000, consisting
        of a trade name for $420,000, $70,000 for the value of non-servicing agreements
        and $1,280,000 for the value of client relationships.  The amounts of these
        intangibles have been estimated based upon information available to management
        and is subject to change based upon an outside appraisal being performed.
        The
        acquired intangibles have been assigned definite lives and are subject to
        amortization, as described in the table below.
  16
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **4.
        Acquisitions, continued**
 
 **Acquisition
        of Safir, continued**
 
 The
        following table details amortization periods for the identifiable, amortizable
        intangibles:
 
 Intangible
                  Asset Category
              
              Amortization
                  PeriodTrade
                  names
              
              
              5
                  yearsClient
                  relationships
              
              
              5
                  yearsNon-compete
                  agreements
              
              
              3
                  years
 
 The
        following table details the allocation of the purchase price for the acquisition
        of Safir:
  Fair
                  ValueCash
              
              $
              447,115Accounts
                  receivable
              
              
              2,405,773Prepaid
                  expenses
              
              
              107,729Property
                  and equipment
              
              
              180,906Intangible
                  assets - client relationships
              
              
              1,280,000Intangible
                  assets - trade name
              
              
              420,000Intangible
                  assets - non-compete-agreements
              
              
              70,000Other
                  assets
              
              
              48,796Accounts
                  payable
              
              
              (487,383
              )Accrued
                  compensation
              
              
              (393,773
              )Accrued
                  expenses
              
              
              (298,279
              )Net
                  fair values assigned to assets acquired andliabilities assumed
              
              
              3,780,884Goodwill
              
              
              11,534,765Total
              
              $
              15,315,649
  The
        following presents a summary of the purchase price consideration for the
        purchase of Safir.
 
 Cash
              
              $
              1,940,649Notes
                  payable
              
              
              7,000,000Value
                  of common stock issued
              
              
              6,000,000Finders
                  fee paid - cash
              
              
              200,000Finders
                  fee paid - value of common stock issued
              
              
              175,000Total
                  Purchase Price Consideration
              
              $
              15,315,649
 
 The
        results of operations for Safir for the period from May 12, 2006 to September
        30, 2006, are reflected in the Company’s results for the three and nine month
        periods ended September 30, 2006 in the accompanying condensed consolidated
        statement of operations.
 17
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **4.
        Acquisitions, continued**
 
 **Acquisition
        of Secure Source**
 
 On
        May
        12, 2006, the Company acquired substantially all of the business and certain
        assets of Secure Source, a Delaware corporation.
 
 The
        acquisition was made pursuant to a certain Asset Purchase Agreement dated
        May
        12, 2006, (the "Secure Source Agreement"), between the Company, Secure Source,
        Marian E. Nicastro and David W. Nicastro. The aggregate purchase price paid
        for
        Secure Source’s assets and business of $3,250,000 consisted of $750,000 in 5%
        promissory notes due May 12, 2009, $1,500,000 in 3% promissory notes paid
        on
        June 29, 2006, $500,000 in 5% promissory notes due May 12, 2007 and $500,000
        in
        common stock of GlobalOptions Group, consisting of 210,970 shares at $2.37
        per
        share.
 The
        assets and liabilities of Secure Source have been recorded in the Company’s
        condensed consolidated balance sheet at their fair values at the date of
        acquisition.  As part of the purchase of Secure Source on May 12, 2006, the
        Company acquired identifiable intangible assets of approximately $1,111,000,
        consisting of a trade name of $60,000, client relationships of $250,000 and
        the
        value of a non-compete agreement of $801,000.    The amounts of
        these intangibles have been estimated based upon information available to
        management and such amounts have changed, based upon further analysis, since
        the
        Company initially recorded the acquisition upon closing. During the three
        months
        ended September 30, 2006, the Company adjusted the valuation of the intangibles,
        resulting in the reduction of $779,000 and a corresponding increase in the
        amount assigned to goodwill. These amounts are subject to further change
        based
        upon an outside appraisal being performed. The Company, at September 30,
        2006
        reallocated the costs of the intangible assets which were allocated at the
        purchase date, specifically goodwill, client relationships and covenant not
        to compete, based on enhanced information currently available on the fair
        market
        value of the asset at the date of purchase. The condensed consolidated financial
        statements and the tables below reflect the adjusted values of intangible
        assets. The acquired intangibles have been assigned definite lives and are
        subject to amortization, as described in the table below.
 
 The
        following table details amortization periods for the identifiable, amortizable
        intangibles:
 
 Intangible
                  Asset Category
              
              Amortization
                  PeriodTrade
                  names
              
              
              10
                  yearsClient
                  relationships
              
              
              3
                  yearsNon-compete
                  agreements
              
              
              3
                  years
  The
        following table details the allocation of the purchase price for the acquisition
        of Secure Source:
  Fair
                  ValueProperty
                  and equipment
              
              $
              101,459Other
                  assets
              
              
              1,795Intangible
                  asset - non-compete agreement
              
              
              801,000Intangible
                  asset - trade names
              
              
              60,000Intangible
                  asset - client relationships
              
              
              250,000Fair
                  value of liabilities assumed
              
              
              (72,120
              )Net
                  fair values assigned to assets acquired andliabilities assumed
              
              
              1,142,134Goodwill
              
              
              2,070,366Total
              
              $
              3,212,500
 18
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **4.
        Acquisitions, continued**
 
 **Acquisition
        of Secure Source, continued**
 
 
 The
        following presents a summary of the purchase price consideration for the
        purchase of Secure Source.
 
 Notes
                  payable
              
              $
              2,712,500Value
                  of common stock issued
              
              
              500,000Total
                  Purchase Price Consideration
              
              $
              3,212,500
 
 The
        results of operations for Secure Source for the period from May 12, 2006
        to
        September 30, 2006, are reflected in the Company’s results for the three and
        nine month periods ended September 30, 2006 in the accompanying condensed
        consolidated statement of operations.
  **Acquisition
        of Hyperion Risk**
 
 On
        August
        10, 2006, the Company acquired substantially all of the business and assets
        of
        Hyperion Risk, a Florida corporation.
 
 The
        acquisition was made pursuant to a certain Asset Purchase Agreement dated
        August
        10, 2006, (the "Hyperion Risk Agreement"), between the Company and Hyperion
        Risk. The aggregate purchase price paid was $3,782,000, which consisted of
        $2,022,000 in cash, $1,500,000 consisting of 672,645 shares of the common
        stock
        of the Company, valued at $2.23 per share, and the payment by the Company
        of Hyperion Risk's credit line balance of approximately $260,000.
  The
        assets and liabilities of Hyperion Risk have been recorded in the Company’s
        condensed consolidated balance sheet at their fair values at the date of
        acquisition.  As part of the purchase of Hyperion Risk on August 10, 2006,
        the Company acquired identifiable intangible assets of  $687,690,
        consisting of a trade name of $60,000, developed technology of $277,690,
        client
        relationships of $240,000 and the value of a non-compete agreement of
        $110,000.    The amounts of these intangibles have been estimated
        based upon information available to management and is subject to change based
        upon an outside appraisal being performed. The acquired intangibles have
        been
        assigned definite lives and are subject to amortization, as described in
        the
        table below.
 
 The
        following table details amortization periods for the identifiable, amortizable
        intangibles:
 
 Intangible
                  Asset Category
              
              Amortization
                  PeriodTrade
                  names
              
              
              5
                  yearsDeveloped
                  Technology
              
              
              2.5
                  yearsClient
                  relationships
              
              
              5
                  yearsNon-compete
                  agreements
              
              
              3
                  years
 
 19
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **4.**
            **Acquisitions,
                continued** 
 **Acquisition
        of Hyperion Risk - continued**
  The
        following table details the allocation of the purchase price for the acquisition
        of Hyperion Risk:
  Fair
                  ValueCurrent
                  assets
              
              $
              630,753Property
                  and equipment
              
              
              60,958Other
                  assets
              
              
              15,000Intangible
                  asset - non-compete agreement
              
              
              110,000Intangible
                  asset - trade names
              
              
              60,000Intangible
                  asset - developed technology
              
              
              277,690Intangible
                  asset - client relationships
              
              
              240,000Fair
                  value of liabilities assumed
              
              
              (576,669
              )Net
                  fair values assigned to assets acquired and
              
              
              817,732liabilities assumedGoodwill
              
              
              2,963,894Total
              
              $
              3,781,626
 
 
 The
        following presents a summary of the purchase price consideration for the
        purchase of Hyperion Risk:
 
 Cash
                  paid
              
              $
              2,281,626Value
                  of common stock issued
              
              
              1,500,000Total
                  Purchase Price Consideration
              
              $
              3,781,626
 
 
 The
        results of operations for Hyperion Risk for the period from August 10, 2006
        to
        September 30, 2006, are reflected in the Company’s results for the three and
        nine month periods ended September 30, 2006 in the accompanying condensed
        consolidated statement of operations.
  20
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **4.
        Acquisitions, continued**
 
 **Unaudited
        Pro-Forma Financial Information**
 
 The
        following table presents the unaudited pro-forma combined results of operations
        of the Company with CBR, JLWA, Safir, Secure Source and Hyperion Risk added
        in
        for the periods preceding the acquisition of their respective net assets.
        The
        respective acquisition dates are August 14, 2005 for CBR, March 10, 2006
        for
        JLWA, May 12, 2006 for both Safir and Secure Source and August 10, 2006 for
        Hyperion Risk.
 
 For
                  the Three Months
                Ended
                  September 30,
              
              For
                  the Nine Months
                Ended
                  September 30,2006
              
              2005
              
              2006
              
              2005Revenues
              
              $
              21,291,541
              
              $
              12,031,080
              
              $
              59,271,308
              
              $
              34,145,401Net
                  loss available to
                common
                  stockholders
              
              $
              (125,283
              )
              $
              (981,562
              )
              $
              (34,220,108
              )
              $
              (3,834,726
              )Pro-forma
                  basic and diluted net loss per common share
              
              $
              (0.01
              )
              $
              (0.05
              )
              $
              (1.76
              )
              $
              (0.24
              )Pro-forma
                  weighted average
                common
                  shares outstanding -
                basic
                  and diluted
              
              
              23,859,029
              
              
              19,136,553
              
              
              19,400,631
              
              
              15,884,767
  The
        pro
        forma combined results are not necessarily indicative of the results that
        actually would have occurred if the CBR, JLWA, Safir, Secure Source and Hyperion
        Risk acquisitions had been completed as of the beginning of 2006 or 2005,
        nor
        are they necessarily indicative of future consolidated results.
  21
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **5. 
        Intangible Assets**
  Intangible
        assets consist of amounts related to the acquisitions of CBR, JLWA, Safir,
        Secure Source and Hyperion Risk as well as an additional $40,000 for a client
        list purchased on February 28, 2006.  During the three and nine months
        ended September 30, 2006, the Company recorded a purchase price adjustment
        in
        connection with the acquisition of CBR and the favorable settlement of a
        contingent obligation, resulting in the reduction of goodwill in the amount
        of
        $85,000. At September 30, 2006, intangible assets are comprised of the
        following:
  Trade
                  names
              
              $
              2,490,000Developed
                  technology
              
              
              329,690Non-compete
                  agreements
              
              
              1,440,222Client
                  relationships
              
              
              5,380,0009,639,912Less: accumulated amortization
              
              
              (1,349,974
              )Intangible
                  assets, net
              
              $
              8,289,938
 
 The
        estimated amortization of amortizable intangible assets for the five years
        ending September 30, 2011 is as follows:
  For
                  the Years
                Ending September
                  30,
              
              Total
              
              Trade
                  Names
              
              Developed
                Technology
              
              Non-CompeteAgreements
              
              Client
                Relationships2007
              
              $
              2,395,400
              
              $
              305,000
              
              $
              128,409
              
              $
              477,991
              
              $
              1,484,0002008
              
              
              2,378,219
              
              
              305,000
              
              
              166,195
              
              
              423,024
              
              
              1,484,0002009
              
              
              1,434,888
              
              
              305,000
              
              
              -
              
              
              215,971
              
              
              913,9182010
              
              
              756,611
              
              
              302,940
              
              
              -
              
              
              3,836
              
              
              449,8362011
              
              
              483,959
              
              
              254,874
              
              
              -
              
              
              -
              
              
              229,085Totals
              
              $
              7,449,077
              
              $
              1,472,814
              
              $
              294,604
              
              $
              1,120,822
              
              $
              4,560,838
 
 
 During
        the three and nine months ended September 30, 2006, the Company recorded
        amortization expense related to the acquired amortizable intangibles of
        $585,791, and $1,349,974, respectively.  During
        both the three and nine months ended September 30, 2005, the Company recorded
        amortization expense related to acquired intangibles of $58,589.For the
        three and nine month periods ended September 30, 2006, the Company recorded
        a
        charge to general and administration costs of approximately $116,000 for
        the
        impairment of a non-compete agreement.
  The
        weighted average amortization period for amortizable intangibles is 4.6 years
        and has no residual value.
 
