UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)




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





For the
Quarterly Period Ended March 31,
2010




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





For the
transition period from __________________ to __________________





Commission
file number: 001-33700




GLOBALOPTIONS GROUP, INC(Exact
      name of registrant as specified in its charter)Delaware
                      
                      30-0342273(State
      or Other Jurisdiction of Incorporation or
                        Organization)
                      
                      (I.R.S.
      Employer Identification No.)75
      Rockefeller Plaza, 27th
      FloorNew
      York, New York
                      
                      10019(Address
      of Principal Executive Offices)
                      
                      (Zip
      Code)





(212)
445-6262


(Registrant’s
telephone number, including area code)







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





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




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




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




Large
accelerated filer  ̈ Accelerated filer
 ̈




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




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




As of May
13, 2010, there were 14,370,080 shares of the issuer’s common stock
outstanding.







GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Form
10-Q


March
31, 2010


TABLE
OF CONTENTS





PART
      IFINANCIAL
      INFORMATIONITEM
      1.       Financial
      Statements.Condensed
      Consolidated Balance Sheets as of March 31, 2010 (Unaudited) and December
      31, 2009
                                      1Condensed
      Consolidated Statements of Operations for the Three Months
      EndedMarch
      31, 2010 and 2009 (Unaudited)
                                      2Condensed
      Consolidated Statement of Stockholders’ Equity for the Three Months
      EndedMarch
      31, 2010 (Unaudited)
                                      3Condensed
      Consolidated Statements of Cash Flows for the Three Months
      EndedMarch
      31, 2010 and 2009 (Unaudited)
                                      4Notes
      to Condensed  Consolidated Financial Statements
      (Unaudited)
                                      6ITEM
      2.       Management’s Discussion and
      Analysis of Financial Condition and Results of Operations.
                                      18ITEM
      3.       Quantitative and Qualitative
      Disclosures About Market Risk.
                                      25ITEM
      4T.    Controls and Procedures.
                                      25PART
      IIOTHER
      INFORMATIONITEM
      1.       Legal
    Proceedings.
                                      26ITEM
      1A.    Risk Factors.
                                      26ITEM
      2.       Unregistered Sales of Equity
      Securities and Use of Proceeds.
                                      26ITEM
      3.       Defaults Upon Senior
      Securities.
                                      26ITEM
      4.       (Removed and
      Reserved).
                                      26ITEM
      5.       Other
    Information.
                                      26ITEM
      6.       Exhibits.
                                      27SIGNATURES.
                                      28







Part
I  FINANCIAL INFORMATION
 Item
1.  Financial Statements
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 
 Condensed
Consolidated Balance Sheets
 (dollars
in thousands, except share and per share amounts)
 
 March 31,
                    
                    
                    December 31,2010
                    
                    
                    2009ASSETSCurrent
      assets:Cash
      and cash equivalents
                    
                    $
                    2,669
                    
                    
                    $
                    3,221Accounts
      receivable, net
                    
                    
                    23,960
                    
                    
                    
                    19,632Inventories,
      net
                    
                    
                    3,435
                    
                    
                    
                    3,354Prepaid
      expenses and other current assets
                    
                    
                    802
                    
                    
                    
                    840Total
      current assets
                    
                    
                    30,866
                    
                    
                    
                    27,047Property
      and equipment, net
                    
                    
                    7,801
                    
                    
                    
                    6,994Intangible
      assets, net
                    
                    
                    3,967
                    
                    
                    
                    4,268Goodwill
                    
                    
                    19,968
                    
                    
                    
                    19,968Security
      deposits and other assets
                    
                    
                    544
                    
                    
                    
                    537Total
      assets
                    
                    $
                    63,146
                    
                    
                    $
                    58,814LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Line
      of credit
                    
                    $
                    4,106
                    
                    
                    $
                    2,163Accounts
      payable
                    
                    
                    4,601
                    
                    
                    
                    3,565Deferred
      revenues
                    
                    
                    483
                    
                    
                    
                    590Accrued
      compensation and related benefits
                    
                    
                    5,460
                    
                    
                    
                    3,643Other
      current liabilities
                    
                    
                    2,324
                    
                    
                    
                    1,730Total
      current liabilities
                    
                    
                    16,974
                    
                    
                    
                    11,691Long-term
      liabilities:Deferred
      tax obligation
                    
                    
                    602
                    
                    
                    
                    511Other
      long-term obligations
                    
                    
                    781
                    
                    
                    
                    789Total
      long-term liabilities
                    
                    
                    1,383
                    
                    
                    
                    1,300Total
      liabilities
                    
                    
                    18,357
                    
                    
                    
                    12,991Commitments
      and contingenciesStockholders'
      equity:Preferred
      stock, $0.001 par value, 14,900,000 shares authorized, no shares issued or
      outstanding
                    
                    
                    -
                    
                    
                    
                    -Series
      D convertible preferred stock, non-voting, $0.001 par value, 100,000
      shares authorized, 0 shares issued and outstanding
                    
                    
                    -
                    
                    
                    
                    -Common
      stock, $0.001 par value; 100,000,000 shares authorized; 14,485,424 shares
      issued and 14,361,530 shares outstanding at March 31, 2010, and 14,472,363
      shares issued and 14,348,469 shares outstanding at December 31,
      2009
                    
                    
                    14
                    
                    
                    
                    14Additional
      paid-in capital
                    
                    
                    112,567
                    
                    
                    
                    111,909Accumulated
      deficit
                    
                    
                    (67,549
                    )
                    
                    
                    (65,857
                    )Treasury
      stock; at cost, 123,894 and 123,894 shares at March 31, 2010 and December
      31, 2009, respectively
                    
                    
                    (243
                    )
                    
                    
                    (243
                    )Total
      stockholders' equity
                    
                    
                    44,789
                    
                    
                    
                    45,823Total
      liabilities and stockholders' equity
                    
                    $
                    63,146
                    
                    
                    $
                    58,814
 
 See notes
to these condensed consolidated financial statements.
  1
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Condensed
Consolidated Statements of Operations
 (dollars
in thousands, except per share amounts)
 (Unaudited)
 
 For the Three Months Ended March
      31,2010
                  
                  
                  2009Revenues
                  
                  $
                  25,234
                  
                  
                  $
                  25,514Cost
      of revenues
                  
                  
                  13,826
                  
                  
                  
                  14,755Gross
      profit
                  
                  
                  11,408
                  
                  
                  
                  10,759Operating
      expenses:Selling
      and marketing
                  
                  
                  3,228
                  
                  
                  
                  3,056General
      and administrative
                  
                  
                  9,698
                  
                  
                  
                  9,148Total
      operating expenses
                  
                  
                  12,926
                  
                  
                  
                  12,204Loss
      from operations
                  
                  
                  (1,518
                  )
                  
                  
                  (1,445
                  )Other
      income (expense):Interest
      income
                  
                  
                  1
                  
                  
                  
                  1Interest
      (expense)
                  
                  
                  (84
                  )
                  
                  
                  (191
                  )Other
      expense, net
                  
                  
                  (83
                  )
                  
                  
                  (190
                  )Loss
      before income taxes
                  
                  
                  (1,601
                  )
                  
                  
                  (1,635
                  )Income
      tax provision
                  
                  
                  91
                  
                  
                  
                  -Net
      loss
                  
                  $
                  (1,692
                  )
                  
                  $
                  (1,635
                  )Basic
      and diluted net loss per share
                  
                  $
                  (0.12
                  )
                  
                  $
                  (0.15
                  )Weighted
      average number of common shares outstanding - basic and
      diluted
                  
                  
                  13,882,454
                  
                  
                  
                  11,110,969
 
 See notes
to these condensed consolidated financial statements.
  2
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Condensed
Consolidated Statement of Stockholders' Equity
 For
the Three Months Ended March 31, 2010
 (Unaudited)
 (dollars
in thousands)
 
 AdditionalCommon
      Stock
                    
                    
                    Treasury
      Shares
                    
                    
                    Paid-in
                    
                    
                    AccumulatedShares
                    
                    
                    Amount
                    
                    
                    Shares
                    
                    
                    Amount
                    
                    
                    Capital
                    
                    
                    Deficit
                    
                    
                    TotalBalance,
      January 1, 2010
                    
                    
                    14,472,363
                    
                    
                    $
                    14
                    
                    
                    
                    123,894
                    
                    
                    $
                    (243
                    )
                    
                    $
                    111,909
                    
                    
                    $
                    (65,857
                    )
                    
                    $
                    45,823Issuance
      of common stock under employee stock purchase plan
                    
                    
                    13,061
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    16
                    
                    
                    
                    -
                    
                    
                    $
                    16Stock
      based compensation - restricted stock vested
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    219
                    
