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 June 30,
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, 27thFloor
                      New York, New York
                    
                    10019(Address
      of Principal Executive Offices)
                    
                    (Zip
      Code)
 
 (212)
445-6262
 (Registrant’s
telephone number, including area code)
 (Former
name and former address, if changed since last report)
 
 Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes x  No  ̈
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T 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.
  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
August 16, 2010, there were 14,424,433 shares of the issuer’s common stock
outstanding.
  
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Form
10-Q
 June
30, 2010
 TABLE
OF CONTENTS
 
 PART
      IFINANCIAL
      INFORMATIONITEM
      1.    Financial Statements.Condensed
      Consolidated Balance Sheets as of June 30, 2010 (Unaudited) and December
      31, 2009
                        1Condensed
      Consolidated Statements of Operations for the Three and Six Months
      EndedJune
      30, 2010 and 2009 (Unaudited)
                        2Condensed
      Consolidated Statement of Stockholders’ Equity for the Six Months
      EndedJune
      30, 2010 (Unaudited)
                        3Condensed
      Consolidated Statements of Cash Flows for the Six Months
    EndedJune
      30, 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.
                        22ITEM
      3.  Quantitative and Qualitative Disclosures About Market
      Risk.
                        34ITEM
      4.  Controls and Procedures.
                        34PART
      IIOTHER
      INFORMATIONITEM
      1.       Legal
    Proceedings.
                        35ITEM
      1A.    Risk Factors.
                        35ITEM
      2.       Unregistered Sales of Equity
      Securities and Use of Proceeds.
                        35ITEM
      3.       Defaults Upon Senior
      Securities.
                        35ITEM
      4.       (Removed and
      Reserved).
                        35ITEM
      5.       Other
    Information.
                        35ITEM
      6.       Exhibits.
                        36SIGNATURES.
                        37
  
  Part I  FINANCIAL INFORMATION
 Item
1.  Financial Statements
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 
 Condensed
Consolidated Balance Sheets
 (dollars
in thousands, except per share amounts)
 
 June 30,
                          
                          
                          December 31,2010
                          
                          
                          2009(unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                          
                          $
                          3,828
                          
                          
                          $
                          3,221Accounts
      receivable, net
                          
                          
                          4,427
                          
                          
                          
                          4,680Inventories,
      net
                          
                          
                          3,453
                          
                          
                          
                          3,354Prepaid
      expenses and other current assets
                          
                          
                          319
                          
                          
                          
                          688Current
      assets of discontinued operations
                          
                          
                          17,419
                          
                          
                          
                          15,103Total
      current assets
                          
                          
                          29,446
                          
                          
                          
                          27,046Property
      and equipment, net
                          
                          
                          3,602
                          
                          
                          
                          3,928Intangible
      assets, net
                          
                          
                          378
                          
                          
                          
                          371Goodwill
                          
                          
                          10,649
                          
                          
                          
                          10,649Security
      deposits and other assets
                          
                          
                          344
                          
                          
                          
                          344Other
      assets of discontinued operations
                          
                          
                          8,940
                          
                          
                          
                          16,475Total
      assets
                          
                          $
                          53,359
                          
                          
                          $
                          58,813LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Line
      of credit
                          
                          $
                          4,171
                          
                          
                          $
                          2,163Accounts
      payable
                          
                          
                          1,366
                          
                          
                          
                          1,185Deferred
      revenues
                          
                          
                          467
                          
                          
                          
                          328Accrued
      compensation and related benefits
                          
                          
                          1,080
                          
                          
                          
                          1,250Other
      current liabilities
                          
                          
                          1,400
                          
                          
                          
                          949Current
      liabilities of discontinued operations
                          
                          
                          6,978
                          
                          
                          
                          5,816Total
      current liabilities
                          
                          
                          15,462
                          
                          
                          
                          11,691Long-term
      liabilities:Other
      long-term obligations
                          
                          
                          275
                          
                          
                          
                          647Long-term
      liabilities of discontinued operations
                          
                          
                          389
                          
                          
                          
                          652Total
      long-term liabilities
                          
                          
                          664
                          
                          
                          
                          1,299Total
      liabilities
                          
                          
                          16,126
                          
                          
                          
                          12,990Commitments
      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, no shares issued or outstanding
                          
                          
                          -
                          
                          
                          
                          -Common
      stock, $0.001 par value, 100,000,000 shares authorized; 14,632,176 shares
      issued and 14,491,455 shares outstanding at June 30, 2010,  and
      14,472,363 shares issued and 14,348,469 shares outstanding at December 31,
      2009
                          
                          
                          15
                          
                          
                          
                          14Additional
      paid-in capital
                          
                          
                          113,108
                          
                          
                          
                          111,909Accumulated
      deficit
                          
                          
                          (75,612
                          )
                          
                          
                          (65,857
                          )Treasury
      stock; at cost, 140,721 and 123,894 shares at June 30, 2010 and December
      31, 2009, respectively
                          
                          
                          (278
                          )
                          
                          
                          (243
                          )Total
      stockholders' equity
                          
                          
                          37,233
                          
                          
                          
                          45,823Total
      liabilities and stockholders' equity
                          
                          $
                          53,359
                          
                          
                          $
                          58,813
 
 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 June
      30,
                        
                        
                        For the Six Months Ended June
      30,2010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009Revenues
                        
                        $
                        6,503
                        
                        
                        $
                        5,405
                        
                        
                        $
                        12,529
                        
                        
                        $
                        10,011Cost
      of revenues
                        
                        
                        3,595
                        
                        
                        
                        3,149
                        
                        
                        
                        6,820
                        
                        
                        
                        5,955Gross
      profit
                        
                        
                        2,908
                        
                        
                        
                        2,256
                        
                        
                        
                        5,709
                        
                        
                        
                        4,056Operating
      expenses:Selling
      and marketing
                        
                        
                        803
                        
                        
                        
                        771
                        
                        
                        
                        1,730
                        
                        
                        
                        1,718General
      and administrative
                        
                        
                        4,944
                        
                        
                        
                        3,891
                        
                        
                        
                        9,544
                        
                        
                        