 22
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **6. 
        Property and Equipment**
  At September 30, 2006, property and equipment is comprised of the following:
  Computer
                  and equipment
              
              $
              528,834Furniture
                  and fixtures
              
              
              261,021Automobiles
              
              
              162,029Leasehold
                  improvements
              
              
              217,7691,169,653Less:
                  accumulated depreciation and amortization
              
              
              (487,640
              )Property
                  and equipment, net
              
              $
              682,013
  Depreciation
        and amortization of property and equipment for the three and nine months
        ended
        September 30, 2006 was $66,560, and $144,053, respectively, and for the three
        and nine months ended September 30, 2005 was $20,343 and $41,509,
        respectively.
  
 **7.**
            **Accrued
                Compensation and Related
                Benefits** 
 ****   At
        September 30, 2006, accrued compensation and related benefits is comprised
        of
        the following:
  Accrued
                  bonuses
              
              $
              1,425,038Accrued
                  payroll and commissions
              
              
              731,812Accrued
                  employee benefits
              
              
              414,165Total
                  accrued compensation and related benefits
              
              $
              2,571,015
 
 
 **8. 
        Line of Credit**
  During
        November 2003, GlobalOptions signed a $1,000,000 line of credit with a financial
        institution with an interest rate of prime plus 1.25%, secured by accounts
        receivable and subject to monthly covenants.
 
 In
        conjunction with the establishment of this line of credit, the financial
        institution was granted warrants to purchase 29,411 shares of the Company’s
        common stock at $0.60 per share.  The value of these warrants, computed
        using the Black-Scholes option pricing model was de-minimus.  These
        warrants were exercised on June 24, 2005 on a cashless basis, and were exchanged
        for 20,579 shares of the Company’s common stock.
  On
        May 4,
        2005, this line of credit agreement was amended to increase the facility
        amount
        to $1,875,000.  This line of credit was renewed on February 3, 2006 and
        expires on February 3, 2007.   During March 2006, the Company entered
        into an agreement to guarantee the obligations of GlobalOptions under this
        line
        of credit.
 
 Effective
        on October 12, 2006, this line of credit was amended to increase the facility
        amount to $5,000,000 (See Note 15). There was no balance outstanding under
        the
        line of credit at September 30, 2006.
  23
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **9. 
        Notes Payable**
 ****
 On
        March
        10, 2006, the Company closed the private placement of an aggregate of
        $12,500,000 in principal amount of 8% promissory notes due on June 30,
        2006.  Pursuant to the notes, as amended upon the consummation of a
        qualified follow-on financing, holders were required to exchange these
        promissory notes through the issuance of shares of the Company’s common stock
        equal to 115% of the principal amount of the notes being exchanged, plus
        accrued
        and unpaid principal, subject to the terms of the agreement.  Under the
        promissory note agreements, the Company may extend the maturity for two
        successive 30 day periods. In connection with raising these funds, the Company
        incurred a total fee of approximately $416,000 to Burnham Hill Partners (“BHP”)
        (See Note 11) and others, for which $306,000 was paid in cash and $110,000
        of
        which Company issued additional 8% promissory notes. The holders of these
        promissory notes subordinated their interest to the Company’s obligations to the
        bank under the line of credit facility.
 
 On
        May
        12, 2006, the Company closed on an additional $2,000,000 in principal amount
        of
        their 8% promissory notes which were due on June 30, 2006, the initial closing
        of which took place on March 10, 2006.  The terms of these notes required
        the holder to make the election to exchange the notes for the Company’s capital
        stock, subject to the terms of the agreement. In connection herewith, the
        Company incurred an obligation to BHP for financing costs aggregating $140,000,
        of which $100,000 is payable in cash.  The remaining $40,000 was
        payable in additional promissory notes.
 
 On
        June
        28, 2006, the Company closed on an additional $30,550,000 in principal amount
        of
        their 8% promissory notes which were due on June 30, 2006, the initial closing
        of which took place on March 10, 2006.  The Company could convert these
        promissory notes at a 115% conversion premium into common stock of the Company.
        In connection herewith, the Company incurred an obligation to BHP for financing
        costs aggregating $2,138,500, of which $1,527,500 was paid in cash.  The
        remaining $611,000 was paid in additional promissory notes.
 
 On
        June
        29, 2006, the notes issued on March 10, 2006, May 12, 2006 and June 28, 2006,
        with an aggregate principal amount of $45,811,000 and aggregate accrued interest
        of $339,731, were exchanged for 53,073 units of the Company’s Convertible
        Preferred Stock - Series B (See Note 12 Convertible Preferred Stock - Series
        B).
  In
        accordance with (“EITF”) 00-27, the notes issued on June 28, 2006 are considered
        to have a conversion premium feature as the premium is equal to 115% of the
        principal amount of the notes. The Company recorded a debt discount of
        $6,922,602 relating to the conversion premium. On June 29, 2006 these notes
        were
        exchanged for units of Convertible Preferred Stock Series B. The exchange
        of
        these notes caused the debt discount to be fully amortized.
  The
        Company incurred deferred financing costs in conjunction with the notes payable
        issued on March 10, 2006, May 12, 2006 and June 28, 2006. Total cash fees
        associated with these note issuances were $1,933,500. In addition, $761,000
        was
        paid in additional promissory notes. The aggregate of $2,694,500 of deferred
        financing costs were amortized through June 29, 2006, the date the notes
        were
        exchanged for units of Convertible Preferred Stock Series B (See Note 12).
        Of
        the total, $0 and $2,694,500 were amortized during the three and nine months
        ended September 30, 2006, respectively.
 24
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **10. 
        Due to Former Members of JLWA for Earnout**
  In
        connection with the purchase of JLWA, the JLWA Agreement provides for JLWA
        to
        obtain up to an additional $15,400,000 in earnout payments upon the attainment
        of certain revenue goals subsequent to the closing of the transaction and
        the
        continued employment of James Lee Witt.
  As
        set
        forth in the JLWA Agreement, the Company has agreed to pay the former members
        of
        JLWA (the “Sellers”) an earnout (the “Earnout”), based upon the achievement of
        certain revenue goals subsequent to March 10, 2006 (the “Closing
        Date”).
  For
        the
        twelve (12) month periods ending on the first, second, third and fourth
        anniversaries of the Closing Date, the Sellers shall be paid such Earnout
        based
        upon the achievement of certain revenues, as set forth below.  The total
        amount of the Earnout shall be limited to a cumulative amount of $15,400,000.
  The
        Earnout shall be paid to Seller within sixty (60) days of the dates of the
        respective anniversaries of the Closing Date as described below:
  • the
        first $4,000,000 of the Earnout shall be paid in cash; and
  •
the
        remainder of the Earnout shall be paid 50% in cash and 50% in shares of common
        stock of the Company (which number of shares shall be calculated by dividing
        the
        total amount of the Earnout payable in shares of common stock by the closing
        price of the Company’s common stock on the last day of each of the respective
        Earnout periods).
  The
        Earnout is payable based upon revenue generated by the JLWA division of the
        Company, so long as such revenue generates a gross margin of at least 50%,
        and
        may include revenues generated by certain acquisitions of the JLWA division
        of
        the Company, as provided in the agreement.  Revenues of the JLWA division
        whereupon the gross margin falls below 50% are not eligible for the Earnout.
  The
        Earnout is computed by the application of the percentages to JLWA earned
        revenues according to the table, below:
 Related
                    Revenue Earnout Periods
                
                Percentage
                      Appliedto JLWA earned RevenuesMarch
                    10, 2006 - March 9, 2007Up
                    to $6,000,000
                
                
                0
                %Between
                    $6,000,000 and $16,000,000
                
                
                40
                %Between
                    $16,000,000 and $36,000,000
                
                
                10
                %March
                    10, 2007 - March 9, 2008Up
                    to $7,000,000
                
                
                0
                %Between
                    $7,000,000 and $38,000,000
                
                
                10
                %March
                    10, 2008 - March 9, 2009Up
                    to $8,000,000
                
                
                0
                %Between
                    $8,000,000 and $40,000,000
                
                
                10
                %March
                    10, 2009 - March 9, 2010Up
                    to $9,000,000
                
                
                0
                %Between
                    $9,000,000 and $40,000,000
                
                
                10
                %
  At
        September 30, 2006, the amount due to the former member of JLWA for the Earnout
        liability due under the Agreement was $4,075,272.
 25
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **11. 
        Commitments**
  ***Employment
        Agreements***
 
 Concurrently
        with our acquisition of JLWA, in March 2006, GlobalOptions entered into a
        four
        year employment agreement with James Lee Witt. Pursuant to the agreement,
        Mr.
        Witt became the Chief Executive Officer of the GlobalOptions/James Lee Witt
        Division and agreed to perform such other duties and responsibilities as
        the
        Board of Directors may assign, and has agreed to devote his full time to
        GlobalOptions at a salary of $300,000 per year and a discretionary annual
        bonus.
        The employment agreement may be terminated for cause by GlobalOptions, upon
        the
        death or disability of the executive, or upon 30-days’ notice by either party.
        In the event GlobalOptions terminates the employment agreement without cause,
        it
        is required to pay Mr. Witt his base salary and certain benefits for twelve
        months following termination. The employment agreement also contains non-compete
        and non-solicitation provisions for 12 months following termination, as well
        as
        confidentiality provisions.
  In
        May 2006, concurrently with the Company’s acquisition of Safir Rosetti,
        GlobalOptions entered into a three year employment agreement with Howard
        Safir,
        the former CEO of Safir. Pursuant to the agreement, Mr. Safir became the
        Vice
        Chairman of the Company and Chief Executive Officer of the division known
        as
        GlobalOptions/Safir Rosetti and agreed to perform such other duties and
        responsibilities as the Board of Directors may assign, and has agreed to
        devote
        his full time to GlobalOptions at a salary of $300,000 per year and a
        discretionary annual bonus. The employment agreement may be terminated for
        cause
        by GlobalOptions, upon the death or disability of the executive, or upon
        30-days’ notice by either party. In the event GlobalOptions terminates the
        employment agreement without cause during the initial term, it is required
        to
        pay Mr. Safir his base salary and certain benefits through March 21, 2009.
        The
        employment agreement also contains non-compete and non-solicitation provisions
        for 12 months following termination, as well as confidentiality
        provisions.
 