                    
                    
                    -
                    
                    
                    $
                    219Stock
      based compensation - employee stock purchase plan
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    6
                    
                    
                    
                    -
                    
                    
                    $
                    6Amortization
      of consultant stock option costs
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    28
                    
                    
                    
                    -
                    
                    
                    $
                    28Amortization
      of employee stock options costs
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    124
                    
                    
                    
                    -
                    
                    
                    $
                    124Amortization
      of consultant restricted stock unit costs
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1
                    
                    
                    
                    -
                    
                    
                    $
                    1Amortization
      of employee restricted stock unit costs
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    264
                    
                    
                    
                    -
                    
                    
                    $
                    264Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (1,692
                    )
                    
                    $
                    (1,692
                    )Balance,
      March 31, 2010
                    
                    
                    14,485,424
                    
                    
                    $
                    14
                    
                    
                    
                    123,894
                    
                    
                    $
                    (243
                    )
                    
                    $
                    112,567
                    
                    
                    $
                    (67,549
                    )
                    
                    $
                    44,789
 
 See notes
to these condensed consolidated financial statements.
  3
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Condensed
Consolidated Statements of Cash Flows
 (Unaudited)
 (dollars
in thousands)
 
 For
      the Three Months Ended March 31,2010
                  
                  
                  2009Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (1,692
                  )
                  
                  $
                  (1,635
                  )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Provision
      for (recovery of) bad debts
                  
                  
                  220
                  
                  
                  
                  (393
                  )Depreciation
      and amortization
                  
                  
                  888
                  
                  
                  
                  987Deferred
      rent
                  
                  
                  6
                  
                  
                  
                  13Stock-based
      compensation
                  
                  
                  642
                  
                  
                  
                  586Deferred
      income taxes
                  
                  
                  91
                  
                  
                  
                  -Changes
      in operating assets and liabilities:Accounts
      receivable
                  
                  
                  (4,548
                  )
                  
                  
                  (3,884
                  )Inventories
                  
                  
                  (81
                  )
                  
                  
                  (530
                  )Prepaid
      expenses and other current assets
                  
                  
                  38
                  
                  
                  
                  170Security
      deposits and other assets
                  
                  
                  (7
                  )
                  
                  
                  5Accounts
      payable
                  
                  
                  1,036
                  
                  
                  
                  577Deferred
      revenues
                  
                  
                  (107
                  )
                  
                  
                  (66
                  )Accrued
      compensation and related benefits
                  
                  
                  1,817
                  
                  
                  
                  1,276Other
      current liabilities
                  
                  
                  (92
                  )
                  
                  
                  172Other
      long-term obligations
                  
                  
                  (7
                  )
                  
                  
                  (15
                  )Total
      adjustments
                  
                  
                  (104
                  )
                  
                  
                  (1,102
                  )Net
      cash used in operating activities
                  
                  
                  (1,796
                  )
                  
                  
                  (2,737
                  )Cash
      flows from investing activities:Purchases
      of property and equipment
                  
                  
                  (695
                  )
                  
                  
                  (413
                  )Purchase
      of intangible assets
                  
                  
                  (20
                  )
                  
                  
                  (6
                  )Net
      cash used in investing activities
                  
                  
                  (715
                  )
                  
                  
                  (419
                  )
 
 See notes
to these condensed consolidated financial statements.
  4
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Condensed
Consolidated Statements of Cash Flows, continued
 (Unaudited)
 (dollars
in thousands)
 
 For the Three Months Ended March
      31,2010
                  
                  
                  2009Cash
      flows from financing activities:Net
      proceeds under line of credit
                  
                  $
                  1,943
                  
                  
                  $
                  428Repayment
      of notes payable
                  
                  
                  -
                  
                  
                  
                  (150
                  )Proceeds
      from issuance of stock in connection with employee stock purchase
      plan
                  
                  
                  16
                  
                  
                  
                  20Net
      cash provided by financing activities
                  
                  
                  1,959
                  
                  
                  
                  298Net
      decrease in cash and cash equivalents
                  
                  
                  (552
                  )
                  
                  
                  (2,858
                  )Cash
      and cash equivalents - beginning of period
                  
                  
                  3,221
                  
                  
                  
                  5,276Cash
      and cash equivalents - end of period
                  
                  $
                  2,669
                  
                  
                  $
                  2,418Supplemental
      disclosure of cash flow information:Cash
      paid during the period for interest
                  
                  $
                  64
                  
                  
                  $
                  109Supplemental
      non-cash investing and financing activity:Asset
      acquired under capital lease obligation
                  
                  $
                  679
                  
                  
                  $
                  -
 
 See notes
to these condensed consolidated financial statements.
  5
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 1. 
Nature of Operations
 
 GlobalOptions
Group, Inc. and Subsidiaries (collectively the “Company” or “GlobalOptions
Group”) is an integrated provider of risk mitigation and management services to
government entities, Fortune 1000 corporations and high net-worth and
high-profile individuals. The Company delivers these services through four
business units: Preparedness Services; Fraud and Special Investigative Unit
(“SIU”) Services; Security Consulting and Investigations; and International
Strategies. The Preparedness Services, Fraud and SIU Services, and Security
Consulting and Investigations units represent the Company’s three financial
reporting segments. The results of the International Strategies business unit,
on the basis of its relative materiality, are included in the Fraud and SIU
Services segment.
  References
herein to “GlobalOptions” refer to GlobalOptions, Inc., an operating subsidiary
of the Company.
 
 See Note
13, Subsequent Events, for a discussion of the  Company’s sale of a
portion of the Security Consulting and Investigations unit and the
Company’s entry into an agreement to sell the Preparedness
Services unit.
 
 2.  Basis
of Presentation
  The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with United States generally accepted accounting
principles for interim financial information and the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by United States generally accepted accounting principles. In the opinion of
management, all adjustments (consisting of normal accruals) considered for a
fair presentation have been included.  The Company has evaluated
subsequent events through the issuance date of this Form
10Q.  Operating results for the three months ended March 31, 2010 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2010.  For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company’s Form 10-K for the year ended December 31, 2009, filed with the
Securities and Exchange Commission on March 16, 2010.
 
 3. 
Summary of Significant Accounting Policies
 
 Income
Taxes
 
 The
Company accounts for income taxes using the liability method. Under this method,
deferred tax assets and liabilities are determined based on differences between
the financial reporting and income tax bases of the underlying assets and
liabilities. The Company establishes a valuation allowance for deferred tax
assets when it determines that it is more likely than not that the benefits of
deferred tax assets will not be realized in future periods.  For the
three months ended March 31, 2010, the Company recorded a deferred income tax
provision on account of an increase in the net deferred tax liability caused
principally by current income tax deductions related to the amortization of
goodwill over a 15 year life that have not been recognized for book purposes.
The Company was not required to provide for a provision for income taxes for the
three months ended March 31, 2009 as a result of losses incurred during this
period.
 
 Net
Loss Per Common Share
  Basic net
loss per common share is computed based on the weighted average number of shares
of common stock outstanding, as adjusted, during the periods presented. Common
stock equivalents, consisting of stock options, restricted stock units (“RSUs”),
and Series D convertible preferred stock were not included in the calculation of
the diluted loss per share because their inclusion would have been
anti-dilutive.  The basic weighted average number of shares was reduced for
non-vested restricted stock awards.
  6
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 3. 
Summary of Significant Accounting Policies, continued
 
 Net
Loss Per Common Share, continued
 
 Potentially
dilutive securities outlined in the table below have been excluded from the
computation of diluted net loss per share, because the effect of their inclusion
would have been anti-dilutive.
 