                        7,784Total
      operating expenses
                        
                        
                        5,747
                        
                        
                        
                        4,662
                        
                        
                        
                        11,274
                        
                        
                        
                        9,502Loss
      from operations
                        
                        
                        (2,839
                        )
                        
                        
                        (2,406
                        )
                        
                        
                        (5,565
                        )
                        
                        
                        (5,446
                        )Other
      income (expense):Interest
      income
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1
                        
                        
                        
                        1Interest
      (expense)
                        
                        
                        (120
                        )
                        
                        
                        (195
                        )
                        
                        
                        (195
                        )
                        
                        
                        (381
                        )Other
      expense, net
                        
                        
                        (120
                        )
                        
                        
                        (195
                        )
                        
                        
                        (194
                        )
                        
                        
                        (380
                        )Loss
      from continuing operations
                        
                        
                        (2,959
                        )
                        
                        
                        (2,601
                        )
                        
                        
                        (5,759
                        )
                        
                        
                        (5,826
                        )(Loss)
      income from discontinued operations, net of tax
                        
                        
                        (5,103
                        )
                        
                        
                        1,780
                        
                        
                        
                        (3,996
                        )
                        
                        
                        3,369Net
      loss
                        
                        $
                        (8,062
                        )
                        
                        $
                        (821
                        )
                        
                        $
                        (9,755
                        )
                        
                        $
                        (2,457
                        )Basic
      and diluted net (loss) income per shareContinuing
      operations
                        
                        $
                        (0.21
                        )
                        
                        $
                        (0.20
                        )
                        
                        $
                        (0.41
                        )
                        
                        $
                        (0.48
                        )Discontinued
      operations, net of tax
                        
                        
                        (0.37
                        )
                        
                        
                        0.14
                        
                        
                        
                        (0.29
                        )
                        
                        
                        0.28Net
      loss per share
                        
                        $
                        (0.58
                        )
                        
                        $
                        (0.06
                        )
                        
                        $
                        (0.70
                        )
                        
                        $
                        (0.20
                        )Weighted
      average number of common shares outstanding - basic and
      diluted
                        
                        
                        13,918,526
                        
                        
                        
                        12,973,261
                        
                        
                        
                        13,900,588
                        
                        
                        
                        12,047,259
 
 See notes
to these condensed consolidated financial statements.
  2
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Condensed
Consolidated Statement of Stockholders' Equity
 For
the Six Months Ended June 30, 2010
 (dollars
in thousands)
 (Unaudited)
 
 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 shares to consultants for services provided
                      
                      
                      26,309
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      45
                      
                      
                      
                      -
                      
                      
                      
                      45Issuance
      of common stock in connection with vesting of restricted stock
      units
                      
                      
                      46,007
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Purchase
      of treasury shares in connection with cashless vesting of restricted stock
      units
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      16,827
                      
                      
                      
                      (35
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (35
                      )Issuance
      of common stock upon exercise of stock options
                      
                      
                      60,376
                      
                      
                      
                      1
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      110
                      
                      
                      
                      -
                      
                      
                      
                      111Issuance
      of common stock under employee stock purchase plan
                      
                      
                      27,121
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      37
                      
                      
                      
                      -
                      
                      
                      
                      37Stock
      based compensation - restricted stock vested
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      432
                      
                      
                      
                      -
                      
                      
                      
                      432Stock
      based compensation - employee stock purchase plan
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      13
                      
                      
                      
                      -
                      
                      
                      
                      13Amortization
      of consultant stock option costs
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      69
                      
                      
                      
                      -
                      
                      
                      
                      69Amortization
      of employee stock options costs
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      202
                      
                      
                      
                      -
                      
                      
                      
                      202Amortization
      of consultant restricted stock unit costs
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      7
                      
                      
                      
                      -
                      
                      
                      
                      7Amortization
      of employee restricted stock unit costs
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      284
                      
                      
                      
                      -
                      
                      
                      
                      284Net
      loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (9,755
                      )
                      
                      
                      (9,755
                      )Balance,
      June 30, 2010
                      
                      
                      14,632,176
                      
                      
                      $
                      15
                      
                      
                      
                      140,721
                      
                      
                      $
                      (278
                      )
                      
                      $
                      113,108
                      
                      
                      $
                      (75,612
                      )
                      
                      $
                      37,233
 
 See notes
to these condensed consolidated financial statements.
  3
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Condensed
Consolidated Statements of Cash Flows
 (dollars
in thousands)
 (Unaudited)
 
 For the Six Months Ended June
      30,2010
                    
                    
                    2009Cash
      flows from operating activities:Net
      loss from continuing operations
                    
                    
                    (5,759
                    )
                    
                    
                    (5,826
                    )Adjustments
      to reconcile net loss to net cash (used in) provided by operating
      activities:Provision
      for bad debts
                    
                    
                    24
                    
                    
                    
                    17Depreciation
      and amortization
                    
                    
                    899
                    
                    
                    
                    579Deferred
      rent
                    
                    
                    7
                    
                    
                    
                    30Stock-based
      compensation
                    
                    
                    1,051
                    
                    
                    
                    1,427Recovery
      of obsolete inventory
                    
                    
                    -
                    
                    
                    
                    (35
                    )Reserve
      for litigation
                    
                    
                    -
                    
                    
                    
                    40Changes
      in operating assets and liabilities:Accounts
      receivable
                    
                    
                    229
                    
                    
                    
                    (249
                    )Inventories
                    
                    
                    (99
                    )
                    
                    
                    (862
                    )Prepaid
      expenses and other current assets
                    
                    
                    369
                    
                    
                    
                    143Security
      deposits and other assets
                    
                    
                    1
                    
                    
                    
                    25Accounts
      payable
                    
                    
                    181
                    
                    
                    
                    387Deferred
      revenues
                    
                    
                    139
                    
                    
                    
                    134Accrued
      compensation and related benefits
                    
                    
                    (170
                    )
                    
                    
                    121Other
      current liabilities
                    
                    
                    443
                    
                    
                    
                    69Other
      long-term obligations
                    
                    
                    (370
                    )
                    