 In
        May
        2006, concurrently with the Company’s acquisition of Safir Rosetti,
        GlobalOptions entered into a three year employment agreement with Joseph
        Rosetti, the former President of Safir. Pursuant to the agreement, Mr. Rosetti
        became the President of the division known as GlobalOptions/Safir Rosetti
        and
        agreed to perform such other duties and responsibilities as the Board of
        Directors may assign, and has agreed to devote his full time to GlobalOptions
        at
        a salary of $200,000 per year and a discretionary annual bonus. The employment
        agreement may be terminated for cause by GlobalOptions, upon the death or
        disability of the executive, or upon 30-days’ notice by either party. In the
        event GlobalOptions terminates the employment agreement without cause during
        the
        initial term, it is required to pay Mr. Rosetti his base salary and certain
        benefits through March 21, 2009. The employment agreement also contains
        non-compete and non-solicitation provisions for 12 months following termination,
        as well as confidentiality provisions.
  26
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **11. 
        Commitments, continued**
  ***Employment
        Agreements, continued***
 
 In
        May
        2006, concurrently with the Company’s acquisition of Secure Source,
        GlobalOptions entered into a three year employment agreement with David W.
        Nicastro, the former President and CEO of Secure Source. Pursuant to the
        agreement, Mr. Nicastro became the senior Executive Officer of the division
        known as Global Options/Secure Source and agreed to perform such other duties
        and responsibilities as the Board of Directors may assign, and has agreed
        to
        devote his full time to GlobalOptions at a salary of $180,000 per year and
        a
        discretionary annual bonus up to $50,000. The employment agreement may be
        terminated for cause by GlobalOptions, upon the death or disability of the
        executive, or upon 30-days’ notice by either party. In the event GlobalOptions
        terminates the employment agreement without cause, it is required to pay
        Mr.
        Nicastro his base salary and certain benefits for two months following
        termination. The employment agreement also contains non-compete and
        non-solicitation provisions for 12 months following termination, as well
        as
        confidentiality provisions.
  In
        August
        2006, concurrently with the Company’s acquisition of Hyperion Risk, the Company
        entered into a three year employment agreement with Franklin B. Pinder III,
        the
        former President and CEO of Hyperion Risk. Pursuant to the agreement, Mr.
        Pinder
        became the Southeast Regional Vice President of GlobalOptions and agreed
        to
        perform such other duties and responsibilities as the Board of Directors
        may
        assign and has agreed to devote his full time to GlobalOptions at a salary
        of
        $170,000 per year and a discretionary annual bonus up to $60,000. The employment
        agreement may be terminated for cause by GlobalOptions, upon death or disability
        of the executive, or upon 30-day’s notice by either party. In the event
        GlobalOptions terminates the employment agreement without cause, it is required
        to pay Mr. Pinder his base salary and certain benefits for a period equal
        to 50%
        of the remaining amount due under the term of the employment agreement. The
        employment agreement also contains non-compete and non-solicitation provisions
        for 12 months following termination, as well as confidentiality provisions.
        In
        addition, Mr. Pinder is eligible for a separate special bonus for the years
        2006, 2007 and 2008, during which the Company will pay Mr. Pinder 10% of
        the
        amount of certain revenue increases achieved over a defined revenue base,
        as
        defined in the agreement. The amount which Pinder may earn under this agreement
        over the full term is capped at $1,200,000 and is payable annually, fifty
        percent in cash and fifty percent in the common stock of the Company. At
        September 30, 2006, in connection with this obligation, the Company has recorded
        $36,000 as accrued compensation and benefits.  The maximum amounts payable
        under the special bonus are outlined below:
 
 Term
              
              Revenue
                  Base
              
              Revenue
                  Increase OverBase
                  Eligible for BonusYear
                  1
              
              $
              5,800,000
              
              $
              1,000,000Year
                  2
              
              $
              6,800,000
              
              $
              4,000,000Year
                  3
              
              $
              12,800,000
              
              $
              7,000,000
 
 
 ***Consulting
        Agreements***
  On
        March
        9, 2006, the Company entered into an agreement with BHP , a division of Pali
        Capital, Inc. to act as its placement agent in connection the private placement
        of certain promissory notes payable (See Note 9).   In connection with
        this agreement, the Company has agreed to pay BHP a fee of 7% of certain
        of the
        gross proceeds received in connection with the issuance of the promissory
        notes
        payable.
 
 In
        addition, on March 14, 2006, the Company entered into a financial advisory
        agreement with BHP, with a term of nine months.   Under this
        agreement, BHP has agreed to advise the Company in regard to potential strategic
        transactions.   Under this agreement, the Company has agreed to issue
        to BHP a common stock warrant to purchase 250,000 shares, exercisable at
        $2.50
        per share to compensate BHP.  These warrants shall have a term of five
        years, a cashless exercise provision and standard weighted average anti-dilution
        protection and piggyback registration rights.  The value of these warrants
        was approximately $388,000 utilizing the Black Scholes option pricing model
        with
        the following assumptions: 0% dividend yield, 87% expected
        volatility, 4.77% risk-free rate and a five year expected life.  Stock
        based compensation expense of $130,000 and $283,000 respectively has been
        recognized related to these warrants for the three and nine months ended
        September 30, 2006. For a period of twelve months from the date of this
        agreement, should the Company request the assistance of BHP, then in connection
        with certain transactions, the Company will pay to BHP a fee of 3% of the
        aggregate transaction value.
  27
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **11.**
            **Commitments,
                continued**  ***Consulting
        Agreements***
 
 Through
        September 30, 2006, BHP was paid aggregate consideration of $2,694,500 in
        connection with certain private placements of debt securities (See Note 9),
        including $416,000 ($306,000 of cash and $110,000 of notes), $140,000 ($100,000
        of cash and $40,000 of notes) and $2,138,500 ($1,527,500 of cash and $611,000
        of
        notes).
 
 ***Operating
        Leases***
  In connection with the purchases of JLWA, Safir, Secure Source, and Hyperion
        Risk, GlobalOptions assumed the obligations for various office leases. Such
        lease obligations expire at various dates through June 2015.
 
 Future
        minimum lease payments under these leases are as follows:
  For
                  the Year Ending September 30,2007
              
              $
              1,243,4062008
              
              
              1,094,6732009
              
              
              983,9822010
              
              
              953,6482011
              
              
              636,586Thereafter
              
              
              1,204,742Total
              
              $
              6,117,037
 
 ****** **12.** ****** **Stockholders’
        Equity**
  ***Common
        Stock and Stock Options***
  On
        March
        10, 2006, in connection with the Company’s purchase of JLWA, the Company issued
        819,672 shares of common stock, valued at $2,000,000 (See Note 4) and granted
        222,222 options for the purchase of common stock at an exercise price of
        $2.25
        per share to various former employees of JLWA.  The options have a five
        year term, vest ratably upon the first, second and third anniversary of the
        date
        of grant and have a value of approximately $351,000 utilizing the Black Scholes
        option pricing model (also See Note 3).   Of the total option value,
        $29,465 and $65,806 were amortized during the three and nine months ended
        September 30, 2006, respectively.
 
 On
        April
        27, 2006, GlobalOptions Group granted, in the aggregate, options for the
        purchase of 123,000 shares of GlobalOptions Group common stock at an exercise
        price of $2.20 per share, consisting of options for the purchase of 17,000
        shares granted to certain employees of GlobalOptions and options for the
        purchase of 106,000 shares granted to certain members of the Company’s advisory
        boards in exchange for services. The options granted to employees have a
        five
        year term and vest ratably upon the first, second and third anniversary of
        the
        date of grant. The options granted to the members of the advisory boards
        have a
        five year term and vest ratably at the end of each of the four quarterly
        periods
        following the date of grant. In the aggregate, these options have a value
        of
        approximately $213,000 utilizing the Black-Scholes option pricing
        model with the following assumptions used: expected life of five years,
        volatility of 87%, dividends of 0%, and a risk free interest rate of $4.95%.
        Of
        the total option value, $51,000 and $102,000 respectively was amortized during
        the three and nine months ended September 30, 2006, respectively.
 
 During
        April 2006 and June 2006, the Company issued 58,539 shares of common stock
        valued at $117,078 to consultants who have provided prior services to the
        Company.
  28
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 ****** **12.** ****** **Stockholders’
        Equity, continued**
  ***Common
        Stock and Stock Options, continued***
 
 On
        May
        12, 2006, GlobalOptions Group granted, in the aggregate, options for the
        purchase of 485,075 and 373,134 shares of GlobalOptions Group common stock
        at an
        exercise price of $2.01 per share, from the 2005 Plan, to employees and officers
        of Safir and Secure Source, respectively.  These options have a five year
        term and for Safir, vest ratably upon the first, second, third and fourth
        anniversaries of the date of grant and for Secure Source, vest ratably upon
        the
        first, second and third anniversaries of the date of grant.  In the
        aggregate, these options have a value of approximately $1,224,000 utilizing
        the
        Black-Scholes option pricing model with the following assumptions used: expected
        life of five years, volatility of 87%, dividends of 0% and a risk-free interest
        rate of 5.08%. Of the total option value, $89,000 and $133,000 respectively
        was
        amortized during the three and nine months ended September 30, 2006,
        respectively. In addition, on May 12, 2006, GlobalOptions Group issued 3,000,000
        and 210,970 shares of GlobalOptions Group common stock to the sellers of
        Safir
        and Secure Source, which were valued at $6,000,000 and $500,000, respectively
        (See Note 4).
 
 On
        June
        10, 2006, the Company issued 87,061 shares of common stock, valued at $175,000,
        to a service provider in connection with the conversion acquisition of Safir.
  On
        June
        12, 2006, GlobalOptions Group granted, in the aggregate, from the 2006 Plan,
        options for the purchase of 1,840,000 shares of GlobalOptions Group common
        stock
        at an exercise price of $2.20 per share, consisting of options for the purchase
        of an aggregate of 1,000,000 shares granted to the Company’s Chief Executive
        Officer and 500,000 shares to Company’s Chief Financial Officer, who is a
        consultant to the Company and 340,000 shares to members of the Company’s board
        of directors.  The options granted to the Company’s officers have a five
        year term and vest ratably upon the first, second and third anniversary of
        the
        date of grant.   The options granted to the members of the board of
        directors have a five year term and vest ratably at the end of each of the
        four
        quarterly periods following the date of grant. In the aggregate, these options
        originally had a value of approximately $2,868,000 utilizing the Black-Scholes
        option pricing model with the following assumptions used: expected life of
        five years, volatility of 87%, dividends of 0% and a risk-free interest rate
        of
        4.95%. Of the total option value, approximately $327,000 and $383,000 was
        amortized during the three and nine months ended September 30, 2006,
        respectively.
  During
        the three and nine months ended September 30, 2006, the Company issued 525,000
        and 647,500 shares of common stock in connection with the conversion of 1,050
        and 1,295 shares of Series A convertible preferred stock.
 
 On
        August
        9, 2006, in connection with the Company’s approval of its 2006 Stock Option
        Plan, the Company filed a Registration Statement on Form S-8 with the Securities
        and Exchange Commission to register 15,000,000 shares of common stock for
        issuance in its stock option plan.
 
 On
        August
        10, 2006, GlobalOptions Group granted, in the aggregate, options for the
        purchase of  243,903
        shares of GlobalOptions Group common stock at an exercise price of $2.01
        per
        share, from the 2006 Plan, to employees and officers of Hyperion Risk. 
These options have a five year term and vest ratably upon the first, second
        and
        third anniversaries of the date of grant.  In the aggregate, these options
        have a value of approximately $332,000 utilizing the Black-Scholes option
        pricing model  with the following assumptions used: expected life of five
        years, volatility of 87%, dividends of 0% and a risk-free interest rate of
        4.86%. Of the total option value, $10,000 was amortized during both the three
        and nine months ended September 30, 2006, respectively.
  29
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 ****** **12.** ****** **Stockholders’
        Equity, continued**
 
 ***Common
        Stock and Stock Options, continued***
 
 During
        the three and nine months ending September 30, 2006, the values of stock
        options
        granted to consultants was re-valued on a mark to market basis and accordingly,
        for the three and nine months ended September 30, 2006, the Company recorded
        a
        benefit of approximately $469,000 and $394,000, respectively to
        general and administrative expense.
 