 March
      31,2010
                    
                    
                    2009Stock
      options
                    
                    
                    1,125,504
                    
                    
                    
                    1,066,008Restricted
      stock units
                    
                    
                    228,735
                    
                    
                    
                    366,045Series
      D convertible preferred stock
                    
                    
                    -
                    
                    
                    
                    875,317Potentially
      dilutive securities realizable from the vesting of performance based
      restricted stock
                    
                    
                    470,563
                    
                    
                    
                    558,063Total
      potentially dilutive securities
                    
                    
                    1,824,802
                    
                    
                    
                    2,865,433
 
 4.
Inventories
 
 Inventories
are comprised of the following:
 
 As ofMarch
      31,
                              2010
                            
                            
                            December
      31,
                              2009Raw
      materials
                            
                            $
                            2,107
                            
                            
                            $
                            2,099Work
      in progress – DNA Analysis
                            
                            
                            315
                            
                            
                            
                            330Finished
      goods
                            
                            
                            1,063
                            
                            
                            
                            9753,485
                            
                            
                            
                            3,404Less:
      Reserve for obsolescence
                            
                            
                            (50
                            )
                            
                            
                            (50
                            )Total
                            
                            $
                            3,435
                            
                            
                            $
                            3,354
  7
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 5. 
Intangible Assets and Goodwill
 
 Intangible
Assets
 
 Intangible
assets are comprised of the following:
 
 Trade
                              Names
                            
                            
                            Developed
                              Technology
                            
                            
                            Non-Compete
                              Agreements
                            
                            
                            Client
                              Relationships
                            
                            
                            Patents
                            
                            
                            Accumulated
                              Amortization
                            
                            
                            TotalBalance
      as of  January 1, 2010
                            
                            $
                            2,560
                            
                            
                            $
                            440
                            
                            
                            $
                            1,499
                            
                            
                            $
                            8,715
                            
                            
                            $
                            183
                            
                            
                            $
                            (9,129
                            )
                            
                            $
                            4,268Additions:Costs
      of patents
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            20
                            
                            
                            
                            -
                            
                            
                            
                            20Amortization
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (321
                            )
                            
                            
                            (321
                            )Balance
      as of  March 31, 2010
                            
                            $
                            2,560
                            
                            
                            $
                            440
                            
                            
                            $
                            1,499
                            
                            
                            $
                            8,715
                            
                            
                            $
                            203
                            
                            
                            $
                            (9,450
                            )
                            
                            $
                            3,967Weighted
      average amortization period atMarch
      31, 2010 (in years)
                            
                            
                            5.1
                            
                            
                            
                            0.3
                            
                            
                            
                            0.0
                            
                            
                            
                            1.7
                            
                            
                            
                            11.8
 
 The
Company recorded amortization expense related to the acquired amortizable
intangibles of $321 and $617 for the three months ended March 31, 2010 and 2009,
respectively.
 
 6.  Accrued Compensation and Related
Benefits
 
 A summary of accrued compensation and
related benefits is comprised of the following:
  As ofMarch
      31,
                          2010
                        
                        
                        December
      31,
                          2009Accrued
      performance based bonuses
                        
                        $
                        2,133
                        
                        
                        $
                        1,429Accrued
      payroll and commissions
                        
                        
                        2,300
                        
                        
                        
                        1,499Accrued
      employee benefits
                        
                        
                        1,027
                        
                        
                        
                        715Total
                        
                        $
                        5,460
                        
                        
                        $
                        3,643
  8
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
  7. 
Line of Credit
 
 The
Company maintains a working capital line of credit (the “Facility”) which is
secured by accounts receivable and is subject to certain liquidity and earnings
financial covenants. The Company has granted a first priority security interest
in substantially all of its assets to the financial institution that provides
this Facility.
  Effective
as of March 29, 2010, the financial institution that provides the Facility,
along with the Company, entered into an agreement  to extend the
maturity of the Facility to September 29, 2010.  The Company paid a
fee of $25 in connection with the March 29, 2010 agreement, which is included in
general and administrative expenses.  The interest rate on the line of
credit at March 31, 2010 was 7.25%.  As of March 31, 2010, the
Company’s net borrowings were $4,106 under the line of credit and based upon the
amount of qualifying accounts receivable, the Company was eligible to draw up to
a total of $10,000 under the Facility.
 
 8.  Commitments
and Contingencies
 
 Employment
Agreements
 
 On March
9, 2010, effective as of April 1, 2010, the Company entered into consulting
agreements with each of Howard Safir, the Chief Executive Officer of the
Company’s Security Consulting and Investigations unit and Adam Safir, Howard
Safir’s son and an officer of the Company’s Security Consulting and
Investigations unit.  Pursuant to the terms of their respective
consulting agreements, as of April 1, 2010, Messrs. Safir and Safir ceased
serving as employees of the Company, but began providing consulting services to
the Security Consulting and Investigations business unit, including assistance
in the Company’s exploration of strategic alternatives and certain marketing
assistance.  The terms of the consulting agreements are 12 months,
provided, however, that the Company may terminate each of the consulting
agreements after three months and/or each month thereafter.  Messrs.
Howard Safir and Adam Safir will receive $30 per month and $20 per month,
respectively, for their consulting services.  In addition, if the
Company sells its Security Consulting and Investigations unit or any assets
thereof, each of Messrs. Howard Safir and Adam Safir will receive up to $600 and
$300, respectively, based upon the sales price received for the business or such
assets.  Also included in the consulting agreements are 12 month
non-solicitation and non-servicing provisions.
 
 See Note
13, Subsequent Events, for a discussion of modifications made to the
employment agreements of two of the Company’s executive
officers.
  9
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 8.  Commitments
and Contingencies, continued
 
 Operating
Leases
 
 The
Company has obligations for various office and laboratory
leases.  Such lease obligations expire at various dates through August
2016.
 
 Rent
expense charged to operations amounted to $840 and $874 for the three months
ended March 31, 2010 and 2009, respectively.
 
 The terms
of certain of the Company’s lease obligations provide for scheduled escalations
in the monthly rent. Non-contingent rent increases are being amortized over the
life of the leases on a straight line basis. Deferred rent of $781 and $782
represents the long-term unamortized rent adjustment amount at March 31, 2010
and December 31, 2009, respectively, and is reflected in other long-term
obligations in the accompanying consolidated balance sheets. In addition, the
current portion of deferred rent was $77 and $70 at March 31, 2010 and December
31, 2009, respectively, and is reflected within other current liabilities in the
consolidated balance sheets.
 
 Included
in other current liabilities at March 31, 2010 and December 31, 2009 are
obligations of $305 and $515, respectively, for restructuring costs, which
includes principally rent obligations for closed offices.
 
 Litigation,
Claims and Assessments
 
 From time
to time, in the normal course of business, the Company may be involved in
litigation.  The Company’s management has determined any asserted or
unasserted claims to be immaterial to the consolidated financial
statements.
 
 9. 
Stockholders’
Equity
 
 Common
Stock Issued
 
 During
the three months ended March 31, 2010, the Company issued 13,061 shares of its
common stock under the Amended and Restated 2006 Employee Stock Purchase Plan
(the “Stock Purchase Plan”).  The Company realized proceeds of $16 and
recognized stock based compensation of $6 in connection with the issuance of
these shares.
 
 Restricted
Stock Issued Under Performance Based Executive Bonus Plan
  On
December 19, 2006, the Company awarded 100,000 and 75,000 shares of unvested
restricted stock to its Chief Executive Officer and Chief Financial Officer,
respectively, in connection with the extension of their respective employment
and consulting agreements. On July 24, 2008 the Company awarded an additional
250,000 and 187,500 shares of unvested restricted stock to its Chief Executive
Office and Chief Financial Officer, respectively, in connection with the 2006
Executive Compensation Performance Bonus Plan.
  At March
31, 2010, an aggregate of 470,563 of the restricted shares awarded to these
executives remain subject to vesting based on certain performance and stock
price targets that have been established by the Compensation
Committee.
 
 Amended and Restated 2006 Long-Term
Incentive Plan(the “Incentive
Plan”)
  Under the Company’s Amended and
Restated 2006 Long-Term Incentive Plan, the Company may issue up to 3,000,000
shares of the Company’s common stock.  The Compensation Committee has
the authority to determine the amount, type and terms of each award, but may not
grant awards under the Incentive Plan, in any combination, for more than 625,000
shares of the Company’s common stock to any individual during any calendar year,
increased from 312,500 under the Company’s original 2006 Long-Term Incentive
Plan.
  As of
March 31, 2010, 904,651 shares of common stock remain eligible to be issued
under the Incentive Plan.
  10
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 9. 
Stockholders’
Equity
  Amended and Restated 2006 Employee
Stock Purchase Plan(“Stock Purchase Plan”)
  Under the
Stock Purchase Plan, eligible employees of the Company are permitted to
automatically purchase at the end of each month, at a discounted price, a
certain number of shares of the Company’s common stock by having the effective
purchase price of such shares withheld from their base pay.  The Stock
Purchase Plan provides for the issuance of up to 2,000,000 shares of the
Company’s common stock.
  As of
March 31, 2010, 1,895,840 shares of common stock remain eligible to be issued
under the Stock Purchase Plan.
  Stock Based Compensation
  Equity
instruments issued to employees are recorded at their fair value on the date of
grant and are amortized over the vesting period of the award.  Stock
based compensation for employees was approximately $613 and $568 for the three
months ended March 31, 2010 and 2009, respectively.   For the
three months ended March 31, 2010 and 2009, $105 and $48, respectively, were
reflected in selling and marketing expenses, and $508 and $520, respectively,
were reflected in general and administrative expenses.
  Equity
instruments issued to non-employees are recorded at their fair value on the
grant date. The non-vested portions of the award are adjusted based on
market value on a quarterly basis and the adjusted value of award is amortized
over the expected service period.  Stock based compensation for
non-employees was approximately $29 and $18 for the three months ended March 31,
2010 and 2009, respectively, and was reflected in general and administrative
expenses.
 