                    
                    (24
                    )Total
      adjustments
                    
                    
                    2,704
                    
                    
                    
                    1,802Net
      cash used in continuing operating activities
                    
                    
                    (3,055
                    )
                    
                    
                    (4,024
                    )Net
      cash provided by discontinued operating activities
                    
                    
                    1,351
                    
                    
                    
                    4,364Net
      cash (used in) provided by operating activities
                    
                    
                    (1,704
                    )
                    
                    
                    340Cash
      flows from investing activities:Purchases
      of property and equipment
                    
                    
                    (548
                    )
                    
                    
                    (932
                    )Purchase
      of intangible assets
                    
                    
                    (32
                    )
                    
                    
                    (10
                    )Net
      cash used in investing activities of continuing operations
                    
                    
                    (580
                    )
                    
                    
                    (942
                    )Net
      cash provided by investing activities of discontinued
      operations
                    
                    
                    2,982
                    
                    
                    
                    624Net
      cash provided by (used in) investing activities
                    
                    
                    2,402
                    
                    
                    
                    (318
                    )
 
 See notes
to these condensed consolidated financial statements.
  4
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Condensed
Consolidated Statements of Cash Flows, continued
 (dollars
in thousands)
 (Unaudited)
 
 For the Six Months Ended June
      30,2010
                    
                    
                    2009Cash
      flows from financing activities:Net  proceeds
      (repayments) under line of credit
                    
                    $
                    2,008
                    
                    
                    $
                    (2,492
                    )Proceeds
      from conversion of Series D perferred stock to common
stock
                    
                    
                    -
                    
                    
                    
                    4Proceeds
      from issuance of stock in connection with options
exercised
                    
                    
                    111
                    
                    
                    
                    -Proceeds
      from issuance of stock in connection with ESPP
                    
                    
                    37
                    
                    
                    
                    48Repurchase
      of common stock
                    
                    
                    (35
                    )
                    
                    
                    (35
                    )Net
      cash provided by (used in) financing activities of continuing
      operations
                    
                    
                    2,121
                    
                    
                    
                    (2,475
                    )Net
      cash used in financing activities of discontinued
    operations
                    
                    
                    (2,212
                    )
                    
                    
                    (400
                    )Net
      cash used in financing activities
                    
                    
                    (91
                    )
                    
                    
                    (2,875
                    )Net
      increase (decrease)  in cash and cash
equivalents
                    
                    
                    607
                    
                    
                    
                    (2,853
                    )Cash
      and cash equivalents - beginning of period
                    
                    
                    3,221
                    
                    
                    
                    5,276Cash
      and cash equivalents - end of period
                    
                    $
                    3,828
                    
                    
                    $
                    2,423Supplemental
      disclosure of cash flow information:Cash
      paid during the period for interest
                    
                    $
                    197
                    
                    
                    $
                    449
 
 See notes
to these condensed consolidated financial statements.
  5
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 1. 
Nature of Operations
  GlobalOptions
Group, Inc. and its subsidiaries (collectively the “Company” or “GlobalOptions
Group”) provide risk mitigation and management services, including forensic DNA
analysis, proprietary DNA collection products, and related research services to
law enforcement agencies, federal and state governments, crime laboratories and
disaster management organizations.
  References
herein to “GlobalOptions” refer to GlobalOptions, Inc., an operating subsidiary
of the Company.
 
 On April
30, 2010, the Company sold its SafirRosetti business unit
(“SafirRosetti”).   Additionally, the Company’s Preparedness
Services business unit (“Preparedness”) and its Fraud and Special
Investigative Unit Services business unit (“FSIU”) were held for sale as of
June 30, 2010 (See Note 2 - Basis of Presentation).  On May 13, 2010,
the Company entered into a definitive agreement to sell Preparedness and on June
11, 2010, the Company entered into a definitive agreement to sell
FSIU.  (See Note 4 – Discontinued Operations for a discussion of the
sales of SafirRosetti on April 30, 2010, Preparedness on July 16, 2010 and FSIU
on July 20, 2010.  See Note 13 – Subsequent Events, for a discussion
of the Company’s entry into a definitive agreement to sell its Forensic DNA
Solutions and Products Services business unit (“Bode”) on August 11,
2010.)
 
 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 of this Form
10-Q.  Operating results for the three and six months ended June 30,
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.
 
 As a
result of the sale of SafirRosetti, and the Company’s classification of FSIU and
Preparedness as “held for sale,” the Condensed Consolidated Balance Sheet as of
June 30, 2010, the Condensed Consolidated Statements of Operations for the three
and six months ended June 30, 2010 and the Condensed Consolidated Statements of
Cash Flows for the six months ended June 30, 2010 present the results and
accounts of these business units as discontinued operations.  All
prior periods presented in the Condensed Consolidated Balance Sheets, the
Condensed Consolidated Statements of Operations, and the Condensed Consolidated
Statements of Cash Flows discussed herein have been restated to conform with
such presentation.
 
 Prior to
the Company’s sale of SafirRosetti and entry into agreements to sell
Preparedness and FSIU, the Company reported its operating results in three
financial reporting segments: Preparedness Services; Fraud and SIU Services; and
Security Consulting and Investigations (which was re-named Forensic DNA
Solutions and Products following the sale of SafirRosetti).  The
Preparedness Services segment consisted of the operations of
Preparedness.  The Fraud and SIU Services segment consisted of the
operations of FSIU and our International Strategies business unit, which
provides multidisciplinary, international risk management and business
solutions.  The Security Consulting and Investigations segment
consisted of the operations of SafirRosetti and The Bode Technology Group, Inc.,
which provides forensic DNA analysis services.  As a result of the
sale of SafirRosetti and entry into agreements to sell Preparedness and FSIU,
the Company determined to cease reporting its operating results in separate
segments.
  6
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
  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.
 
 Discontinued
Operations
 
 The
results of operations, loss on sale and impairment charges, as applicable for
SafirRosetti, which was sold on April 30, 2010, and for each of Preparedness and
FSIU, which are classified as “held for sale”  are included in “(Loss)
income from discontinued operations, net of tax” in the accompanying
Condensed Consolidated Statements of Operations. Assets and liabilities of the
discontinued operations have been reclassified and are reflected in the
accompanying Condensed Consolidated Balance Sheet as “Current assets of
discontinued operations,” “Other assets of discontinued operations,” “Current
liabilities of discontinued operations” and “Long-term liabilities of
discontinued operations.”
 