 
 ***Convertible
        Preferred Stock - Series B***
  On
        June
        29, 2006, the Company authorized the designation of a total of 60,000 shares
        as
        Series B convertible preferred stock.
  On
        June
        29, 2006, in a private placement notes in the amount of $45,811,000 and accrued
        interest of $339,731 were exchanged for 53,073 units, valued at $1,000 per
        unit
        for a total value of approximately $53,073,000.  Each unit consisted of one
        share of Convertible Preferred Stock Series B and a detachable, transferable
        series B-1 warrant to purchase 175 shares of common stock at $2.15 per
        share and a detachable, transferable warrant series B-2 to purchase
        175 shares at $2.85 per share.
  ***Optional
        Conversion***
  Holders
        of Series B convertible preferred stock will be entitled at any time to convert
        their shares of Series B convertible preferred stock into the Company’s common
        stock, without any further payment. Each share of Series B convertible preferred
        stock is initially convertible into 500 shares of common stock at a conversion
        price of $2.00. The number of shares of the Company’s common stock issuable upon
        conversion of the Series B convertible preferred stock is subject to adjustment
        upon the occurrence of certain events, including, among others, a stock split,
        reverse stock split or combination of the Company’s common stock; an issuance of
        common stock or other securities of the company as a dividend or distribution
        on
        the Company’s common stock; a reclassification, exchange or substitution of the
        Company’s common stock; or a capital reorganization of the Company. In the event
        that the Company issues any shares of common stock or common stock equivalents
        in a private placement, secondary offering or shelf offering for cash
        consideration at a price less than $2.00 per share of common stock, the
        conversion price will be reduced based on weighted average anti-dilution
        protections subject to customary carve outs, but in no event will the conversion
        price be less than $.765 per share.
 
 ***Mandatory
        Conversion***
  Subject
        to an effective Registration Statement, beginning 12 months from the closing
        date of the offering of the Series B convertible preferred stock, if the
        closing
        bid price of the common stock exceeds $4.50 and trading volume of the Company’s
        common stock is not less than 100,000 shares for at least fifteen trading
        days
        out of a period of twenty (20) consecutive trading days, the Company may
        require
        the conversion of the Series B convertible preferred stock into shares of
        common
        stock at the applicable conversion price. In the event a holder of Series
        B
        convertible preferred stock is prohibited from converting into common stock
        under this provision due to the 4.99% ownership limitation discussed below,
        the
        excess portion of the Series B convertible preferred stock shall remain
        outstanding, but shall cease to accrue a dividend.
 
 30
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **12.** ****** **Stockholders’
        Equity, continued**
 
 ***Registration
        Rights***
 
 EITF
        Issue No. 05-4 “The Effect of a Liquidated Damages Clause on a Freestanding
        Financial Instrument Subject to EITF Issue No. 00-19, ‘Accounting for Derivative
        Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
        Stock” (“EITF No. 05-4”) addresses financial instruments, such as stock purchase
        warrants, which are accounted for under EITF 00-19 that may be issued at
        the
        same time and in contemplation of a registration rights agreement that includes
        a liquidated damages clause. The consensus of EITF No. 05-4 has not been
        finalized. On June 29, 2006, the Company completed a private placement of
        convertible notes and entered into registration rights and warrant agreement
        in
        connection with and following the private placement. The Company views its
        registration rights agreement as a free standing financial instrument that
        includes liquidated damages which could be deemed substantial. Accordingly
        the
        Company views that the interpretive guidance in EITF Issue No. 05-4, view
        C,
        provides the best fit for its circumstances and would require a company,
        in
        certain circumstances to record a derivative liability. However due to various
        factors including the good filing history of the Company, the lower likelihood
        of a penalty for liquidated damages relating to the requirement by the Company
        to file the registration statement related to the warrants, to have the
        registration statement declared effective and remain effective, the exposure
        to
        this registration rights damages was deemed to be de minimus and therefore
        no
        liability was recorded in the condensed consolidated financial
        statements.
 ******
 ***Limitations
        on Conversion*** **
  Each
        holder of Series B convertible preferred stock may not convert his shares
        into
        the Company’s common stock such that the number of shares of the Company’s
        common stock issued after the conversion would exceed, when aggregated with
        all
        other shares of the Company’s common stock owned by such holder at such time, in
        excess of 4.99% of the then issued and outstanding shares of the Company’s
        common stock.
 
 ***Voting
        Rights***
  Holders
        of Series B convertible preferred stock are entitled to vote their shares
        on an
        as-if-converted to common stock basis, and will vote together with the holders
        of the common stock, and not as a separate class. Holders of Series B
        convertible preferred stock will also have any voting rights to which they
        are
        entitled by law.
  ***Liquidation
        Rights***
  In
        the
        event of any voluntary or involuntary liquidation, dissolution or winding-up
        of
        the Company, holders of Series B convertible preferred stock will be entitled
        to
        receive out of assets of the Company available for distribution to the Company’s
        stockholders, before any distribution is made to holders of the common
        stock, liquidating distributions in an amount equal to $1,000 per share.
        After payment of the full amount of the liquidating distributions to which
        the
        holders of the Series B convertible preferred stock are entitled, holders
        of the
        Series B convertible preferred stock will receive liquidating distributions
        pro
        rata with holders of the Company’s Series A convertible preferred stock and
        holders of the common stock, based on the number of shares of common stock
        into
        which the Series B convertible preferred stock is convertible at the conversion
        price then in effect.
 31
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **12.** ****** **Stockholders’
        Equity, continued**
 
 ***Dividends***
  Commencing
        18 months from the issuance date of June 29, 2006, dividends accumulate at
        the
        rate of 6% per annum for the first 12 months and 8% per annum thereafter.
        Dividends are payable in cash or in shares of the common stock at the holder’s
        election. To the extent that any dividends are declared on the common stock,
        holders of Series B convertible preferred stock will be entitled to receive
        such
        dividends on an as-if-converted basis. No dividends may be declared or paid
        on
        junior securities until the dividend on the Series B convertible preferred
        stock
        is paid in full.
  ***Adjustments***
  In
        the
        event that the Company issues any shares of common stock or common stock
        equivalents in a private placement, secondary offering or shelf offering
        for
        cash consideration at a price less than the current warrant exercise price
        then
        in effect, the warrant exercise price will be reduced based on weighted average
        anti-dilution protections subject to customary carve outs. Additionally,
        the
        warrants contain provisions that protect the holders thereof against dilution
        by
        adjustment of the purchase price in certain events, such as stock dividends,
        stock splits, and other similar events.
  The
        holders of any type of warrant will not possess any voting or other rights
        as a
        stockholder of our company unless and until the holder exercises the
        warrant.
 
 ***Series
        B Convertible Preferred Stock - Beneficial Conversion Feature and Deemed
        Dividend***
 
 At
        June
        29, 2006, the date of issuance, the fixed conversion price of the Series
        B
        convertible preferred stock of $2.00 represented a discount to the market
        value
        of the Company’s common stock, which was at a quoted market price of $2.20 per
        share. In accordance with EITF 00-27, “Application of Issue 98-5 to Certain
        Convertible Instruments” and EITF 98-5, “Accounting for Convertible Securities
        with Beneficial Conversion Features or Contingently Adjusted Conversion Ratios”,
        the Company determined the relative fair value of the warrants and the
        convertible preferred stock and allocated the proceeds received on a relative
        fair value basis. The fair value of the warrants was calculated using the
        Black-Scholes option pricing model with the following assumptions: dividend
        yield of 0%, expected volatility of 87%, risk-free interest rate of 5.21%
        and an
        expected term of two and a half years. Based upon this calculation, the
        effective conversion price of the Series B convertible preferred stock was
        determined to be $1.28 per common share, resulting in a beneficial conversion
        feature for a deemed dividend of $24,413,362 for the nine months
        ended.
  ***Warrants
        (Series B-1 and Series B-2)***
  Each
        Series B-1 warrant, of which 9,287,835 were issued in the closing of our
        Series
        B convertible preferred stock offering, entitles the holder thereof to purchase
        shares of our common stock at an exercise price of $2.15 per share from the
        date
        of issuance until the fifth anniversary thereof. Each Series B-2 warrant,
        of
        which 9,287,835 were also issued in the closing of our Series B convertible
        preferred stock offering, entitles the holder thereof to purchase shares
        of our
        common stock at an exercise price of $2.85 per share from the date of issuance
        until the fifth anniversary thereof. In the aggregate, these warrants have
        a
        fair value of approximately $20,800,000 utilizing the Black-Scholes option
        pricing model with the following assumptions used: expected life 2.5 years,
        volatility 87%, 0% dividends and a risk-free interest rate 5.21%.
 32
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **12.** **Stockholders’
        Equity, continued**
 
 ***Warrants
        (Series B-1 and Series B-2), continued***
 
 The
        Series B-1 and Series B-2 warrants share the following features:
  In
        the
        event of issuance of any shares of the Company’s common stock or common stock
        equivalents in a private placement, secondary offering or shelf offering
        for
        cash consideration at a price less than the current warrant exercise price
        then
        in effect, the warrant exercise price will be reduced based on weighted average
        anti-dilution protections subject to customary carve outs. Additionally,
        the
        warrants contain provisions that protect the holders thereof against dilution
        by
        adjustment of the purchase price in certain events, such as stock dividends,
        stock splits, and other similar events.
  The
        holders of any type of warrant will not possess any voting or other rights
        as a
        stockholder of the Company unless and until the holder exercises the
        warrant.
  ***Transfer,
        Exchange and Exercise***
  The
        warrants may be exercised upon surrender of the certificate therefore on
        or
        prior to the expiration date (as explained below) at the Company’s offices with
        the form of “Election to Purchase” section of the warrant filled out and
        executed as indicated, accompanied by payment (in the form of certified or
        cashier’s check payable to the order of GlobalOptions Group, Inc.) of the full
        exercise price for the number of warrants being exercised.
 ******
 ***Registration
        Statements***
  On
        August
        9, 2006, the Company filed a Form SB-2 to register 43,359,500 shares in
        connection with Series B convertible preferred stock and warrants issued
        on June
        29, 2006. On September 19, 2006, the company filed Amendment No. 1 to this
        Form
        SB-2, and at the present time is awaiting a response from the Securities
        and
        Exchange Commission.
 
 On
        August
        9, 2006, the Company filed a supplement on Form 424 (b)(3) to its registration
        statement on Form SB-2 dated May 8, 2006.
 
 
 **13.
        Major Clients**
 
 The
        Company’s top three clients represented 49%, 11%, and 1%; and 16%, 9%, and 7%,
        respectively, of revenues for the nine months ended September 30, 2006 and
        2005,
        respectively. The Company’s top three clients represented 52%, 9%, and 3%; and
        9%, 11%, and 4%, of revenues for the three months ended September 30, 2006
        and
        2005, respectively
  The
        Company has foreign clients representing 1% and 19% of revenues for the nine
        months ended September 30, 2006 and 2005 respectively. Revenue from foreign
        clients was negligible for the three months ended September 30, 2006, and
        represented 15% of total revenues for the three months ended September 30,
        2005.  These foreign clients operate primarily in Russia and the
        Caribbean.  For each of these foreign clients, the Company is paid in U.S.
        dollars.
 
 During
        the nine months ended September 30, 2006, a client that represented
        approximately 19% of revenues for the year ended December 31, 2005 has elected
        not to renew its relationship with the Company.
 
 33
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **14. 
        Client and Segment Data**
  The
        Company’s reportable operating segments services consisted of the following
        three business segments: Investigations/Litigation Support, Crisis Management
        Services and Security.  The Company’s reportable segments are organized,
        managed and operated along product lines. These product lines are provided
        to
        similar clients, are offered together as packaged offerings, generally produce
        similar margins and are managed under a consolidated operations management.
        JWLA
        is reflected within the Crisis Management Segment.
  The
        Investigations/Litigation Support Services segment includes activities from
        litigation support, due diligence, inventory control, asset recovery, and
        business intelligence.
 