 The
following table summarizes total stock based compensation costs recognized for
the three months ended March 31, 2010 and 2009, respectively.
 
 For the Three Months Ended
      March 31,2010
                                                
                                                
                                                2009Employees
                                                
                                                
                                                Non
                                                  Employees
                                                
                                                
                                                Total
                                                
                                                
                                                Employees
                                                
                                                
                                                Non
                                                  Employees
                                                
                                                
                                                TotalStock
      options
                                                
                                                $
                                                124
                                                
                                                
                                                $
                                                28
                                                
                                                
                                                $
                                                152
                                                
                                                
                                                $
                                                115
                                                
                                                
                                                $
                                                20
                                                
                                                
                                                $
                                                135RSUs
                                                
                                                
                                                264
                                                
                                                
                                                
                                                1
                                                
                                                
                                                
                                                265
                                                
                                                
                                                
                                                254
                                                
                                                
                                                
                                                (2
                                                )
                                                
                                                
                                                252Stock
      purchase plan
                                                
                                                
                                                6
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                6
                                                
                                                
                                                
                                                7
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                7Amortization
      of restricted shares under performance based executive bonus
      awards
                                                
                                                
                                                219
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                219
                                                
                                                
                                                
                                                192
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                192Total
                                                
                                                $
                                                613
                                                
                                                
                                                $
                                                29
                                                
                                                
                                                $
                                                642
                                                
                                                
                                                $
                                                568
                                                
                                                
                                                $
                                                18
                                                
                                                
                                                $
                                                586
  11
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 10.
Stock Based Compensation
 
 Stock Options
 
 The fair
value of each option grant during the three months ended March 31, 2010 and 2009
was estimated on the date of grant using the Black-Scholes option pricing
model.  The weighted average assumptions used to compute the grant
date value of the options granted during the three months ended March 31, 2010
and 2009 were as follows:
 
 For the Three Months Ended March
      31,2010
                      
                      
                      2009Dividend
      yield
                      
                      
                      0%
                      
                      
                      
                      0%Expected
      volatility
                      
                      
                      103.2%
                      
                      
                      
                      104%Risk-free
      interest rate
                      
                      
                      2.69%
                      
                      
                      
                      1.86%Expected
      lives
                      
                      3
      years%
                      
                      
                      3.6
      years%
 
 The
Company has determined that the expected life of options granted prior to July
1, 2008 is the same as the contractual term for such options because the
recipients were expected to remain with the Company for the full term of the
option award.  The expected life of options granted on and after
July 1, 2008 was calculated using the simplified method, calculating the
expected life as the average of the contractual term and the vesting
period.
 
 The
weighted average fair value of the options on the date of grant, using the fair
value based methodology for the three months ended March 31, 2010 and 2009 was
$1.06 and $1.24 per share, respectively.
 
 On
January 1, 2010, the Company granted, in the aggregate, options for the purchase
of 75,000 shares of its common stock at an exercise price of $1.65 per share,
under the Incentive Plan, to three members of the Board of Directors. The
options have a five year term and vest ratably at the end of each of the four
quarterly periods following the date of grant.  In the aggregate,
these options have a fair value of approximately $80 utilizing the Black-Scholes
option pricing model and the following assumptions: expected life of three
years; volatility of 103.2%; dividends of 0%; and a risk free interest rate of
2.69%.
 
 On
January 1, 2010, the Company granted, in the aggregate, options for the purchase
of 100,000 shares of its common stock at an exercise price of $1.65 per share,
under the Incentive Plan, to certain members of its advisory boards for their
advisory services to the Company.  The options have a five year term and
vest ratably at the end of each of the four quarterly periods following the date
of grant.  In the aggregate, these options have a fair value of
approximately $106 utilizing the Black-Scholes option pricing model and the
following assumptions: expected life of three years; volatility of 103.2%;
dividends of 0%; and a risk free interest rate of 2.69%.
 
 At March
31, 2010, the unamortized value of stock options held by employees was
approximately $388.  The unamortized portion will be expensed over a
weighted average period of 0.8 years.
  12
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 10.
Stock Based Compensation, continued
 
 Stock Options, continued
 
 A summary
of the status of the Company’s stock option plans and the changes during the
three months ended March
31, 2010, is presented in the table below:
 Number
      of
                        Options
                      
                      
                      Weighted
                        Average
                        Exercise
                        Price
                      
                      
                      Weighted
                        Average
                        Remaining
                        Contractual
                        Life
                      
                      
                      Intrinsic
                        Value(per
      share)
                      
                      
                      (in
      years)Options
      outstanding at December 31, 2009
                      
                      
                      967,781
                      
                      
                      $
                      2.57
                      
                      
                      
                      3.5Granted
                      
                      
                      175,000Forfeited
                      
                      
                      (17,277
                      )Options
      outstanding at March 31, 2010
                      
                      
                      1,125,504
                      
                      
                      $
                      2.43
                      
                      
                      
                      3.5
                      
                      
                      
                      -Exercisable
      March 31, 2010
                      
                      
                      694,579
                      
                      
                      $
                      2.84
                      
                      
                      
                      3.3
                      
                      
                      
                      -
 
 Restricted
Stock Units (RSUs)
 
 At March
31, 2010, the unamortized value of RSUs held by employees was approximately
$968. The unamortized portion will be expensed over a weighted average period of
1.1 years.
 
 A summary
of the activity related to RSUs for the three months ended March 31, 2010 is
presented below:
 
 Total
                    
                    
                    Weighted
                      Average
      Grant
                      Date
      Fair ValueNonvested
      at January 1, 2010
                    
                    
                    228,819
                    
                    
                    $
                    2.12RSUs
      vested
                    
                    
                    -RSUs
      forfeited
                    
                    
                    (84
                    )Nonvested
      at March 31, 2010
                    
                    
                    228,735
                    
                    
                    $
                    2.12
  13
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
  10.
Stock Based Compensation, continued
 
 Amended and Restated 2006 Employee
Stock Purchase Plan
 
 The Stock
Purchase Plan was established for eligible employees to purchase shares of the
Company’s common stock on a monthly basis at 85% of the lower of the market
value of the Company’s common stock on the first or last business day of each
month. Under the Stock Purchase Plan, employees may authorize the Company to
withhold up to 15% of their compensation during any monthly offering period for
common stock purchases, subject to certain limitations. The Stock Purchase Plan
was implemented in July 2008 and is qualified under Section 423 of the Internal
Revenue Code.
 
 For the
three months ended March 31, 2010 and 2009, 13,061 and 16,261 shares were issued
under the Stock Purchase Plan, resulting in proceeds of $16 and $20,
respectively. Stock based compensation recognized in connection with the
issuance of these shares was $6 and $7 for the three months ended March 31, 2010
and 2009, respectively.
 
 11.   Client
and Segment Data
  The
Company’s reportable operating segments consist of the following three
business segments: Preparedness Services, Fraud and SIU Services, and Security
Consulting and Investigations. The Company’s reportable segments are
organized, managed and operated along key product and service lines. These
product and service lines provided to similar clients are offered together as
packaged offerings, generally produce similar margins and are managed under a
consolidated operations management.
 
 The
Preparedness Services segment develops and implements crisis management and
emergency response plans for disaster mitigation, continuity of operations and
other emergency management issues for governments, corporations and individuals.
See Note 13, Subsequent Events, for a discussion of the Company’s
entry into an agreement to sell the Preparedness Services
unit.
 
 The Fraud
and SIU Services segment provides investigative surveillance, anti-fraud
solutions and business intelligence services to the insurance industry, law
firms and multinational organizations. The results of the Company’s
International Strategies business unit, on the basis of its relative
materiality, are included in the Fraud and SIU Services segment.
 
 The
Security Consulting and Investigations segment delivers specialized security and
investigative services to governments, corporations and individuals. See Note
13, Subsequent Events, for a discussion regarding the Company’s sale of the
SafirRosetti unit within this segment.
 
 Total
revenues by segment include revenues to unaffiliated clients. The Company
evaluates performance based on income (loss) from operations. Operating
income (loss) is gross profit less operating expenses.
 
 The
following tables summarize financial information about the Company’s business
segments for the three months ended March 31, 2010 and
2009.
 