 For
comparative purposes, all prior periods presented have been reclassified to
reflect the classifications on a consistent basis.
 
 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. 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.
 
 June 30,2010
                      
                      
                      2009Stock
      options
                      
                      
                      1,036,907
                      
                      
                      
                      1,040,663Restricted
      stock units
                      
                      
                      144,420
                      
                      
                      
                      318,475Series
      D convertible preferred stock
                      
                      
                      -
                      
                      
                      
                      477,317Potentially
      dilutive securities realizable from thevesting
      of performance based restricted stock
                      
                      
                      470,563
                      
                      
                      
                      558,063Total
      potentially dilutive securities
                      
                      
                      1,651,890
                      
                      
                      
                      2,394,518
  7
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
  4.
Discontinued Operations
 
 Introduction
  During
the second quarter of 2010, the Company completed the sale of SafirRosetti and
entered into agreements to sell Preparedness and FSIU.  Prior to
approving the Company’s entry into the purchase agreements with respect to each
such transaction, the Company’s Board of Directors, acting with the advice and
assistance of its legal advisors, evaluated the respective purchase agreements
and, acting with the advice and assistance of its legal and financial advisors,
evaluated the consideration negotiated with the buyers and their
representatives.  In such evaluation, the Board of Directors
considered a number of substantive factors, both positive and negative, and
potential benefits and detriments of the specific transaction, including but not
limited to the consideration offered, likelihood of consummation, prospects for
the business unit going forward, opinion of financial advisors (when provided),
and effect on the Company’s cash flows.  After careful consideration,
the Board of Directors determined that each of the transactions were advisable
and in the best interests of the Company and its stockholders and the form,
terms and provisions of the respective transaction documents were expedient and
in the best interests of the Company and its stockholders.
  As a
result of the Company’s sale of SafirRosetti and entry into agreements to sell
Preparedness and FSIU, the results and accounts of these three business units
are shown as discontinued operations in the Company’s financial
statements.
 
 Sale
of SafirRosetti
 
 On April
30, 2010, pursuant to the Board of Directors’ approval on April 21, 2010, the
Company and GlobalOptions (the “Sellers”) completed the sale of all assets used
in SafirRosetti 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.
 
 SafirRosetti
delivered specialized security and investigative services to governments,
corporations and individuals, and reported the results of its operations as part
of the Company’s Security Consulting and Investigations reporting segment, which
was re-named Forensic DNA Solutions and Products following the sale of
SafirRosetti.
 
 Pursuant to the terms of the
SafirRosetti Purchase Agreement,the Sellers soldSafirRosettito Guidepostfor 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) a secured promissory note(the “SafirRosetti Note”)in the aggregate face amount of
$1,750, with an interest rate of 0.79% per annum,payable in equal installments at
December 31, 2010 and June 30, 2011 and (iii) 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.
 
 The
SafirRosetti 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 accounts
receivable back to the Sellers on June 30, 2011, subject to a purchase right by
Guidepost.
 
 As of
June 30, 2010, the Company recorded a loss of $1,930 on the sale of
SafirRosetti, pursuant to the following:
 
 Cash selling price (of which $525 was held in escrow)
                        
                        $
                        3,500Note receivable, net
                        
                        
                        1,670Gross
      proceeds from sale
                        
                        
                        5,170Less:
      expenses of sale
                        
                        
                        355Net
      proceeds from sale
                        
                        
                        4,815Less:
      net book value of assets sold to buyer or written off in connection with
      the sale
                        
                        
                        6,745Net
      (loss) on the sale of SafirRosetti
                        
                        $
                        (1,930
                        )
 
 This net loss does not reflect the benefit of contingent proceeds on the sale,
which will be recorded in future periods as realized, as a reduction of the loss
on the sale.
  8
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 4.
Discontinued Operations, continued
 
 Sale
of Preparedness
  On July
16, 2010, pursuant to the Board of Directors’ approval on May 6, 2010, the
Sellers completed the sale of all assets used in Preparedness in accordance with
an asset purchase agreement dated May 13, 2010 (the “Preparedness Purchase
Agreement”), by and among the Sellers and Witt Group Holdings, LLC, (“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 Preparedness are principals.
 
 Preparedness
developed and implemented crisis management and emergency response plans for
disaster mitigation, continuity of operations and other emergency management
issues for governments, corporations and individuals, and reported the results
of its operations in the Company’s Preparedness Services reporting
segment.
 
 Pursuant
to the terms of the Preparedness Purchase Agreement, the Sellers sold
Preparedness to Witt Holdings for 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, which payment may not
exceed $12,000, and (iii) the assumption of all of the Preparedness liabilities,
including all termination and severance payments due to James Lee Witt, Mark
Merritt, Barry Scanlon and Pate Felts upon the sale of Preparedness under their
respective employment agreements, less $286, representing a payment in
connection with the Seller’s sublease of a portion of Preparedness’ Washington
D.C. facility for a period of twelve months after closing.  The
maximum total consideration payable to the Sellers under the Preparedness
Purchase Agreement is $22,000.
 
 In
addition, Witt Holdings has agreed to pay the Sellers, within six months of the
date of closing, the amount by which the working capital of Preparedness at
closing exceeds $6,800, and the Sellers have agreed to pay Witt Holdings, within
six months of the date of closing, the amount by which the working capital of
Preparedness is less than $5,800.  The 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 has
agreed upon such “true-up” payment to transfer to the Sellers all rights with
respect to such uncollected receivables.
 
 Additionally, in
connection with the Preparedness Purchase Agreement, the Company entered into
(i) a license agreement pursuant to which it granted Witt Holdings a world-wide,
perpetual, irrevocable, exclusive, royalty free, fully paid-up right and license
to use the Company’s GlobalTrak software in the field of emergency preparedness
and disaster relief recovery, and the Company agreed not to license the
GlobalTrak software to any other business in such field, and (ii) a transition
service agreement pursuant to which the Company will provide Witt Holdings with
certain specified transition services following the closing, including but not
limited to certain information technology services.
 