 The
        Crisis Management Services segment includes activities related to risk planning
        and response to natural disasters, kidnappings, labor disputes, bombings,
        product tampering and industrial espionage.
  The
        Security Services segment includes activities from threat and vulnerability
        assessments; fraud prevention; IT security, and technical
        systems/counter-measures both nationally and internationally.
  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 and nine months ended September 30, 2006 and 2005
        (in
        thousands):
  **For
                  the Three Months Ended September 30, 2006****Investigations/**
                **Litigation**
                **Support**
              
              **Crisis**
                **Management**
              
              **Security**
              
              **Corporate**
              
              **Consolidated**Revenues
              
              $
              8,342
              
              $
              12,608
              
              $
              67
              
              $
              -
              
              $
              21,017Income
                  (Loss) from
                Operations
              
              $
              (2,548
              )
              $
              2,548
              
              $
              (189
              )
              $
              -
              
              $
              (189
              )Depreciation
                  and
                Amortization
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              653
              
              $
              653Interest
                  Expense
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              21
              
              $
              18
  
 
 
 34
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 
 **14. 
        Client and Segment Data, continued**
  **For
        the Three Months Ended September 30, 2005**
  **Investigations/**
                **Litigation**
                **Support**
              
              **Crisis**
                **Management**
              
              **Security**
              
              **Corporate**
              
              **Consolidated**Revenues
              
              $
              1,916
              
              $
              267
              
              $
              327
              
              $
              -
              
              $
              2,510Loss
                  from
                Operations
              
              $
              (646
              )
              $
              (326
              )
              $
              (273
              )
              $
              -
              
              $
              (1,244
              )Depreciation
                  and
                Amortization
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              79
              
              $
              79Interest
                  Expense
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              18
              
              $
              18
  **For
        the Nine Months Ended September 30, 2006**
  **Investigations/**
                  **Litigation**
                  **Support**
                
                **Crisis**
                  **Management**
                
                **Security**
                
                **Corporate**
                
                **Consolidated**Revenues
                
                $
                16,607
                
                $
                27,571
                
                $
                434
                
                $
                -
                
                $
                44,612Income
                    (Loss) from
                  Operations
                
                $
                (6,011
                )
                $
                5,941
                
                $
                (1,059
                )
                $
                -
                
                $
                (1,129
                )Depreciation
                    and
                  Amortization
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                1,357
                
                $
                1,357Interest
                    Expense
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                628
                
                $
                628
 
 35
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 
 **14. 
        Client and Segment Data, continued**
  **For
        the Nine Months Ended September 30, 2005**
  **Investigations/**
                  **Litigation**
                  **Support**
                
                **Crisis**
                  **Management**
                
                **Security**
                
                **Corporate**
                
                **Consolidated**Revenues
                
                $
                3,383
                
                $
                763
                
                $
                616
                
                $
                -
                
                $
                4,762Loss
                    from
                  Operations
                
                $
                (1,536
                )
                $
                (824
                )
                $
                (353)-
                
                $
                -
                
                $
                (2,713
                )Depreciation
                    and
                  Amortization
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                100
                
                $
                100Interest
                    Expense
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                81
                
                $
                81
 
 
 **15.
        Subsequent Events**
 ***Line
          of Credit***
 
 Effective
          on October 12, 2006, the line of credit facility with a financial institution
          was amended to increase the facility amount to $5,000,000. Under the terms
          of
          the agreement, the Company granted the financial institution a security
          interest
          in, and pledged and assigned substantially all of the Company’s current and
          future acquired personal property and its intellectual property and reaffirmed
          its guarantee of this obligation as originally made on March 8,
          2006.
 
 ***Reincorporation
          and Increase in Authorized Shares of Common Stock***
 
 On
          October 17, 2006 the Board of Directors has declared that the Company shall
          be
          reincorporated in the state of Delaware, or, in the case of rejection of
          the
          reincorporation, an increase in authorized capital stock, subject to stockholder
          approval. In connection with the reincorporation, the Board of Directors,
          approved, subject to stockholder approval, an increase in authorized capital
          stock, a new certificate of incorporation, a new certificate of designation
          of
          the Series A and Series B preferred stock, and new by-laws.
  ***Reverse
          Stock Split***
 
 On
          October 17, 2006, the Board of Directors approved, subject to Stockholder
          approval and the discretion of the Board of Directors, a reverse stock
          split at
          a ratio of 1-for-5, 1-for-6, 1-for-7, 1-for-8, 1-for-9 or 1-for-10, to
          be
          completed prior to December 31, 2007.
 36
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **15.
        Subsequent Events, continued**
 ***Long-Term
            Incentive Plan***
 
 On
            October 17, 2006 the Board of Directors adopted the 2006 Long-Term Incentive
            Plan (the “Incentive Plan”), subject to stockholder approval, and that the
            shares that may be issued under such plan shall not exceed an aggregate
            of
            12,000,000 shares of common stock and that the Board of Directors have
            delegated
            to the compensation committee of the Board of Directors (the “Compensation
            Committee”) the authority, subject to stockholder approval of the Incentive
            Plan, to administer the Incentive Plan. Further, the Board of Directors
            has
            approved that the remaining shares reserved, but unissued with respect
            to any
            awards under the Company’s 2006 Stock Option Plan and 2005 Stock Option Plan are
            hereby unreserved and no new awards shall be issued pursuant to the Company’s
            2006 Stock Option Plan or 2005 Stock Option Plan.
  ***2006
            Employee Stock Purchase Plan***
  On
            October 17, 2006 the Board of Directors adopt the 2006 Employee Stock
            Purchase
            Plan (the “Employee Stock Purchase Plan”), subject to stockholder approval, and
            that the shares that may be issued under such plan shall not exceed an
            aggregate
            of 2,000,000 shares of common stock and that the Board of Directors have
            delegated to the Compensation Committee the authority, subject to stockholder
            approval of the Employee Stock Purchase Plan, to administer the Employee
            Stock
            Plan.
  ***Special
            Meeting of Stockholders***
  The
            Board
            of Directors have determined that there will be a special meeting of
            stockholders scheduled for December 5, 2006, at which time the stockholders
            will
            be called to consider and vote upon the approval of the reincorporation,
            an
            amendment to the Articles of Incorporation to increase the authorized
            capital of
            the Company, the Reverse Stock Split, the Incentive Plan, and the Employee
            Stock
            Purchase Plan.
  ***Conversion
            of Series A Convertible Preferred Stock***
  During
            October, 2006, the Company issued 37,500 shares of common stock in connection
            with the conversion of 75 shares of Series A convertible preferred
            stock.
 
 37
 **GLOBALOPTIONS
            GROUP, INC. AND SUBSIDIARIES**
 **Notes
            To Condensed Consolidated Financial Statements**
 **(Unaudited)**
 **15.
        Subsequent Events, continued**
 ***Investor
          Rights Agreement***
  On
          October 23, 2006, the Company and holders of a majority in interest of
          the
          Company's Series B convertible preferred stock amended the Company's Investor
          Rights Agreement dated as of June 28, 2006 to amend and restate the definition
          of "Effectiveness Date" in the Investor Rights Agreement to read as follows:
          "Effectiveness Date” means the date that is one hundred and twenty (120) days
          following the closing date, provided that such date shall be tolled (i)
          for the
          duration of any blackout period, (ii) for periods of regulatory review
          exceeding
          customary periods, and (iii) for periods of regulatory review the resolution
          of
          which is outside the full control, power or authority of the Company or
          its
          agents, provided the Company has met comment response deadlines applicable
          to it
          (to the extent within its or its agents' full control, power or authority)
          and
          is using its reasonable best efforts to cause the registration statement
          to be
          declared effective under the Securities Act.


38





**ITEM
      2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**




*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**





This
      Quarterly Report on Form 10-QSB contains “forward-looking statements” within the
      meaning of the Private Securities Litigation Reform Act of 1995. These
      statements can sometimes be identified by the use of forward-looking words
      such
      as “anticipate,”  “believe,”  “estimate,”  “expect,” 
“intend,”  “may,”  “will” and similar expressions. These statements
      are based on management’s current expectations and are subject to risks,
      uncertainties and assumptions. Should one or more of these risks or
      uncertainties materialize or should underlying assumptions prove incorrect,
      actual results may vary materially from those anticipated, estimated, expected,
      intended or projected.





The
      following factors, among others, could cause actual results to differ materially
      from those described in the forward-looking statements: changes in the demand
      for, or in the mix of, our services; project delays or cancellations; cost
      overruns with regard to fixed price projects; competitive pricing and other
      competitive pressures; changes in United States and foreign governmental
      regulation and licensing requirements; general economic conditions; political
      instability in foreign countries in which we operate; our ability to integrate
      and manage successfully any business we acquire; and other factors that are
      set
      forth in our Form 10-KSB for the year ended December 31, 2005,
      filed on April 17, 2006.





**General**




We
      are a
      provider of risk mitigation services to Fortune 500 corporations, governmental
      organizations and high-profile individuals throughout the world. Our risk
      mitigation services currently include investigations and litigation support,
      risk management, security, crisis management and corporate governance. Our
      investigations and litigation segment operates primarily domestically. We have
      many engagements in the remainder of our business that may take our staff around
      the world and are typically highly sensitive engagements where we are
      interacting with senior leaders in both corporations and governments. Our
      overall mission is to identify, evaluate, assess and prevent issues that may
      threaten people, organizations or strategic initiatives for companies and
      governments around the globe.





Founded
      in 1998, the management, staff and advisory boards include security and
      terrorism experts from America’s elite military units, former intelligence and
      law enforcement officers, professional investigators, and legal and crisis
      communications specialists. We provide services to governments, law firms,
      private clients and corporations, including two of the ten largest corporations
      in the world.





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








39





On
      June 24, 2005, we completed a reverse merger transaction, in which
      GlobalOptions Acquisition Corp., a Delaware corporation and our newly-created,
      wholly-owned subsidiary (“GlobalOptions Acquisition”), merged with and into our
      operating company, GlobalOptions, Inc., a Delaware corporation
      (“GlobalOptions”). At the time of the reverse merger, our corporate name was
      Creative Solutions with Art, Inc. (“Creative Solutions”). Following the reverse
      merger we changed our name to GlobalOptions Group, Inc. (“GlobalOptions Group”)
      and our trading symbol to “GLOI.OB.” As a result of the reverse merger,
      GlobalOptions became our wholly-owned operating subsidiary, with GlobalOptions’
former security holders acquiring a majority of the outstanding shares of our
      common stock, par value $.001 per share. The reverse merger was consummated
      under Delaware law and pursuant to an Agreement and Plan of Merger, dated
      June 24, 2005. Concurrent with the closing of the reverse merger, and on
      September 22, 2005, we also completed a private offering to accredited investors
      of units consisting of one share of our series A convertible preferred
      stock and detachable, transferable warrants to purchase 125 shares of our
      common stock, and received proceeds of $7,219,200 at the closing of the private
      placement, net of offering costs of $530,800.




On
      March
      10, 2006 we issued notes payable of $12,500,000 and received net proceeds of
      $12,194,060. On May 12, 2006, we issued notes payable of $2,000,000 and received
      net proceeds of $1,900,000. On June 28, 2006 we issued notes payable of
      $30,550,000 and received net proceeds of $29,022,500.




Our
      principal corporate offices are located at 75 Rockefeller Plaza, 27 th Floor,
      New York, New York 10019. Our telephone number is (212) 445-6262.




On
      June 24, 2005, Harvey W. Schiller, Ph.D. was named Chairman and Chief
      Executive Officer, Per-Olof Lööf was named Vice Chairman of the Board of
      Directors, and Jeffrey O. Nyweide was named Chief Financial Officer, Executive
      Vice President-Corporate Development and Secretary.




On
      May
      19, 2005, GlobalOptions and Confidential Business Resources (“CBR”), a
      privately-held nationwide investigations firm based in Nashville, Tennessee,
      entered into an asset purchase agreement with respect to the proposed
      acquisition by GlobalOptions of all of the assets and business activities of
      CBR. The acquisition of CBR was completed August 14, 2005.




On
      January 13, 2006, GlobalOptions and James Lee Witt Associates (“JLWA”), a
      privately-held emergency management firm based in Washington, DC, entered into
      an asset purchase agreement with respect to the proposed acquisition by
      GlobalOptions of all of the assets and business activities of JLWA. The
      acquisition of JLWA was completed March 10, 2006.




On
      May
      12, 2006 the Company acquired Safir Rosetti, LLC (“Safir”) and Secure Source,
      Inc. (“Secure Source). Safir is a security consulting, investigative and
      intelligence firm headquarterd in New York City. Secure Source is an
      international risk consulting firm with offices in the Dallas and Washington
      D.C. areas.




On
      August
      10, 2006, the Company acquired substantially all of the business and assets
      of
      Hyperion Risk, Inc. (“Hyperion Risk”), a Florida corporation.  
Hyperion Risk is an investigative and intelligence firm based in Orlando,
      Florida.