 For the Three Months Ended
March 31, 2010
 
 Preparedness
                        Services
                      
                      
                      Fraud & SIU
                        Services-
                      
                      
                      Security
                        Consulting &
                        Investigations
                      
                      
                      Corporate
                      
                      
                      ConsolidatedRevenues
                      
                      $
                      9,189
                      
                      
                      $
                      6,997
                      
                      
                      $
                      9,048
                      
                      
                      $
                      -   -
                      
                      
                      $
                      25,234Income
      (Loss) from Operations
                      
                      $
                      375
                      
                      
                      $
                      (1,167
                      )
                      
                      $
                      (726
                      )
                      
                      $
                      -
                      
                      
                      $
                      (1,518
                      )Depreciation
      and Amortization
                      
                      $
                      81
                      
                      
                      $
                      355
                      
                      
                      $
                      452
                      
                      
                      $
                      -
                      
                      
                      $
                      888Interest
      Expense , net
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      83
                      
                      
                      $
                      83
  14
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 11.   Client
and Segment Data, continued
 
 For the Three Months Ended March 31,
      2009Preparedness
                          Services
                        
                        
                        Fraud & SIU
                          Services-
                        
                        
                        Security
                          Consulting &
                          Investigations
                        
                        
                        Corporate
                        
                        
                        ConsolidatedRevenues
                        
                        $
                        10,958
                        
                        
                        $
                        6,899
                        
                        
                        $
                        7,657
                        
                        
                        $
                        -
                        
                        
                        $
                        25,514Income
      (loss) from Operations
                        
                        $
                        741
                        
                        
                        $
                        (1,165
                        )
                        
                        $
                        (1,021
                        )
                        
                        $
                        -
                        
                        
                        $
                        (1,445
                        )Depreciation
      and Amortization
                        
                        $
                        251
                        
                        
                        $
                        288
                        
                        
                        $
                        448
                        
                        
                        $
                        -
                        
                        
                        $
                        987Interest
      Expense, net
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        190
                        
                        
                        $
                        190
 
 12.  Major
Clients/Customers
  Revenues
from the Company’s services to a limited number of clients have accounted for a
substantial percentage of the Company’s total revenues. The Company’s largest
client, which is within the Preparedness Services segment and represents work
performed under government contracts, accounted for approximately 22% and 27% of
the Company’s revenues for the three months ended March 31, 2010 and 2009,
respectively.
 
 For the
three months ended March 31, 2010 and 2009, work performed under government
contracts represented 55% and 55% of the Company’s revenues, respectively, the
most significant of which represented 61% and 62%, respectively, of the
Company’s revenues within the Preparedness Services segment for the same
periods.
 
 13.  Subsequent
Events
  Stock Based Compensation
  On
April 30, 2010, the Company issued 8,550 shares of its common stock under the
stock purchase plan.  The Company realized proceeds of $12 and
recognized stock based compensation of $4 in connection with the issuance of
these shares.
 
 Sale
of SafirRosetti Business Unit
 
 On April 30, 2010, the Company and
GlobalOptions (the “Sellers”) completed the sale of all assets used in the
Company’s
SafirRosetti business unit (“SafirRosetti”), which provided the security
consulting and design services within the Security Consulting and Investigations
segment,  in accordance with an asset purchase agreement dated April
23, 2010 (the “SafirRosetti Purchase Agreement”), by and among the Sellers and
Guidepost Solutions LLC (“Guidepost”), of which Joseph Rosetti, a former officer
of SafirRosetti, is a principal.
  Pursuant to the terms of the
SafirRosetti Purchase Agreement, the SafirRosetti unit was sold for an aggregate
consideration of (i) $3,500 in cash, subject to certain adjustments, of which
$525 will be held in escrow for a period of 17 months, (ii) the assumption of
substantially all of the liabilities of SafirRosetti which accrue post-closing,
(iii) a secured promissory note in the aggregate face amount of $1,750, with an
interest rate of 0.79% per annum (the “Note”), payable in equal installments at
December 31, 2010 and June 30, 2011 and (iv) contingent consideration based on
70% of the purchased accounts receivable in excess of $1,750 collected by
Guidepost between the closing and the one year anniversary of the closing.
  15
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
 
 13. Subsequent Events,
continued
 
 Sale
of SafirRosetti Business Unit, continued
 
 The Note
provides a first priority lien against the sold accounts receivable of
SafirRosetti and the post-closing accounts receivable of Guidepost arising from
the customer accounts purchased and a second priority lien against the
remaining property of SafirRosetti transferred to
Guidepost.  Guidepost will transfer all uncollected account
receivables back to the Sellers on June 30, 2011, subject to a purchase right by
Guidepost.
  As a
result of the sale of SafirRosetti, the Company’s Security Consulting and
Investigations segment is being renamed “Forensic DNA Solutions and Products”
and will be comprised solely of The Bode Technology Group, Inc., which provides
forensic DNA analysis services.
 Entry
into Agreement to Sell Preparedness Services Business Unit
  On May
13, 2010, the Sellers entered into an Asset Purchase Agreement (the
“Preparedness Purchase Agreement”) with Witt Group Holdings, LLC, a Delaware
limited liability company (“Witt Holdings”), of which James Lee Witt, Chief
Executive Officer, Mark Merritt, Co-President, Barry Scanlon, Co-President, and
Pate Felts, Senior Advisor, respectively, of the Company’s Preparedness Services
unit (the “Preparedness Unit”) are principals.
  Pursuant
to the terms of the Preparedness Purchase Agreement, Sellers will sell the
Preparedness Unit to Witt Holdings for an aggregate consideration of (i) $10,000
in cash, of which $1,000 is to be held in escrow for 12 months following the
Closing, (ii) an earnout payment equal to 40% of any revenues over $15,000
earned during the 12-month period following the closing of the transactions
contemplated under the Preparedness Purchase Agreement (the “Closing”), which
payment may not exceed $12,000, and (iii) the assumption of all of the
Preparedness Unit’s liabilities, including its liabilities arising post Closing,
including all termination and severance payments due to James Lee Witt, Mark
Merritt, Barry Scanlon and Pate Felts upon the sale of the Preparedness Unit
under their respective employment agreements, less $286, representing a payment
due under the Preparedness Unit’s real estate lease in Washington D.C. The
maximum total consideration payable to the Sellers under the Preparedness
Purchase Agreement is $22,000.
  In
addition, Witt Holdings has agreed to pay Sellers, within six months of the date
of Closing, the amount by which the working capital of the Preparedness Unit at
the Closing exceeds $6,800, and Sellers have agreed to pay Witt Holdings within
six months of the date of Closing, the amount by which the working capital of
the Preparedness Unit is less than $5,800.  Sellers have also agreed
to pay Witt Holdings (i) a “true-up” of up to $1,000 based on accounts
receivable (other than accounts receivable originating from the State of
Louisiana or its agencies) that remain uncollected as of six months following
the Closing, and (ii) the face amount of any uncollected receivables arising
from the bankruptcy or dissolution of any non-governmental
entity.  Witt Holdings agreed upon such payment to transfer to Sellers
all rights with respect to such uncollected receivables.
  The sale
of the Preparedness Unit is subject to the approval of the Company’s
shareholders and certain other customary closing conditions.  The
Preparedness Purchase Agreement may be terminated by Sellers and/or Witt
Holdings for a number of reasons, including but not limited to if the
transactions contemplated under the Preparedness Purchase Agreement do
not close on or before October 31, 2010.
  Modification
of Employment Agreements
  In
connection with the Company’s entry into the Preparedness Purchase Agreement,
the Compensation Committee of the Company’s Board of Directors determined that a
“change of control,” as defined under the employment agreements of Dr. Schiller,
the Company’s Chief Executive Officer, and Mr. Nyweide, the Company’s Chief
Financial Officer and Executive Vice President (a “Change of Control”), would
result from the completion of the sale of the Preparedness Unit.  In
the event of a Change of Control, Dr. Schiller and Mr. Nyweide’s employment
agreements provide that Dr. Schiller and Mr. Nyweide may terminate their
employment with the Company for “good reason,” as defined under their employment
agreements, Dr. Schiller and Mr. Nyweide will become entitled to certain
severance payments should they terminate their employment, and all stock
options, restricted stock and restricted stock units held by Dr. Schiller and
Mr. Nyweide will vest immediately and all performance conditions of any and all
cash bonuses and performance stock options or restricted stock will be deemed to
be met.
  On May
13, 2010, the Company entered into modifications of its employment agreements
with Dr. Schiller and Mr. Nyweide to induce them to remain with the Company in
the event that they become entitled to terminate their employment agreements as
a result of the occurrence of a Change of Control.
 16
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (In
thousands except share and per share amounts)
  13.Subsequent Events,
continued
  Modification
of Employment Agreements, continued
  Schiller
Modification
  The
modification (the “Schiller Modification”) to Dr. Schiller’s employment
agreement (the “Schiller Employment Agreement”) provides that in the event of
the sale of two of the Company’s four divisions, provided that at least one such
sale requires the approval of the Company’s stockholders (a “Sales Event”), Dr.
Schiller will continue to serve as Chairman and Chief Executive Officer of the
Company for one year following the Sales Event, although at a reduced level of
responsibility.  Beginning on the first day of the month immediately
following a Sales Event, Dr. Schiller will receive a base salary of $180 per
annum, plus living expenses as provided under the Schiller Employment Agreement,
for the duration of the Schiller Modification.  In addition to his
base salary, Dr. Schiller will be eligible for a discretionary cash bonus one
year after the Sales Event.  Following the completion of the term of
the Schiller Modification, the Company has the option to continue to employ Dr.
Schiller on a month-to-month basis for $20 per month.
  Notwithstanding
Dr. Schiller’s continued employment following a Sales Event, after the
occurrence of a Sales Event, the Company is required to deposit all funds that
would have been required to be paid to Dr. Schiller under the Schiller
Employment Agreement had he terminated his employment for Good Reason (as
defined under the Schiller Employment Agreement) as a result of the Sales Event,
into a “rabbi trust.”  Pursuant to the Schiller Modification, such
funds will be paid to Dr. Schiller six months after his separation from
service for any reason (for
purposes of Section 409A of the Internal Revenue Code, the deferred compensation
rules, which may include a point in time when Dr. Schiller works
part-time.)
  The
Schiller Modification also provides that upon Dr. Schiller’s termination without
Cause (as defined under the Schiller Employment Agreement), for Good Reason not
including a Sales Event, or as a result of death or Disability (as defined under
the Schiller Employment Agreement) prior to the end of the term of the Schiller
Modification, Dr. Schiller will receive his salary and benefits through the end
of the term.  In addition, if an asset purchase agreement or similar
agreement has been signed that would constitute a Sales Event if consummated,
and Dr. Schiller’s employment is terminated without Cause prior to its
consummation, Dr. Schiller will be entitled to these payments if such Sales
Event occurs or another Change of Control occurs within six months of the date
of termination.
  Nyweide
Modification
  The
modification (the “Nyweide Modification”) to Mr. Nyweide’s employment agreement
(the “Nyweide Employment Agreement”) provides that in the event of a Sales
Event, Mr. Nyweide will continue to serve as Chief Financial Officer and
Executive Vice President of the Company for 18 months following the Sales
Event.  Following a Sales Event, Mr. Nyweide will receive his current
base salary of $375 per annum for the first twelve months of such term and a
reduced base salary of $180 per annum for the remaining six months, during which
period his responsibilities are intended to be reduced.  In addition
to his base salary, Mr. Nyweide will be eligible to receive a performance bonus
of $150 in connection with a Sales Event, and a performance bonus of $250 in the
event of a sale of the Company’s fourth and final division.  Following
the completion of the term of the Nyweide Modification, the Company has the
option to continue to employ Mr. Nyweide on a month-to-month basis under the
same terms and conditions.
  Notwithstanding
Mr. Nyweide’s continued employment following a Sales Event, after the occurrence
of a Sales Event, the Company is required to deposit all funds that would have
been required to be paid to Mr. Nyweide under the Nyweide Employment Agreement
had he terminated his employment for Good Reason (as defined under the Nyweide
Employment Agreement) as a result of the Sales Event, into a “rabbi
trust.”  Pursuant to the Nyweide Modification, such funds will be paid
to Mr. Nyweide six months after his separation from service for any
reason.
  The
Nyweide Modification also provides that upon Mr. Nyweide’s termination without
Cause (as defined under the Nyweide Employment Agreement), for Good Reason not
including a Sales Event, or as a result of death or Disability (as defined under
the Nyweide Employment Agreement) prior to the end of the term of the Nyweide
Modification, Mr. Nyweide will receive his salary and benefits through the end
of the term.  In addition, if an asset purchase agreement or similar
agreement has been signed that would constitute a Sales Event if consummated,
and Mr. Nyweide’s employment is terminated without Cause prior to its
consummation, Mr. Nyweide will be entitled to these payments if such Sales Event
occurs or another Change of Control occurs within six months of the date of
termination.
  17