 The sale
of Preparedness was subject to the approval of the Company’s stockholders, which
approval was obtained at a special meeting of the Company’s stockholders on July
15, 2010.
  9
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
  4.
Discontinued Operations, continued
 
 Sale of FSIU
  On July
20, 2010, pursuant to the Board of Directors’ approval on June 10, 2010,
the Sellers completed the sale of all assets used in FSIU in accordance with an
asset purchase agreement dated June 11, 2010 (the “FSIU Purchase Agreement”), by
and among the Sellers and GlobalOptions Services, Inc. (“Global Services”), of
which Frank Pinder, the President of FSIU, together with David Finney,
James Buscarini, Kevin McGinn and Mike Brantley, respectively the Vice
Presidents of Operations, Business Development, Finance and IT, are officers and
shareholders.  Balmoral Advisors, LLC, Private Equity Partners LLC and
the North Atlantic Value LLP unit of JO Hambro Capital Management Ltd were the
private equity sponsors.
 
 FSIU
provided investigative surveillance, anti-fraud solutions and business
intelligence services to the insurance industry, law firms and multinational
organizations, and reported the results of its operations in the Company’s Fraud
and SIU Services reporting segment.
  Pursuant
to the terms of the FSIU Purchase Agreement, the Sellers sold FSIU to
Global Services for aggregate consideration of (i) $8,340 in cash at closing,
inclusive of $34 for an estimated adjustment for working capital and $56 for the
purchase real estate lease deposits, of which $825 is to be held in escrow
for 15 months following the closing and (ii) the assumption of substantially all
of the liabilities of FSIU.  The cash purchase price is subject to a
post closing adjustment for the actual working capital of FSIU at
closing.
 
 In connection with FSIU being
classified as held for sale at June 30, 2010, the Company recorded a charge to
discontinued operations of $4,475 to write down the carrying value of the assets
of FSIU to fair value.
 
 In
connection with the FSIU Purchase Agreement, the Sellers and Global Services
entered into certain license agreements pursuant to which the Sellers granted
Global Services worldwide, perpetual, irrevocable, exclusive, royalty-free,
fully paid-up rights and licenses to certain of the Seller’s intellectual
property, including but not limited to the “GlobalOptions” corporate name, logo
and websites (all of which Global Services has the right to purchase in the
future for nominal consideration), and the Company’s Rapid Data Module and Rapid
Video Module software and related source materials.  Additionally, the
Sellers and Global Services entered into a transition service agreement pursuant
to which the Sellers and Global Services will provide each other with certain
transition services following the closing.
 
 Results
of Discontinued Operations
 
 Results and net loss from discontinued
operations are as follows, reflecting results and net loss of SafirRosetti,
Preparedness, and FSIU:
 
 Forthethreemonthsended
                        June30,
                      
                      
                      Forthesixmonthsended
                        June30,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009Revenues
                      
                      $
                      18,143
                      
                      
                      $
                      21,025
                      
                      
                      $
                      37,351
                      
                      
                      $
                      41,933(Loss)
      income from operations
                      
                      $
                      (3,780
                      )
                      
                      $
                      1,781
                      
                      
                      $
                      (2,572
                      )
                      
                      $
                      3,375(Loss)
      income before tax
                      
                      $
                      (5,705
                      )
                      
                      $
                      1,780
                      
                      
                      $
                      (4,507
                      )
                      
                      $
                      3,369(Loss)
      income net of tax
                      
                      $
                      (5,103
                      )
                      
                      $
                      1,780
                      
                      
                      $
                      (3,996
                      )
                      
                      $
                      3,369
  10
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
  4.
Discontinued Operations, continued
 
 Results
of Discontinued Operations, continued
 
 Assets
and liabilities included in discontinued operations as of June 30, 2010 and
December 31, 2009 are as follows:
 
 As ofJune 30, 2010
                          
                          
                          December 31, 2009AssetsAccounts
      receivable, net
                          
                          $
                          15,038
                          
                          
                          $
                          14,951Receivables
      related to sale of business unit
                          
                          
                          2,212
                          
                          
                          
                          -Prepaid
      expenses and other current assets
                          
                          
                          169
                          
                          
                          
                          152Property
      and equipment, net
                          
                          
                          3,877
                          
                          
                          
                          3,066Goodwill
      and intangible assets, net
                          
                          
                          4,889
                          
                          
                          
                          13,216Deposits
      and other
                          
                          
                          174
                          
                          
                          
                          193Total
      assets of discontinued operations
                          
                          $
                          26,359
                          
                          
                          $
                          31,578LiabilitiesAccounts
      payable
                          
                          $
                          3,279
                          
                          
                          $
                          2,380Accrued
      expenses and other  liabilities
                          
                          
                          4,088
                          
                          
                          
                          4,088Total
      liabilities of discontinued operations
                          
                          $
                          7,367
                          
                          
                          $
                          6,468
 
 5.
Inventories
 
 Inventories
are comprised of the following:
 
 As ofJune 30, 2010
                        
                        
                        December 31, 2009Raw
      materials
                        
                        $
                        2,231
                        
                        
                        $
                        2,099Work
      in progress – DNA Analysis
                        
                        
                        300
                        
                        
                        
                        330Finished
      goods
                        
                        
                        972
                        
                        
                        
                        9753,503
                        
                        
                        
                        3,404Less:
      Reserve for obsolescence
                        
                        
                        (50
                        )
                        
                        
                        (50
                        )Total
                        
                        $
                        3,453
                        
                        
                        $
                        3,354
  11
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
  6. 
Intangible Assets
 
 Intangible
assets are comprised of the following:
 
 Trade Names
                      
                      
                      Developed
                        Technology
                      
                      
                      Patents
                      
                      
                      Accumulated
                        Amortization
                      
                      
                      TotalBalance as of  January 1, 2010
                      
                      $
                      200
                      
                      
                      $
                      110
                      
                      
                      $
                      182
                      
                      
                      $
                      (121
                      )
                      
                      $
                      371Additions:Costs
      of patents
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      32
                      
                      
                      
                      -
                      
                      
                      
                      32Amortization
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (25
                      )
                      
                      
                      (25
                      )Balance
      as of  June 30, 2010
                      
                      $
                      200
                      
                      
                      $
                      110
                      
                      
                      $
                      214
                      
                      
                      $
                      (146
                      )
                      
                      $
                      378Weighted
      average amortization period at June 30, 2010 (in years)
                      
                      
                      6.7
                      
                      
                      
                      1.7
                      
                      
                      
                      11.5
 
 The
Company recorded amortization expense related to the acquired amortizable
intangibles of $12 and $11 for the three months ended June 30, 2010 and 2009,
respectively, and $25 and $21 for the six months ended June 30, 2010 and 2009,
respectively.
 