The
      following discussion and financial information is presented to aid in
      understanding our financial position and results of operations for the three
      and
      nine months ended September 30, 2006, as compared to the three and nine months
      ended September 30, 2005.





40





**Overview**




We
      experienced increases in revenues of approximately $18,507,000 (737%) and
      $39,850,000 (837%), reported an operating loss of approximatel y
      $189,000 and $1,129,000
      and a net loss of $16,000 and $11,764,000 for the three and nine months ended
      September 30, 2006, respectively when compared to the same periods in 2005.
      We
      had revenue of $21,017,000 for the three months ended September 30, 2006, as
      compared to revenue of $2,510,000 for the three months ended September 30,
      2005
      and had revenue of $44,612,000 for the nine months ended September 30,
      2006 ,
      as
      compared to revenue of $4,762,000 for the nine months ended September 30,
      2005. The
      increase in revenues for the nine month period is primarily attributable to
      the
      acquisitions of CBR, JLWA, Safir, Secure Source and Hyperion Risk which provided
      revenues of $8,313,000, $27,392,000, $4,094,000, $893,703 and $1,126,000,
      respectively.





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


Our
        gross
        profit for the three months ended September 30, 2006 was 49% as compared
        to 41%
        for the three months ended September 30, 2005. The increase in the three
        month
        period ended September 30, 2006 was primarily due to changes in the mix of
        the
        types of client engagements, in connection with the recent acquisitions of
        CBR,
        JLWA, Safir, Secure Source and Hyperion Risk.
 
 Our
        gross
        profit for the nine months ended September 30, 2006 was 49% as compared to
        46%
        for the nine months ended September 30, 2005. The slight increase in the
        nine
        months period ended September 30, 2006 was primarily due to changes in the
        mix
        of the types of client engagements, in connection with the recent acquisitions
        of CBR, JLWA, Safir, Secure Source and Hyperion Risk.




Net
      loss
      applicable to common stockholders for the three months ended September 30,
      2006
      and 2005 was $16,000 and $1,394,000 respectively, for an increase of $1,378,000
      or approximately 989%. Net loss applicable to common stock holders for the
      nine
      months ended September 30, 2006 and 2005 was $36,177,000 and $3,758,000,
      respectively, for an increase of $32,419,000 or approximately 863%. The
      increased net loss was primarily attributable to the amortization of debt
      discounts of $0 and $7,523,000 and amortization of deferred financing costs
      of
      $0 and $2,695,000 related to our financing programs, as well as to the deemed
      dividend on Series A convertible preferred stock of $0 and $24,913,000,
      respectively, for the three and nine months ended September 30, 2006.





While
      the
      financial results for GlobalOptions Group shows a significant net loss
      applicable to common stockholders for the nine months ended September 30, 2006,
      we believe the Company represents a unique opportunity to build a profitable
      global leader in the highly fragmented risk mitigation industry. GlobalOptions
      Group is an established company that will serve as our nexus for a series of
      acquisitions that we believe will deliver capabilities, products and services
      designed to meet the ever increasing demand for the assessment and management
      of
      risk. We see no indication that the drivers of increased risk mitigation
      spending are likely to dissipate any time in the near future. Risk mitigation
      providers on both the product and services side are still fragmented and ripe
      for consolidation with no clear market leader or dominant brand. We believe
      there is an opportunity to provide comprehensive solutions which can drive
      increased revenues for a company that can build a comprehensive platform. We
      expect GlobalOptions Group to be that company.




Our
      strategic vision is to build the first truly integrated enterprise risk
      mitigation company by selectively acquiring the best companies in the industry
      with proven management teams and a strategic long-term vision. Platform
      acquisitions will be geographically diverse and offer solutions in different
      risk mitigation segments to gain scope and synergies. Targets will have a
      combination of existing clients, revenue, significant channel presence and/or
      a
      high margin core business. Within the last twelve months, we acquired the four
      companies, JLWA, Safir, Secure Source and Hyperion Risk, and have identified
      one
      more target acquisition candidate.





41




On
      August
      14, 2005, GlobalOptions acquired CBR, a privately-held nationwide investigations
      firm based in Nashville, Tennessee. The aggregate purchase price paid for CBR’s
      assets and business was approximately $5,293,000 subject to certain adjustments
      through August 13, 2006 to the opening balance working capital, as such purchase
      price adjustments are defined in the agreement. The aggregate purchase price
      of
      approximately $5,293,000 consisted of cash in the amount of $4,363,000 (net
      of
      cash acquired of $26,000) and inclusive of a broker fee of $143,000, and a
      note
      payable to the seller of $904,000 due August 14, 2006. On August 16, 2006,
      $819,000 was paid to seller in connection with this obligation.





On
      March
      10, 2006, GlobalOptions purchased substantially all of the assets and
      liabilities of JLWA, a privately held crisis and emergency consulting management
      firm based in Washington, D.C. The acquisition was made pursuant to a certain
      Asset Purchase Agreement (the “JLWA Agreement”) dated January 13, 2006, as
      amended, between GlobalOptions Group and JLWA. The aggregate purchase price
      paid
      for JLWA’s assets and business was approximately $8,404,000 after the purchase
      adjustment on June 9, 2006. The aggregate purchase price of approximately
      $8,404,000, consisted of a cash payment at closing of $3,600,000, a cash payment
      of $1,858,000 to pay off JLWA’s line of credit balance, the issuance of 819,672
      shares of common stock of GlobalOptions Group valued at $2,000,000, or $2.44
      per
      share, a 4.6% note payable to the seller of $400,000 due March 9, 2007, and
      a
      non-interest bearing working capital purchase price adjustment of approximately
      $546,000, paid on June 8, 2006. The purchase price is subject to a post-closing
      adjustment for working capital. In addition, the JLWA Agreement provides for
      the
      sellers to obtain up to an additional $15,400,000 upon the attainment of certain
      revenue goals subsequent to the closing of the transaction and the continued
      employment of James Lee Witt, the former president and chief executive officer
      of JLWA.





On
      May
      12, 2006, GlobalOptions acquired substantially all of the business and assets
      of
      Safir Rosetti, LLC  (“Safir”), a Delaware limited liability company. Safir
      is a security consulting, investigative and intelligence firm headquartered
      in
      New York City with seven additional offices nationwide. The acquisition was
      made
      pursuant to a certain Asset Purchase Agreement dated January 27, 2006, as
      amended (the “Safir Agreement”), between GlobalOptions Group and Safir. The
      aggregate purchase price paid for Safir’s business and assets was approximately
      $15,316,000, and included $6,000,000 in 8% promissory notes issued by the
      Company and paid on June 29, 2006, $1,000,000 in 4% promissory notes of the
      Company due on May 12, 2007, $6,000,000 in common stock of the Company,
      consisting of 3,000,000 shares at $2.00 per share, payments to retire
      certain indebtedness of approximately $1,941,000 of Safir in anticipation of
      the
      closing, which included as follows: approximately $553,000 on April 3, 2006
      and
      $1,388,000 on April 28, 2006 and a finders fee of $375,000 paid to QuanStar
      Group, LLC, a related party. During the quarter ended September 30, 2006, the
      Company paid $605,519 in principal on the 4% promissory notes due on May 12,
      2007.




On
      May
      12, 2006, GlobalOptions acquired substantially all of the business and certain
      assets of Secure Source, Inc. (“Secure Source”), a Delaware Corporation. Secure
      Source is an international risk consulting firm with offices in Washington
      D.C.
      and Dallas, Texas. The acquisition was made pursuant to a certain Asset Purchase
      Agreement dated May 12, 2006, (the “Secure Source Agreement”), between the
      Company, Secure Source, Marian E. Nicastro and David W. Nicastro. The aggregate
      purchase price paid for Secure Source’s business and assets of $3,250,000
      consists of $1,500,000 in 3% promissory notes paid on June 29, 2006 and $750,000
      in 5% promissory notes due May 12, 2009, and $500,000 in 5% promissory notes
      due
      May 12, 2007 and $500,000 in common stock of GlobalOptions Group, consisting
      of
      248,756 shares valued at $2.01 per share.





On
      August
      10, 2006, the Company acquired substantially all of the business and assets
      of
      Hyperion Risk, Inc. (“Hyperion Risk”), a Florida corporation.  
Hyperion Risk an investigative and intelligence firm.   The
      acquisition was made pursuant to a certain Asset Purchase Agreement (the
“Hyperion Agreement”) between the Company and Hyperion Risk, dated August 10,
      2006. The aggregate purchase price paid for Hyperion’s business and assets was
      $3,782,000, which consisted of cash in the amount of $2,022,000, and
      $1,500,000 consisting of 672,645 shares of the Company’s common stock
      valued at $2.23 per share, and the Company’s cash payments to pay off Hyperion
      Risk’s credit line balance of approximately $260,000.




42


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




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




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




**Critical
      Accounting Policies**





GlobalOptions
      Group’s significant accounting policies, including the assumptions and judgments
      underlying them, are more fully described in our “Notes to Consolidated
      Financial Statements” included in this Form 10-KSB for the year ended December
      31, 2005. Some of our accounting policies require the application of significant
      judgment by management in the preparation of the condensed consolidated
      financial statements, and as a result, they are subject to a greater degree
      of
      uncertainty. In applying these policies, management uses its judgment to
      determine the appropriate assumptions to be used in calculating estimates that
      affect the reported amounts of assets, liabilities, revenues and expenses.
      Management bases its estimates and assumptions on historical experience and
      on
      various other factors that are believed to be reasonable under the
      circumstances. GlobalOptions Group has identified certain of its accounting
      policies as the ones that are most important to the portrayal of our condensed
      consolidated financial condition and results of operations and which require
      management to make its most difficult and subjective judgments, often as a
      result of the need to make estimates of matters that are inherently uncertain.
      GlobalOptions Group’s critical accounting policies include the following:





*Revenue
      Recognition*





Revenue
      is recognized as the services are performed pursuant to the applicable
      contractual arrangements. Revenue related to time and materials arrangements
      is
      recognized in the period in which the services are performed. Revenue related
      to
      fixed price arrangements are recognized based upon the achievement of certain
      milestones or progress points within the project plan. The impact of any
      revisions in estimated total revenue and direct contract costs is recognized
      in
      the period in which they become known. Expenses incurred by professional staff
      in the generation of revenue are billed to the client and recorded as revenue
      when incurred. For certain foreign accounts, revenues are recognized and the
      related expenses are recorded only after the receipt in cash of the revenue
      amounts. We incur no obligations to third parties for expenses related to these
      certain foreign accounts until such time that invoiced revenues are received
      in
      cash. Revenues received in advance of when earned are credited to the deferred
      revenues account.




43


*Intangible
      Assets*





In
      accordance with the requirements of Statement of Financial Accounting Standards
      No. 141 (“SFAS No. 141”), “Business Combinations”, the Company recognizes
      certain intangible assets acquired in acquisitions, primarily goodwill, trade
      names, covenants not to compete, and customer relationships.  In
      accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible
      Assets”, on a regular basis, the Company performs impairment analysis of the
      carrying value of goodwill and certain other intangible assets by assessing
      the
      recoverability when there are indications of potential impairment based on
      estimates of undiscounted future cash flows. The amount of impairment is
      calculated by comparing anticipated discounted future cash flows with the
      carrying value of the related asset. In performing this analysis, management
      considers such factors as current results, trends, and future prospects, in
      addition to other economic factors.




*Allowance
      for Doubtful Accounts*





We
      provide services to a variety of different clients across the United States
      and
      internationally and extend credit to our clients in the normal course of
      business.  We rarely obtain collateral to enhance the collection of
      receivables.  We determine the amount of the allowance for doubtful
      accounts primarily based upon an aging of the receivables balances, as well
      as
      upon the judgment our officers and managers.


*Stock
        Based Compensation*
 
 The
        Company accounts for equity instruments issued to non-employees in accordance
        with the provisions of SFAS 123 and the Emerging Issues Task Force (“EITF”)
        Issue No.  96-18,  “Accounting  for  Equity 
Instruments  That Are Issued to Other Than  Employees  for 
Acquiring,  or In  Conjunction  with Selling,  Goods or
        Services” (“EITF 96-18”) which require a that such equity instruments are
        recorded at their fair value on the measurement  date, which is typically
        the date the services are performed.  Stock based compensation for
        non-employees is accounted for under EITF 96-18 and is reflected within general
        and administrative expenses.
 