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


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





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





Forward-Looking
Statements





Information
included or incorporated by reference in this Quarterly Report on Form 10-Q may
contain forward-looking statements. This information may involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from the future
results, performance or achievements expressed or implied by any forward-looking
statements. Forward-looking statements, which involve assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the words "may," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative of these words or other variations on
these words or comparable terminology. Factors that could cause or contribute
to such differences include, but are not limited to, those identified below, and
those discussed in the section titled “Risk Factors” included in our Annual
Report on Form 10-K for the year ended December 31, 2009, filed with the
Securities and Exchange Commission (the “SEC”) on March 16,
2010.  Furthermore, such forward-looking statements speak only as of
the date of this report.  Except as required by law, we undertake no
obligation to update any forward-looking statements to reflect events or
circumstances after the date of such statements.




Overview




GlobalOptions
Group, Inc. and Subsidiaries (collectively the “Company” or “GlobalOptions
Group”) is an integrated provider of risk mitigation and risk management
services to government entities, Fortune 1,000 corporations and high net-worth
and high-profile individuals. We enable clients to identify, assess and
prevent natural and man-made threats to the well-being of individuals and the
operations of governments and corporations. In addition, we assist our
clients in recovering from the damages or losses resulting from the occurrence
of acts of terror, natural disasters, fraud and other risks. We have
established operating platforms for each of our business units that leverage our
experienced senior management team and our proprietary business processes and
technology solutions.  We have an established base of key clients,
forming a base upon which we intend to grow our business.




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




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




•
            Preparedness
      Servicesdevelops
      and implements crisis management and emergency response plans for disaster
      mitigation, continuity of operations and other emergency management issues
      for governments, corporations and individuals. Services we provide include
      preparedness, response and recovery services, threat and impact
      assessments, business continuity plans and emergency exercises and
      training programs. The Preparedness Services unit is led by former Federal
      Emergency Management Agency Director James Lee Witt.See Corporate Developments below
      for a discussion of our entry into an agreement to sell our
      Preparedness Services unit.




•
            Fraud and
      Special Investigative Unit (“SIU”) Servicesprovides investigative
      surveillance, anti-fraud solutions and business intelligence services to
      the insurance industry, law firms and multinational organizations.
      Services we provide include fraud reporting, anti-fraud training,
      insurance claims investigations, surveillance, background investigations,
      and corporate investigations for liability, on-scene accident
      investigations and regulatory compliance. The Fraud and SIU Services unit
      is led by Halsey Fischer, a 20-year industry veteran and former President
      and Chief Executive Officer of Confidential Business Resources
      (“CBR”).


18


•
            SecurityConsulting
      and Investigationsdelivers specialized security and investigative services to governments,
      corporations and individuals. Services we provide include forensic DNA
      analysis, as well as security consulting and design services consisting of
      facilities and IT security, litigation support, business intelligence, IT
      and accounting forensics, executive protection, independent monitoring and
      regulatory compliance. Effective April 30, 2010, we completed the sale of
      all assets used in our SafirRosetti business unit (“SafirRosetti”), which
      provided the security consulting and design services within this business
      unit.  As a result of the sale of SafirRosetti, this unit is
      being renamed “Forensic DNA Soultions and Products” and will be comprised
      solely of The Bode Technology Group, Inc. (“Bode”), which
      provides DNA analysis services.  The Forensic DNA
      Solutions and Products unit will be led by Barry Watson, CEO of
      Bode.See Corporate
      Developments below for a discussion of the sale of
      SafirRosetti.




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





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





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





For the Three Months
                        Ended March 31,Segment
                      
                      2010
                      
                      
                      2009Preparedness
      Services
                      
                      
                      36.4
                      %
                      
                      
                      43.0
                      %Fraud
      and SIU Services
                      
                      
                      27.7
                      
                      
                      
                      27.0Security
      Consulting and Investigations
                      
                      
                      35.9
                      
                      
                      
                      30.0Total
                      
                      
                      100.0
                      %
                      
                      
                      100.0
                      %




Growth
Strategy




Our goal
is to offer this industry’s most comprehensive risk mitigation solutions to
government entities, Fortune 1,000 corporations and high net-worth and
high-profile individuals.  We intend to grow our business in the
following manner.




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




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




Develop New Solutions. We
will continue to develop and seek solutions to meet unique client and dynamic
market segment needs by expanding and bundling our product and service
offerings. As we continue to grow, principally through organic
growth and through select acquisitions, we expect to meet additional needs
of our clients. Evidence of this strategy is our enterprise-oriented solution,
GlobalTrak 3.0TM, and
the DNA technology service we offer through Bode.