 7.  Accrued Compensation and Related
Benefits
 
 A summary of accrued compensation and
related benefits is comprised of the following:
 
 As ofJune 30, 2010
                        
                        
                        December 31, 2009Accrued
      performance based bonuses
                        
                        $
                        380
                        
                        
                        $
                        751Accrued
      payroll and commissions
                        
                        
                        403
                        
                        
                        
                        359Accrued
      employee benefits
                        
                        
                        297
                        
                        
                        
                        140Total
                        
                        $
                        1,080
                        
                        
                        $
                        1,250
 
 8. 
      Line of Credit
 
 The
Company maintains a working capital line of credit (the “Facility”), which
matures on September 29, 2010 and 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 a modification of the 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 June 30, 2010 was 7.25%.  As of
June 30, 2010, the Company’s net borrowings were $4,171 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.  See
Note 13 – Subsequent Events – Line of Credit, for a discussion of additional
modifications to the Facility made after the end of the second quarter of
2010.
   12
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 9.  Commitments
and Contingencies
 
 Consulting
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 were available to provide consulting
services to the Security Consulting and Investigations business unit, including
being available to assist in the Company’s exploration of strategic alternatives
and certain marketing assistance.  The terms of the consulting
agreements were 12 months, provided, however, that the Company had the right to
terminate each of the consulting agreements after three months and/or each month
thereafter.  Messrs. Howard Safir and Adam Safir received $30 per
month and $20 per month, respectively, under the consulting
agreements.  In addition, if the Company was to sell its Security
Consulting and Investigations segment or any assets thereof during the term of
the respective consulting agreements, each of Messrs. Howard Safir and Adam
Safir could have received up to $600 and $300, respectively, based upon certain
aggregate sales price levels received for the business or such
assets.  Also included in the consulting agreements are 12 month
non-solicitation and non-servicing provisions.  On June 24, 2010,
Messrs. Safir and Safir were notified that their consulting agreements were
terminated, effective on June 30, 2010.
 
 Employment
Agreements
 
 Effective
May 11, 2010, the Company modified its employment agreements with each of Dr.
Schiller, its CEO and Chairman, and Mr. Nyweide, its Chief Financial Officer and
Executive Vice President of Corporate Development, to induce them to remain with
the Company in the event that they became entitled to terminate their employment
agreements as a result of the occurrence of a “change of control,” as defined
under their employment agreements, which the Compensation Committee of the
Company’s Board of Directors determined would result from the completion of the
sale of Preparedness (the “Sales Event”).
  The
Company’s employment agreement with Dr. Schiller, as modified (the
“Schiller Employment Agreement”), provides that in the event of a Sales Event,
Dr. Schiller will continue to serve as its Chairman and Chief Executive
Officer for one year following the Sales Event, and devote the necessary working
time and efforts, but less than substantial working time and efforts, to the
business of GlobalOptions Group.  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 certain living expenses, for the duration of the
term.  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
Employment Agreement, the Company will have the option to continue to employ
Dr. Schiller on a month-to-month basis for $20 per
month.   See Note 13 – Subsequent Events – Sales Event, for a
discussion of additional compensation for Dr. Schiller triggered upon a Sales
Event.
  The
Company’s employment agreement with Mr. Nyweide, as modified (the “Nyweide
Employment Agreement”), provides that in the event of a Sales Event,
Mr. Nyweide will continue to serve as its Chief Financial Officer and
Executive Vice President 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 (half payable on the
date of the Sales Event and the remainder payable on the three-month anniversary
thereof), and a performance bonus of $250 in the event of a sale of the
Company’s fourth and final business division (half payable upon the sale of such
business division and the remainder payable at the completion of the term of the
Nyweide Employment Agreement).  Following the completion of the term
of the Nyweide Employment Agreement, the Company will have the option to
continue to employ Mr. Nyweide on a month-to-month basis under the same
terms and conditions.  See Note 13 – Subsequent Events – Sales Event,
for a discussion of additional compensation for Mr. Nyweide triggered upon a
Sales Event.
  13
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 9.  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 continuing operations amounted to $293 and $306 for the three
months ended June 30, 2010 and 2009, respectively, and $600 and $597 for the six
months ended June 30, 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 $653 and $647
represents the long-term unamortized rent adjustment amount at June 30, 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 $22 and $17 at June 30, 2010 and December 31, 2009,
respectively, and is reflected within other current liabilities in the
consolidated balance sheets.
 
 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.
 
 10. 
Stockholders’
Equity
 
 Common
Stock Issued
 
 During
the six months ended June 30, 2010, the Company issued 27,121 shares of its
common stock under the Amended and Restated 2006 Employee Stock Purchase Plan
(the “Stock Purchase Plan”).  The Company realized proceeds of $37 and
recognized stock based compensation of $13 in connection with the issuance of
these shares.
  During
June 2010, the Company issued 60,376 shares of its common stock upon the
exercise of stock options and realized proceeds of $111.
 
 On June
24, 2010, pursuant to a stock purchase agreement dated April 1, 2009, the
Company issued 26,309 shares of its common stock valued at $45 to
Lippert/Heilshorn and Associates, Inc. for services rendered to the Company
during the first half of 2010.
 