 The
        Company accounts for stock-based compensation in accordance with the provisions
        of SFAS 123R.
 
 The
        Company recognizes compensation costs over the requisite service period of
        the
        award, which is generally the vesting term of the options associated with
        the
        underlying employment agreement, where applicable.
 
 Option
        valuation models require the input of highly subjective assumptions including
        the expected life of the option. Because the Company's employee stock options
        have characteristics significantly different from those of traded options,
        and
        because changes in the subjective input assumptions can materially affect
        the
        fair value estimate, in management's opinion, the existing models do not
        necessarily provide a reliable single measure of the fair value of its employee
        stock options. The fair value of the stock based instruments was estimated
        on
        the date of grant using the Black-Scholes option pricing
        model.




**GlobalOptions
      Group’s Three Months Ended September 30, 2006 Compared to Three Months Ended
      September 30, 2005**




**Revenues**




We
      had
      overall revenues of approximately $21,017,000 for the three months ended
      September 30, 2006 as compared to revenues of approximately $2,510,000 for
      the
      three months ended September 30, 2005, for an increase of $18,507,000 or
      approximately 737%.  Substantially all of the revenues reported in the
      three months ended September 30, 2006, were from domestic clients The
      increase in revenue for the three months ended September 30, 2006 was primarily
      attributable to the acquisitions of CBR, JLWA, Safir, Secure Source and Hyperion
      Risk.





**Investigations/Litigation
      Support Segment Revenues**





In
      the
      investigations/litigation support segment, we had revenues of $8,343,000 for
      the
      three months ended September 30, 2006, as compared to revenues of $1,916,000
      for
      the three months ended September 30, 2005, for an increase of $6,427,000 or
      approximately 335%. All of the investigations/litigation support revenues
      reported in the three months ended September 30, 2006 were domestic. The
      increase in investigations/litigation support segment revenues for the three
      months ended September 30, 2006 was primarily attributable to the expansion
      of
      our client base through the acquisitions of CBR, Safir, Secure Source and
      Hyperion Risk for which all revenues are included in this segment.




**Crisis
      Management Segment Revenues**





In
      the
      crisis management segment, we had revenues of $12,608,000 for the three months
      ended September 30, 2006 as compared to revenues of $267,000 for the three
      months ended September 30, 2005, for an increase of $12,341,000 or
      approximately 4,622%. All of the crisis management revenue during the three
      months ended September 30, 2006 is primarily attributable to revenues from
      the
      JLWA operations, which were acquired on March 10, 2006.


44


**Security
          Segment Revenues**
  In
          the
          security segment, we had revenues of $67,000 for the three months ended
          September 30, 2006 as compared to revenues of $327,000 for the three months
          ended September 30, 2005, for a decrease of $260,000 or approximately 80%.
          Of
          the security segment revenues reported in the three months ended September
          30,
          2006, all were domestic.


**Cost
      of Revenues and Gross Profit**




Our
      consolidated cost of revenues increased $9,254,000 or approximately 624% from
      $1,484,000 in the three months ended September 30, 2005 to $10,738,000 in the
      three months ended September 30, 2006, which was primarily due to the increases
      in the crisis management and investigations segments revenues. The increase
      in
      these segments is attributable to the additional volume from the CBR, JLWA,
      Safir, Secure Source and Hyperion Risk acquisitions.





**Operating
      Expenses**




We
      experienced a 1,000% increase in selling and marketing expenses for the three
      months ended September 30, 2006, when compared to the same period in 2005.
      Selling and marketing expenses for the three months ended September 30, 2006
      were $2,585,000, compared to $233,000 for the three months ended September
      30,
      2005, for an increase $2,352,000. This increase is primarily attributable to
      the
      accrued earnout obligation of approximately $1,833,000 related to the JLWA
      acquisition.





We
      experienced a 361% increase in overall operating expenses for the three months
      ended September 30, 2006, when compared to the same period in 2005. General
      and
      administrative expenses for the three months ended September 30, 2006 were
      $7,883,000, compared to $2,037,000 for the three months ended September 30,
      2005. Of this increase, approximately $2,242,000 is attributable to CBR (which
      we have combined with Secure Source and Hyperion Risk), $1,591,000 to Witt
      and $4,050,000 related to legal, accounting and other professional fees incurred
      in order to fulfill our responsibilities as a public company and costs incurred
      for due diligence related to fulfillment of our growth plan.





**Investigations/Litigation
      Support Segment Results**




Our
      investigations segment had operating losses of $2,548,000 for the three months
      ended September 30, 2006 as compared to operating losses of $645,000 for the
      three months ended September 30, 2005, for an increase in our loss of $1,903,000
      or approximately 294%. Reflected in this segment are all results of CBR, Safir,
      Secure Source and Hyperion Risk. The overall general and administrative
      expenses, of which approximately 75% are allocated to the investigations
      division, have increased by 284% as compared to the three months ended September
      30, 2005. This is attributable in part to the increased infrastructure
      associated with the Company’s acquisitions and in part to the increased
      corporate overhead costs of operating a public company.





**Crisis
      Management Segment Results**




Our
      crisis management segment had an operating profit of approximately $2,548,000
      for the three months ended September 30, 2006 as compared to an operating loss
      of $326,000 for the three months ended September 30, 2005, for an increased
      operating profit of $2,874,000 or approximately 882%. The significant increase
      in operating profit for three months ended September 30, 2006 was due most
      significantly to the operations of JLWA.





**Security
      Segment Results**




Our
      security segment had an operating loss of $189,000 for the three months ended
      September 30, 2006 as compared to an operating loss of $273,000 for the three
      months ended September 30, 2005, for an decrease of $84,000 or approximately
      31%. The decreased loss is attributable to a lower level of corporate overhead
      borne within this segment.




45


**Interest
      Expense**




Interest
      expense increased by $3,000 to $21,000 in the three months ended September
      30,
      2006 from $18,000 in the three months ended September 30, 2005. The slight
      increase in interest expense is attributable to additional debt incurred in
      connection with the acquisitions of JLWA, Safir, and Secure Source.





**Income
      Taxes**




Although
      we have federal and state net operating losses available for income tax purposes
      that may be carried forward to offset future taxable income, the deferred tax
      assets are subject to a 100% valuation allowance because it is more likely
      than
      not that the deferred tax assets will not be realized as of September 30, 2006.
      Our ability to use our net operating loss carryforwards may be subject to an
      annual limitation in future periods pursuant to Section 382 of the Internal
      Revenue Code.




**Net
      Loss Applicable to Common Stockholders**




Net
      losses applicable to common stockholders for the three months ended September
      30, 2006 and 2005 were $16,000 and $1,394,000, respectively, an decrease of
      $1,378,000 or 989%. For the three month period ended September 30, 2006, we
      realized an overall gross profit of 49%, up from 41%. The gross profit amounts
      for the three months ended September 30, 2006 and 2005 were $10,279,000 and
      $1,026,000, an increase of $9,253,000 or 902%. This increased gross profit
      is
      offset by increases in operating expenses of $8,198,000 for the same period.
      The
      decreased net loss for the three month period ended September 30, 2006 was
      primarily attributable to the increase in revenue, attributable to acquired
      operations, and improved gross margin percentage offset by increased operating
      costs.





Basic
      net
      loss per share is computed based on the weighted average number of shares of
      common stock outstanding during the periods presented. Common stock equivalents,
      consisting of options, warrants, Series A and Series B convertible
      preferred stock were not included in the calculation of the diluted net losses
      per share because their inclusion would have been anti-dilutive. Basic and
      diluted net losses per share applicable to common stockholders was $0.00
      for the three month period ended September 30, 2006 as compared to $0.10 in
      the
      corresponding 2005 period.




**GlobalOptions
      Group’s Nine Months Ended September 30, 2006 Compared to Nine Months Ended
      September 30, 2005**




**Revenues**




We
      had
      overall revenues of approximately $44,612,000 for the nine months ended
      September 30, 2006 as compared to revenues of $4,762,000 for the nine months
      ended September 30, 2005, for an increase of $39,850,000, or approximately
      836%.
      Of the revenues reported in the nine months ended September 30, 2006,
      approximately 99% was domestic and 1% related to international clients. The
      increase in revenue for the nine months ended September 30, 2006 was primarily
      attributable to the acquisitions of CBR, JLWA, Safir, Secure Source and Hyperion
      Risk.





**Investigations/Litigation
      Support Segment Revenues**




In
      the
      investigations/litigation support segment, we had revenues of $16,607,000 for
      the nine months ended September 30, 2006, as compared to revenues of $3,383,000
      for the nine months ended September 30, 2005, for an increase of $13,224,000
      or
      approximately 391%. All of the investigations/litigation support revenues
      reported in the nine months ended September 30, 2006 were domestic. The increase
      in investigations/litigation support segment revenues for the nine months ended
      September 30, 2006 was primarily attributable to the expansion of our client
      base through the acquisitions of CBR, Safir, Secure Source and Hyperion Risk.





46


**Crisis
      Management Segment Revenues**




In
      the
      crisis management segment, we had revenues of $27,570,000 for the nine months
      ended September 30, 2006 as compared to revenues of $763,000 for the nine months
      ended September 30, 2005, for an increase of $26,807,000 or approximately
      3,513%. Approximately 99% of the crisis management revenue during the nine
      months ended September 30, 2006 is attributable to revenues from the JLWA
      operations, which were acquired on March 10, 2006.




**Security
      Segment Revenues**




In
      the
      security segment, we had revenues of $434,000 for the nine months ended
      September 30, 2006 as compared to revenues of $616,000 for the nine months
      ended
      September 30, 2005, for a decrease of $182,000 or approximately 30%. Of the
      security segment revenues reported in the nine months ended September 30, 2006,
      all were domestic. This increase was due to a significant client generating
      a
      large amount of revenues within the nine months ended September 30, 2006.




**Cost
      of Revenues and Gross Profit**




Our
      consolidated cost of revenues increased $20,289,000, or approximately 789%
      from
      $2,572,000 in the nine months ended September 30, 2005 to $22,861,000 in the
      nine months ended September 30, 2006, which was primarily due to the increases
      in the investigations and crisis management segments revenues. The increase
      in
      these segments is attributable to the additional volume from the JLWA, Safir,
      Secure Source and Hyperion Risk acquisitions. The gross profit percentage
      increased from 46% to 49% from the nine months ended as the product mix within
      the newly acquired operations has shifted slightly to lower margin client
      services.





**Operating
      Expenses**




We
      experienced a 1,124% increase in selling and marketing expenses for the nine
      months ended September 30, 2006, when compared to the same period in 2005.
      Selling and marketing expenses for the nine months ended September 30, 2006
      were
      $6,353,000, compared to $519,000 for the nine months ended September 30, 2005,
      for an increase $5,834,000. This increase is primarily attributable to the
      accrued earnout obligation of $4,075,000 related to the JLWA
      acquisition.





We
      experienced a 367% increase in overall operating expenses for the nine months
      ended September 30, 2006, when compared to the same period in 2005. General
      and
      administrative expenses for the nine months ended September 30, 2006 were
      $16,527,000, compared to $4,384,000 for the nine months ended September 30,
      2005. Of this increase of $8,944,000 is attributable to the increased overhead
      associated with the Company’s acquisitions, and $3,199,000 related to costs,
      such as legal, accounting and other professional fees incurred in order to
      fulfill our responsibilities as a public company and costs incurred for due
      diligence related to fulfillment of our growth plan.





**Investigations/Litigation
      Support Segment**




Our
      investigations segment had operating losses of $6,011,000 for the nine months
      ended September 30, 2006 as compared to operating losses of $1,536,000 for
      the
      nine months ended September 30, 2005, for an increase in our loss of $4,475,000
      or approximately 291%. The overall general and administrative expenses, of
      which
      approximately 76% are allocated to the investigations division, have increased
      by 277% as compared to the nine months ended September 30, 2005. This is
      attributable in part to the increased infrastructure associated with our
      acquisitions and in part to the increased corporate overhead costs of operating
      a public company.