19




Corporate
Developments




Modification to the Line of Credit
Agreement




We
maintain a working capital line of credit (the “Facility”) which is secured by
accounts receivable and is subject to certain liquidity and earnings financial
covenants, and have granted a first priority security interest in substantially
all of our assets to the financial institution that provides the
Facility.




Effective
as of March 29, 2010, the financial institution that provides the Facility
entered into an amendment to our working capital line of credit to extend the
maturity of the Facility to September 29, 2010.  A fee of $25 was paid
in connection with the March 31, 2010 modification, which is included in general
and administrative expenses.  The interest rate on the line of credit
at March 31, 2010 was 7.25%.  As of March 31, 2010, our net borrowings
were $4,106 under the line of credit and based upon the amount of qualifying
accounts receivables, we were eligible to draw up to a total of $10,000 under
the Facility.




Sale
of SafirRosetti Business Unit




On April
30, 2010, we completed the sale of all assets used in our SafirRosetti business
unit, which provided the security consulting and design services within the
Security Consulting and Investigations segment, in accordance with an asset
purchase agreement dated April 23, 2010 (the “SafirRosetti Purchase Agreement”),
by and among us and GlobalOptions (the “Sellers”), and Guidepost Solutions LLC
(“Guidepost”), of which Joseph Rosetti, a former officer of SafirRosetti, is a
principal.





Pursuant
to the terms of the SafirRosetti Purchase Agreement, the SafirRosetti unit was
sold for an aggregate consideration of (i) $3,500 in cash, subject to certain
adjustments, of which $525 will be held in escrow for a period of 17 months,
(ii) the assumption of substantially all of the liabilities of SafirRosetti
which accrue post-closing, (iii) a secured promissory note in the aggregate face
amount of $1,750, with an interest rate of 0.79% per annum (the “Note”), payable
in equal installments at December 31, 2010 and June 30, 2011 and (iv) contingent
consideration based on 70% of the purchased accounts receivable in excess of
$1,750 collected by the Guidepost between the closing and the one year
anniversary of the closing.





The Note
provides a first priority lien against the sold accounts receivable of
SafirRosetti and the post-closing accounts receivable of Guidepost arising from
the customer accounts purchased, and a second priority lien against the
remaining property of SafirRosetti transferred to
Guidepost.  Guidepost will transfer all uncollected account
receivables back to the Sellers on June 30, 2011, subject to a purchase right by
Guidepost.




As a
result of the sale of SafirRosetti, the Company’s Security Consulting and
Investigations segment is being renamed “Forensic DNA Solutions and Products”
and will be comprised solely of The Bode Technology Group, Inc., which provides
forensic DNA analysis services.
  For
additional disclosure regarding the SafirRosetti Purchase Agreement, see our
Current Reports on Form 8-K filed with the SEC on April 29, 2010 and May 6,
2010.


Entry
into Agreement to Sell Preparedness Services Business Unit




On May
13, 2010, the Sellers entered into an Asset Purchase Agreement (the
“Preparedness Purchase Agreement”) with Witt Group Holdings, LLC, a Delaware
limited liability company (“Witt Holdings”), of which James Lee Witt, Chief
Executive Officer, Mark Merritt, Co-President, Barry Scanlon, Co-President, and
Pate Felts, Senior Advisor, respectively, of our Preparedness Services unit (the
“Preparedness Unit”) are principals.
  Pursuant
to the terms of the Preparedness Purchase Agreement, Sellers will sell the
Preparedness Unit to Witt Holdings for an aggregate consideration of (i) $10,000
in cash, of which $1,000 is to be held in escrow for 12 months following the
Closing, (ii) an earnout payment equal to 40% of any revenues over $15,000
earned during the 12-month period following the closing of the transactions
contemplated under the Preparedness Purchase Agreement (the “Closing”), which
payment may not exceed $12,000, and (iii) the assumption of all of the
Preparedness Unit’s liabilities, including its liabilities arising post Closing,
including all termination and severance payments due to James Lee Witt, Mark
Merritt, Barry Scanlon and Pate Felts upon the sale of the Preparedness Unit
under their respective employment agreements, less $286, representing a payment
due under the Preparedness Unit’s real estate lease in Washington D.C. The
maximum total consideration payable to the Sellers under the Preparedness
Purchase Agreement is $22,000.


20






In
addition, Witt Holdings has agreed to pay Sellers, within six months of the date
of Closing, the amount by which the working capital of the Preparedness Unit at
the Closing exceeds $6,800, and Sellers have agreed to pay Witt Holdings within
six months of the date of Closing, the amount by which the working capital of
the Preparedness Unit is less than $5,800.  Sellers have also agreed
to pay Witt Holdings (i) a “true-up” of up to $1,000 based on accounts
receivable (other than accounts receivable originating from the State of
Louisiana or its agencies) that remain uncollected as of six months following
the Closing, and (ii) the face amount of any uncollected receivables arising
from the bankruptcy or dissolution of any non-governmental
entity.  Witt Holdings agreed upon such payment to transfer to Sellers
all rights with respect to such uncollected receivables.
  The sale
of the Preparedness Unit is subject to the approval of our shareholders and
certain other customary closing conditions.  The Preparedness Purchase
Agreement may be terminated by Sellers and/or Witt for a number of reasons,
including but not limited to if the transactions contemplated under the
Preparedness Purchase Agreement do not close on or before October 31,
2010.
  For
additional disclosure regarding the Preparedness Purchase Agreement, see our
Current Report on Form 8-K filed with the SEC on May 13, 2010.


Modification
of Employment Agreements




On May
13, 2010, in connection with our entry into the Preparedness Purchase Agreement,
we entered into employment agreement modifications (the “Employment Agreement
Modifications”) with Harvey W. Schiller, our Chairman and Chief Executive
Officer, and Jeffrey O. Nyweide, our Chief Financial Officer and Executive Vice
President.  We entered into the Employment Agreement Modifications in
order to induce Dr. Schiller and Mr. Nyweide to remain with us in the event that
they become entitled to terminate their employment agreements as a result of the
occurrence of a “change of control,” as defined under their employment
agreements.
  For
additional disclosure regarding the Employment Agreement Modifications, see our
Current Report on Form 8-K filed with the SEC on May 13, 2010.
  Statements
of Operations





Revenues




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


21




Gross
Profit




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




Operating
Expenses




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




Results
of Operations




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




For the Three Months
                          Ended March 31,2010
                        
                        
                        2009Revenues
                        
                        
                        100
                        %
                        
                        
                        100
                        %Cost
      of revenues
                        
                        
                        55
                        
                        
                        
                        58Gross
      profit
                        
                        
                        45
                        
                        
                        
                        42Operating
      expenses:Selling
      and marketing
                        
                        
                        13
                        
                        
                        
                        12General
      and administrative
                        
                        
                        38
                        
                        
                        
                        36Total
      operating expenses
                        
                        
                        51
                        
                        
                        
                        48Loss
      from operations
                        
                        
                        (6
                        )
                        
                        
                        (6
                        )Other
      income (expense), net
                        
                        
                        -
                        
                        
                        
                        (1
                        )Net
      loss
                        
                        
                        (6
                        )%
                        
                        
                        (7
                        )%




GlobalOptions
Group Three Months Ended March 31, 2010 Compared to the Three Months Ended March
31, 2009




Revenues




We had
overall revenues of $25,234 for the three months ended March 31, 2010, as
compared to revenues of $25,514 for the three months ended March 31, 2009, for
an overall decrease of $280 or 1%.





Preparedness Services revenues were
$9,189 for the three months ended March 31, 2010, as compared to $10,958 for the
three months ended March 31, 2009.  The decrease of $1,769 or 2% was
primarily attributable to a reduction in our relief efforts in Texas, Iowa and
Indiana.





Fraud and SIU Services revenues were
$6,997 for the three months ended March 31, 2010, as compared to $6,899 for the
three months ended March 31, 2009, reflecting an increase of
1%.


22





Security
Consulting and Investigations revenues were $9,048 for the three months ended
March 31, 2010, as compared to $7,657 for the three months ended March 31,
2009.  The increase of $1,391 or 18% was primarily attributable to an
increase in demand for forensic DNA analysis and research and development
projects.




Gross
Profit




Our
consolidated gross profit for the three months ended March 31, 2010 and 2009 was
$11,408 and $10,759, respectively, reflecting an increase of $649 or
6%.  Our gross profit margins for the three months ended March 31,
2010 and 2009 were 45% and 42% respectively.