 On June
30, 2010 the Company issued 31,913 and 14,094 shares of its common stock to the
Chief Executive Officer and Chief Financial Officer, respectively, pursuant to
the vesting of RSUs under the Company’s Amended and Restated 2006 Long Term
Incentive Plan (the “Incentive Plan”).  The Chief Executive Officer
and Chief Financial Officer elected to have the company withhold 12,063 and
4,764 shares, respectively, in satisfaction of their tax obligations in
connection with the vesting of these RSUs.  Such withheld shares
valued at $25 and $10, respectively, are reflected as treasury shares in the
Company’s books and records.
 
 See Note
13 – Subsequent Events – Sales Event, for a discussion of the issuance of
additional shares of the Company’s common stock pursuant to the vesting of
additional RSUs held by the Company’s Chief Executive Officer and Chief
Financial as a result of the sale of Preparedness.
  14
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 10. 
Stockholders’ Equity,
continued
 
 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 (the “Performance Bonus
Plan”).
 
 At June
30, 2010, an aggregate of 470,563 of the restricted shares awarded to these
executives remained subject to vesting based on certain performance and stock
price targets that have been established by the Compensation
Committee.  See Note 13 – Subsequent Events – Sales Event, for a
discussion of the vesting of these restricted shares as a result of the sale of
Preparedness.
 
 11.
Stock Based Compensation
 
 Amended and Restated 2006 Long-Term
Incentive Plan(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
June 30, 2010, 1,035,357 shares of common stock remained eligible to be issued
under the Incentive Plan.
  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
June 30, 2010, 1,881,780 shares of common stock remained 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 $318 and $708 for the three
months ended June 30, 2010 and 2009, respectively, and $930 and $1,274 for the
six months ended June 30, 2010 and 2009, respectively.   For the
three months ended June 30, 2010 and 2009, $100 and $68, respectively, were
reflected in selling and marketing expenses, and $217 and $640, 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 $92 and $138 for the three months ended June 30,
2010 and 2009, respectively, and $121 and $155 for the six months ended June 30,
2010 and 2009, respectively.  For the three months ended June 30, 2010
and 2009, $0 and $97, respectively, were reflected in selling and marketing
expenses, and $92 and $41, respectively, were reflected in general and
administrative expenses.  For the six months ended June 30, 2010 and
2009, $0 and $97, respectively, were reflected in selling and marketing
expenses, and $121 and $58, respectively, were reflected in general and
administrative expenses.
  15
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
  11.
Stock Based Compensation, continued
 
 Stock
Based Compensation, continued
  The
following tables summarize total stock based compensation costs recognized for
the three and six months ended June 30, 2010 and 2009.
 
 For the Three Months Ended June 30,2010
                      
                      
                      2009Employees
                      
                      
                      Non
                        Employees
                      
                      
                      Total
                      
                      
                      Employees
                      
                      
                      Non
                        Employees
                      
                      
                      TotalStock
      options
                      
                      $
                      78
                      
                      
                      $
                      41
                      
                      
                      $
                      119
                      
                      
                      $
                      105
                      
                      
                      $
                      35
                      
                      
                      $
                      140RSUs
                      
                      
                      20
                      
                      
                      
                      6
                      
                      
                      
                      26
                      
                      
                      
                      324
                      
                      
                      
                      6
                      
                      
                      
                      330Stock
      purchase plan
                      
                      
                      7
                      
                      
                      
                      -
                      
                      
                      
                      7
                      
                      
                      
                      8
                      
                      
                      
                      -
                      
                      
                      
                      8Amortization
      of restricted sharesunder
      performance basedexecutive
      bonus award
                      
                      
                      213
                      
                      
                      
                      -
                      
                      
                      
                      213
                      
                      
                      
                      271
                      
                      
                      
                      -
                      
                      
                      
                      271Shares
      issued to consultants forservices
                      
                      
                      -
                      
                      
                      
                      45
                      
                      
                      
                      45
                      
                      
                      
                      -
                      
                      
                      
                      97
                      
                      
                      
                      97Total
                      
                      $
                      318
                      
                      
                      $
                      92
                      
                      
                      $
                      410
                      
                      
                      $
                      708
                      
                      
                      $
                      138
                      
                      
                      $
                      846
 
 For the Six Months Ended June 30,2010
                        
                        
                        2009Employees
                        
                        
                        Non
                          Employees
                        
                        
                        Total
                        
                        
                        Employees
                        
                        
                        Non
                          Employees
                        
                        
                        TotalStock
      options
                        
                        $
                        201
                        
                        
                        $
                        69
                        
                        
                        $
                        270
                        
                        
                        $
                        219
                        
                        
                        $
                        55
                        
                        
                        $
                        274RSUs
                        
                        
                        284
                        
                        
                        
                        7
                        
                        
                        
                        291
                        
                        
                        
                        578
                        
                        
                        
                        4
                        
                        
                        
                        582Stock
      purchase plan
                        
                        
                        13
                        
                        
                        
                        -
                        
                        
                        
                        13
                        
                        
                        
                        14
                        
                        
                        
                        -
                        
                        
                        
                        14Amortization
      of restricted shares under performance based executive bonus
      award
                        
                        
                        432
                        
                        
                        
                        -
                        
                        
                        
                        432
                        
                        
                        
                        463
                        
                        
                        
                        -
                        
                        
                        
                        463Shares
      issued to consultants for services
                        
                        
                        -
                        
                        
                        
                        45
                        
                        
                        
                        45
                        
                        
                        
                        -
                        
                        
                        
                        97
                        
                        
                        
                        97Total
                        
                        $
                        930
                        
                        
                        $
                        121
                        
                        
                        $
                        1,051
                        
                        
                        $
                        1,274
                        
                        
                        $
                        156
                        
                        
                        $
                        1,430
  16
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 11.
Stock Based Compensation, continued
 
 Stock Options
 
 The fair
value of each option grant during the six months ended June 30, 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 and six months ended June 30,
2010 and 2009 were as follows:
 
 For
      the Three Months Ended June 30,
                        
                        
                        For
      the Six Months Ended June 30,2010
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2009Dividend
      yield
                        
                        
                        -
                        
                        
                        