47


**Crisis
      Management Segment Results**




Our
      crisis management segment had operating profits of approximately $5,941,000
      for
      the nine months ended September 30, 2006 as compared to operating losses of
      $824,000 for the nine months ended September 30, 2005, for an increase of
      $6,765,000 or approximately 814%. The increase in operating income for the
      nine
      months ended September 30, 2006 was in part due to the increased infrastructure
      associated with the acquisitions of JLWA, Safir and Secure Source and in offset
      part to the increased corporate overhead costs of operating a public company.





**Security
      Segment Results**




Our
      security segment had operating losses of $1,058,000 for the nine months ended
      September 30, 2006 as compared to operating losses of $353,000 for the nine
      months ended September 30, 2005, for an increase of $705,000. The increased
      loss
      is attributable to a higher level of corporate overhead borne within this
      segment.




**Interest
      Expense**




Interest
      expense increased by $546,000 to $628,000 in the nine months ended September
      30,
      2006 from $82,000 in the nine months ended September 30, 2005. The increase
      in
      interest expense is attributable to additional debt incurred in connection
      with
      the acquisitions of JLWA, Safir, and Secure Source


**Amortization
        of Deferred Financing Costs and Debt Discounts**
 
 The
        Company incurred costs in conjunction with notes payable issued on March
        10,
        2006, May 12, 2006 and June 28, 2006. These costs were capitalized to deferred
        financing costs, and amortized over the term of the related debt. Additionally,
        in accordance with Emerging Issues Task force (“EITF”) 00-27, the notes issued
        on June 28, 2006 were considered to have a beneficial conversion premium
        feature. The Company recorded a debt discount of $6,922,602 related to this
        conversion premium. In addition, the Company recorded a debt discount of
        $600,000, as the value of the beneficial conversion feature related to the
        8%
        promissory note issued in conjunction with the acquisition of Safir on May
        12,
        2006.
 
 The
        aggregate $2,694,500 of deferred financing costs, as well as the aggregate
        $7,522,602 of deferred debt discounts were amortized through June 29, 2006,
        the
        date the notes were exchanged for Series B convertible preferred
        stock.


**Income
      Taxes**




Although
      we have federal and state net operating losses available for income tax purposes
      that may be carried forward to offset future taxable income, the deferred tax
      assets are subject to a 100% valuation allowance because it is more likely
      than
      not that the deferred tax assets will not be realized as of September 30, 2006.
      Our ability to use our net operating loss carryforwards may be subject to an
      annual limitation in future periods pursuant to Section 382 of the Internal
      Revenue Code.




**Net
      Loss Applicable to Common Stockholders**




Net
      losses applicable to common stockholders for the nine months ended September
      30,
      2006 and 2005 were $36,177,000 and $3,758,000, respectively, an increase of
      $32,419,000 or 8,628 %. We realized an overall gross profit of 49%, up from
      46%
      for the nine months ended September 30, 2005. The gross profit amounts for
      the
      nine months ended September 30, 2006 and 2005 were $21,751,000 and $2,190,000,
      an increase of $19,561,000 or 893%. This increased gross profit is offset by
      increases in operating expenses of $17,977,000 for the same period. The
      increased net loss for the nine month period ended September 30, 2006 was
      primarily attributable to the amortization of the debt discounts of $7,523,000
      and amortization of the deferred financing costs of $2,695,000 related to our
      financing programs, as well as to the deemed dividend on the Series A
      convertible preferred stock of $24,413,000.





Basic
      net
      loss per share applicable to common stockholders is computed based on
      the weighted average number of shares of common stock outstanding during the
      periods presented. Common stock equivalents, consisting of options, warrants,
      Series A and B convertible preferred stock were not included in the calculation
      of the diluted net losses per share because their inclusion would have been
      anti-dilutive. Basic and diluted net loss per share applicable to common
      stockholders was $2.11  for the nine month period ended September 30,
      2006 as compared to $0.34 in the corresponding 2005 period.





48


**Liquidity
      and Capital Resources**




We
      had
      cash balances on hand of $22,327,000 as of September 30, 2006, which resulted
      primarily from proceeds from issuance of convertible notes which generated
      $45,050,000 during the nine months ended September 30, 2006. We incurred cash
      issuance costs of $1,933,500 in connection with the issuance of these notes.
      On
      June 29, 2006, these notes were exchanged for 53,073 units, at $1,000 per units
      of Series B convertible preferred stock. Approximately $9,979,000 of these
      funds
      were used to purchase or fund the repayment of debt issued to JLWA, Safir and
      Secure Source for the acquisitions.





We
      historically have met our operating cash needs by using borrowings under our
      line of credit arrangement and through our private placement of equity and
      debt
      securities. At September 30, 2006, we had working capital of approximately
      $28,691,000. We currently believe that cash on hand, cash flows from operations,
      available borrowings under our line of credit facility and our intention to
      retire debt through the issuance of equity, will be sufficient to meet our
      current funding requirements and obligations over the next twelve
      months.




Cash
      used
      in operating activities amounted to approximately $1,729,000 and $2,613,000
      during the nine months ended September 30, 2006 and 2005, respectively. The
      2006
      decrease of $884,000 in cash used in operations was due, most significantly,
      to
      a $4,200,000 improvement in net loss after adding back non cash items, offset
      by
      an increase of $10, 596,000 in accounts receivable, and benefited by an increase
      of $1,180,000 in accounts payable, increase of $1,557,000 in accrued
      compensation and related benefits and an increase of $4,075,000 in due to former
      members of JLWA for earnout.





Cash
      used
      in investing activities of approximately $10,121,000 consisted primarily of
      approximately $9,979,000 related to our purchase of JLWA, Safir and Hyperion
      Risk.





Financing
      activities provided net funds of approximately $33,648,000 and $7,256,000 during
      the nine months ended September 30, 2006 and 2005, respectively. The increase
      was primarily a result of the net proceeds from the sale of the convertible
      notes of $45,050,000, net of repayments of notes aggregating $8,925,000 issued
      in connection with the acquisitions of CBR, Safir and Secure Source.





On
      March
      10, 2006, GlobalOptions purchased substantially all of assets and liabilities
      of
      JLWA, a privately held crisis and emergency consulting management firm based
      in
      Washington, D.C. The acquisition was made pursuant to the JLWA Agreement. The
      aggregate purchase price paid for JLWA’s assets and business was $8,404,000
      consisting of a cash payment at closing of $3,600,000, a cash payment of
      $1,857,000 to pay off JLWA’s line of credit balance, the issuance of 819,672
      shares of common stock of GlobalOptions Group, valued at $2,000,000, or $2.44
      per share, a 4.6% note payable to the seller of $400,000 due March 9, 2007,
      and a non-interest bearing working capital purchase price adjustment of $546,000
      paid June 8, 2006. In addition, the Agreement provides for the sellers to obtain
      up to an additional $15,400,000 upon the attainment of certain revenue goals
      subsequent to the closing of the transaction.





On
      May
      12, 2006, GlobalOptions acquired substantially all of the business and assets
      of
      Safir. Safir is a security consulting, investigative and intelligence firm
      headquartered in New York City with seven additional offices nationwide. The
      acquisition was made pursuant to the Safir Agreement. The aggregate purchase
      price paid for Safir’s business and assets was $15,316,000, and included
      $6,000,000 in 8% promissory notes issued by the Company and paid on June 29,
      2006, $1,000,000 in 4% promissory notes of the Company, due on May 12, 2007,
      a
      finders fee of $375,000 paid to QuanStar Group, LLC, a related party, $6,000,000
      in common stock of the Company, consisting of 3,000,000 shares valued
      at $2.00 per share, plus payments to retire certain indebtedness of
      $1,941,000 of Safir in anticipation of the closing, including $553,000 on April
      3, 2006 and $1,387,000 on April 28, 2006.




On
      May
      12, 2006, GlobalOptions acquired substantially all of the business and certain
      assets of Secure Source. Secure Source is an international risk consulting
      firm
      with offices in Washington D.C. and Dallas, Texas. The acquisition was made
      pursuant to the Secure Source Agreement. The aggregate purchase price paid
      for
      Secure Source’s business and assets of $3,250,000 consisted of $750,000 in 5%
      promissory notes due May 12, 2009, and $1,500,000 in 3% promissory notes paid
      on
      June 29, 2006 and $500,000 in 5% promissory notes due May 12, 2007, plus
      $500,000 in common stock of GlobalOptions Group, consisting of 210,970 shares
      valued at $2.37 per share.





On
      August
      10, 2006, GlobalOptions acquired substantially all of the business and assets
      of
      Hyperion Risk.   Hyperion Risk an investigative and intelligence
      firm.   The acquisition was made pursuant to the Hyperion
      Risk Agreement. The aggregate purchase price paid for Hyperion’s business
      and assets was $3,782,000, which consisted of cash in the amount of $2,022,000,
      and $1,500,000 consisting of 672,645 shares of the Company’s common
      stock valued at $2.23 per share, and the Company’s cash payments to pay off
      Hyperion Risk’s credit line balance of approximately $260,000.




49


**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.




**Recent
      Accounting Pronouncements**




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





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





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





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





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


In
        the
        current quarter we have reclassified certain components of our stockholders’
equity section to reflect the elimination of deferred compensation arising
        from
        unvested share-based compensation pursuant to the requirements of Staff
        Accounting Bulletin No. 107, regarding Statement of Financial Accounting
        Standards No. 123(R), “Share-Based Payment.” This deferred compensation was
        previously recorded as an increase to additional paid-in capital with a
        corresponding reduction to stockholders’ equity for such deferred compensation.
        This reclassification has no effect on net income or total stockholders’ equity
        as previously reported. The Company will record an increase to additional
        paid-in capital as the share-based payments vest.





**Item
      3.     CONTROLS AND PROCEDURES**





*Evaluation
      of our Disclosure Controls and Internal Controls*





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





*Officers’
      Certifications*





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





*Disclosure
      Controls and Internal Controls*




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




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




*Remediation
      of Material Weaknesses and Significant Deficiencies*





During
      the three months ended September 30, 2006, we have taken specific actions to
      remediate the reportable conditions and material weakness, including the
      devotion of additional resources to the quarterly closing process, the hiring
      of
      additional qualified financial accounting personnel, and realignment of certain
      financial responsibilities to achieve stronger segregation of financial duties.
      We intend to continue to further strengthen our controls and procedures
      regarding the closing process.


*Changes
        in Internal Control Over Financial Reporting*
 
 Other
        than expressly noted above in this Item 3, there were no significant changes
        in
        our internal controls over financial reporting that occurred during the current
        quarter that have materially affected, or are reasonably likely to materially
        affect, our internal controls over financial reporting.








51


**PART
      II**




**OTHER
      INFORMATION**




**Item
      1.     Legal Proceedings.**




None.




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





None.




**Item
      3.     Defaults Upon Senior
      Securities.**




None.




**Item
      4.     Submission of Matters to a Vote of Security Holders.
      (subject to review by Olshan)**




**Item
      5.     Other Information.**




None.




**Item
      6.**  **Exhibits.**




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




**Exhibit
                No.**
            
            **Description**31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of The Sarbanes-Oxley
                Act of 2002.31.2
            
            Certification
                of Chief Financial Officer pursuant to Section 302 of The Sarbanes-Oxley
                Act of 2002.32.1
            
            Certification
                of Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley
                Act of 2002.32.2
            
            Certification
                of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley
                Act of 2002.





52


**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




GLOBALOPTIONS
                GROUP, INC.Dated:
                November 14, 2006
            By:
            /s/ Harvey
                W. SchillerHarvey
                W. Schiller
              Chairman
                of the Board and Chief Executive Officer
              (Principal
                Executive Officer)





Dated:
                November 14, 2006
            By:
            /s/ Jeffrey
                O. NyweideJeffrey
                O. Nyweide
              Chief
                Financial Officer, Executive Vice
              President,
                Corporate Developmentand
                Secretary (Principal Financial Officer and
              Principal
                Accounting Officer)




53