Preparedness
Services gross profit was $4,200 or 46% of this segment’s revenues for the three
months ended March 31, 2010, as compared to $4,975 or 45% of this segment’s
revenues for the three months ended March 31, 2009.  Fraud and SIU
Services gross profit was $2,859 or 41% of this segment’s revenues for the three
months ended March 31, 2010, as compared to $2,643 or 39% of this segment’s
revenues for the three months ended March 31, 2009.  The decrease in
gross profit margin in this segment was primarily due to increased use of third
party consultants in 2010. Security Consulting and Investigations gross profit
was $4,349 or 48% of this segment’s revenues for the three months ended March
31, 2010, as compared to $3,111 or 41% of this segment’s revenues for the three
months ended March 31, 2009.  The increase in profit margin was
primarily a result of increased utilization of fixed labor costs in this segment
during the three months ended March 31, 2010.




Operating
Expenses




Selling
and marketing expenses were $3,229 or 13% of revenues for the three months ended
March 31, 2010, as compared to $3,056 or 12% of revenues for the three months
ended March 31, 2009. The increase in selling expenses for the three months
ended March 31, 2010 was primarily due to an increased emphasis on our selling
and marketing activities, including the utilization of business development
consultants.  General and administrative expenses were $9,698 or 38%
of revenues for the three months ended March 31, 2010, as compared to $9,148 or
36% of revenues for the three months ended March 31, 2009.  The
increase of $550 or 6% is primarily attributable to increases in professional
fees and bad debt expense.




Liquidity
and Capital Resources




For
the Three Months Ended March 31, 2010




We had a
cash and cash equivalent balance of $2,669 as of March 31, 2010.




Cash used
in operating activities was approximately $1,796 and $2,737 for the three months
ended March 31, 2010 and 2009, respectively.  Cash used in operating
activities for the three months ended March 31, 2010 resulted primarily from our
net loss of $1,692 as well as an increase in the funds required to finance
accounts receivable of $4,548, offset by a decrease in accrued compensation of
$1,817 and a decrease in accounts payable of $1,036, as well
as  non-cash charges for depreciation and amortization of $888 and for
stock based compensation of $642.




Cash used
in investing activities was $715 and $419 for the three months ended March 31,
2010 and 2009, respectively.  Of the cash used in investing activities
for the three months ended March 31, 2010, $695 represented purchases of
property, plant and equipment.




Financing
activities provided net funds of $1,959 and $298 for the three months ended
March 31, 2010 and 2009, respectively.  The net cash provided for the
three months ended March 31, 2010 is primarily due to proceeds from the line of
credit of $1,943.




Effective
as of March 29, 2010, the financial institution that provides the Facility
entered into an amendment to our working capital line of credit to extend the
maturity of the Facility to September 29, 2010.  We paid a one-time
fee of $25 in connection with the March 31, 2010 modification, which is included
in general and administrative expenses.  The interest rate on the line
of credit at March 31, 2010 was 7.25%.  As of March 31, 2010,
our  net borrowings were $4,106 under the line of credit and based
upon the amount of qualifying accounts receivable we were eligible to draw up to
a total of $10,000 under the Facility. The line of credit and all obligations
outstanding thereunder are due and payable not later than September 30,
2010.




23




For the
three months ended March 31, 2010, we have met our cash needs through operating
cash flows, a reduction in our cash balance and  borrowings under the
Facility. At March 31, 2010, we had working capital of $13,892.  We
believe that a combination of cost reductions that we have implemented to date,
and will continue to implement, an acceleration of the collection of certain of
our government receivables, along with anticipated revenue improvements
resulting from both new products and from new relationships generated from our
February 2010 client forum marketing event, will allow us to generate
improvements in cash flows from operations. The April 30, 2010 sale of our
SafirRosetti unit generated net cash at closing of approximately $3,000.
Furthermore, we believe that these improved operating cash flows, along with the
proceeds from our line of credit arrangement will be sufficient to finance our
operations through March 31, 2011.




Off-Balance
Sheet Arrangements




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





Critical
Accounting Policies




Our
significant accounting policies, including the assumptions and judgments
underlying them, are more fully described in our “Notes to Consolidated
Financial Statements” included in the Annual Report on Form 10-K for the year
ended December 31, 2009. Some of our accounting policies require the application
of significant judgment by management in the preparation of the consolidated
financial statements and, as a result, they are subject to a greater degree of
uncertainty. In applying these policies, management uses its judgment to
determine the appropriate assumptions to be used in calculating estimates that
affect the reported amounts of assets, liabilities, revenues and expenses.
Management bases its estimates and assumptions on historical experience and on
various other factors that are believed to be reasonable under the
circumstances. We have identified certain of our accounting policies as the ones
that are most important to the portrayal of our consolidated financial condition
and results of operations and which require management to make its most
difficult and subjective judgments, often as a result of the need to make
estimates of matters that are inherently uncertain. Our critical accounting
policies include the following:




Revenue Recognition and Related
Costs




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




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




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




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




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




24




Intangible Assets, Goodwill and
Impairment




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




Allowance for Doubtful
Accounts




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




Stock-Based Compensation




The
Company has adopted the fair value recognition provisions Accounting Standards
Codification 718 “Compensation—Stock Compensation” (“ASC 718”). 
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 ASC 718. 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.




ASC 718
also requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates. Forfeitures were estimated based on historical experience. Prior to
the adoption of ASC 718, the Company accounted for forfeitures as they
occurred.




We
account for equity instruments issued to non-employees in accordance with the
provisions of ASC 718 which requires that such equity instruments be recorded at
their fair value on the measurement date, which is typically the date the
services are performed. Stock-based compensation for non-employees is accounted
for under ASC 718 and is reflected within general and administrative
expenses.




Item 3. Quantitative and Qualitative
Disclosures About Market Risk.




Not
applicable.





Item
4. Controls and Procedures.





Disclosure
Controls and Procedures





Disclosure
controls and procedures (as defined in Rule 13(a)-15(e)) are controls and other
procedures that are designed to ensure that information required to be disclosed
by a public company in the reports that it files or submits under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms. Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by a
public company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the company’s management, including its
principal executive and principal financial officers, or persons performing
similar functions, as appropriate to allow for timely decisions regarding
required disclosure. Disclosure controls and procedures include many aspects of
internal control over financial reporting.





In
connection with the preparation of this Quarterly Report on Form 10-Q for the
quarter ended March 31, 2010, management, with the participation of our Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of our disclosure controls and procedures pursuant to Rule 13a-15 under the
Exchange Act and have determined that such controls and procedures were
effective as of March 31, 2010.




25




Changes
in Internal Control over Financial Reporting




There were no changes in our internal
control over financial reporting or in any other factors that could
significantly affect these controls, during our first quarter ended March 31,
2010, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.




PART
II




OTHER
INFORMATION




Item
1. Legal Proceedings.




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




Item 1A. Risk
Factors.




Not Applicable.





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





None





Item
3. Default Upon Senior Securities.




None.




Item
4.  (Removed and Reserved).




None.




Item
5. Other Information.




There are
no items required to be disclosed on Current Report on Form 8-K during the three
months ended March 31, 2010 that were not so reported.




26




Item
6. Exhibits.




The
following is a list of exhibits filed as part of this Quarterly Report on Form
10-Q.





Exhibit No.
                  
                  Description31.1
                  
                  
                  Certification
      of Principal Executive Officer pursuant to Section 302 of The
      Sarbanes-Oxley Act of2002*31.2
                  
                  
                  Certification
      of Principal Financial Officer pursuant to Section 302 of The
      Sarbanes-Oxley Act of2002*32.1
                  
                  
                  Certification
      of Principal Executive Officer pursuant to Section 906 of The
      Sarbanes-Oxley Act of2002*32.2
                  
                  
                  Certification
      of Principal Financial Officer pursuant to Section 906 of The
      Sarbanes-Oxley Act of
2002*









27




SIGNATURES





Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.





GLOBALOPTIONS
      GROUP, INC.Dated: May 13,
    2010
            By:
            /s/ Harvey W. SchillerHarvey
      W. SchillerChairman,
      Chief Executive Officer and Director (PrincipalExecutive
      Officer)Dated: May 13,
    2010
            By:
            /s/ Jeffrey O. NyweideJeffrey
      O. NyweideExecutive
      Vice President-Corporate Development,Chief
      Financial Officer and Secretary(Principal
      Financial Officer and Principal
              Accounting
      Officer)




28




EXHIBIT
INDEX





Exhibit No.
                            
                            Description31.1
                            
                            
                            Certification
      of Principal Executive Officer pursuant to Section 302 of The
      Sarbanes-Oxley Act of2002*31.2
                            
                            
                            Certification
      of Principal Financial Officer pursuant to Section 302 of The
      Sarbanes-Oxley Act of2002*32.1
                            
                            
                            Certification
      of Principal Executive Officer pursuant to Section 906 of The
      Sarbanes-Oxley Act of2002*32.2
                            
                            
                            Certification
      of Principal Financial Officer pursuant to Section 906 of The
      Sarbanes-Oxley Act of
2002*





29