                        0
                        %
                        
                        
                        0
                        %
                        
                        
                        0
                        %Expected
      volatility
                        
                        
                        -
                        
                        
                        
                        104
                        %
                        
                        
                        103.2
                        %
                        
                        
                        104
                        %Risk-free
      interest rate
                        
                        
                        -
                        
                        
                        
                        1.86
                        %
                        
                        
                        2.69
                        %
                        
                        
                        1.86
                        %Expected
      lives
                        
                        
                        -
                        
                        
                        3.6
      years
                        
                        
                        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 six months ended June 30, 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 June
30, 2010, the unamortized value of stock options held by employees was
approximately $275.  The unamortized portion will be expensed over a
weighted average period of 0.7 years.
  17
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 11.
Stock Based Compensation, continued
 
 Stock Options, continued
 
 A summary
of the status of the Company’s stock option plans and the changes during the six
months ended June 30,
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 January 1, 2010
                    
                    
                    967,781
                    
                    
                    $
                    2.57
                    
                    
                    
                    3.5Granted
                    
                    
                    175,000Exercised
                    
                    
                    (60,376
                    )Forfeited
                    
                    
                    (45,498
                    )Options
      outstanding at June 30, 2010
                    
                    
                    1,036,907
                    
                    
                    $
                    2.37
                    
                    
                    
                    3.3
                    
                    
                    $
                    440Exercisable
      June 30, 2010
                    
                    
                    690,088
                    
                    
                    $
                    2.70
                    
                    
                    
                    3.1
                    
                    
                    $
                    239
 
 Of the
options outstanding at June 30, 2010, 417,599 were held by employees of
discontinued operations, of which 220,447 were vested and
exercisable.
 
 See Note
13 – Subsequent Events – Stock Based Compensation, for a discussion of the
effect of the sales of Preparedness and FSIU on the Company’s stock options
outstanding and exercisable.
 
 Restricted
Stock Units (RSUs)
 
 At June
30, 2010, the unamortized value of RSUs held by employees was approximately
$716. The unamortized portion will be expensed over a weighted average period of
1.0 years.
 
 A summary
of the activity related to RSUs for the six months ended June 30, 2010 is
presented below:
 
 Total
                            
                            
                            Weighted Average Grant
                              Date Fair ValueNonvested
      at January 1, 2010
                            
                            
                            228,819
                            
                            
                            $
                            2.12RSUs
      vested
                            
                            
                            (109,556
                            )RSUs
      forfeited
                            
                            
                            (38,392
                            )Nonvested
      at June 30, 2010
                            
                            
                            80,871
                            
                            
                            $
                            2.12
  18
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
  11.
Stock Based Compensation, continued
 
 Amended and Restated 2006 Employee
Stock Purchase Plan (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 June 30, 2010 and 2009, 14,060 and 20,363 shares were issued
under the Stock Purchase Plan, resulting in proceeds of $21 and $26,
respectively.  Stock based compensation recognized in connection with
the issuance of these shares was $7 and $8, respectively.  For the six
months ended June 30, 2010 and 2009, 27,121 and 36,624 shares were issued under
the Stock Purchase Plan, resulting in proceeds of $37 and $46, respectively.
Stock based compensation recognized in connection with the issuance of these
shares was $13 and $15, respectively.
 
 See Note
13 – Subsequent Events – Stock Based Compensation, for a discussion of stock
issuances under the Stock Purchase Plan in July 2010.
 
 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 represents work performed under government contracts, accounted
for approximately 28% and 16% of the Company’s revenues for the three months
ended June 30, 2010 and 2009, respectively, and 15% and 15% of the Company’s
revenues for the six months ended June 30, 2010 and 2009,
respectively.
  Accounts
receivable balances from a significant single customer were $539 and $963 at
June 30, 2010 and December 31, 2009, respectively.
 
 Work
performed under government contracts represented 86% and 96% of the Company’s
revenues for the three months ended June 30, 2010 and 2009, respectively, and
87% and 95% of the Company’s revenues for the six months ended June 30, 2010 and
2009, respectively.
 
 Revenues
from foreign sources represented 13% and 2% of the Company’s revenues for the
three months ended June 30, 2010 and 2009, respectively, and 11% and 3% of the
Company’s revenues for the six months ended June 30, 2010 and 2009,
respectively.
 
 13.  Subsequent
Events
  Line of Credit
 
 On  July
12, 2010, GlobalOptions and The Bode Technology Group, Inc.,  a
subsidiary of GlobalOptions, entered into a modification of the agreement
providing for the Facility, which provided that upon the sale of FSIU, among
other things: (i) the maximum amount available under the Facility would be
reduced from $10,000  to $7,500; (ii) the financial covenants would be
revised to incorporate gains or losses related to the sale of certain of the
Company’s business units; and (iii) the early termination fee under the Loan
Agreement would be reduced to $38.  These changes became effective
following the completion of the sale of FSIU on July 20, 2010.
  19
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 13.  Subsequent
Events, continued
  Line of Credit, continued
 
 On July
16, 2010, effectively immediately, GlobalOptions and The Bode Technology Group,
Inc. entered into a modification of the agreement providing for the Facility,
which provided that in response to the sale of Preparedness, among other things:
(i) the maximum amount available under the Facility would be further reduced
from $7,500 to $5,000; (ii) the financial covenants would be further revised to
incorporate severance and bonus payments under the employment agreements of the
Company’s CEO, CFO and the CEO of Bode; and (iii) the early termination fee
under the Loan Agreement would be reduced to $25.
 
 Sales
Event
 
 As
discussed in Note 9, Commitments and Contingencies – Employment Agreements, the
Company modified its employment agreements with each of Dr. Schiller, its CEO
and Chairman, and Mr. Nyweide, its Chief Financial Officer and Executive Vice
President of Corporate Development, to induce them to remain with the Company in
the event that they became entitled to terminate their employment agreements as
a result of the occurrence of a Sales Event.
  On July
16, 2010, upon the occurrence of the Sales Event, 268,750 shares of
restricted stock granted under the Performance Bonus Plan and 31,912 RSUs held
by Dr. Schiller became fully vested and non-forfeitable, and the target cash
bonus award for the year 2010 was deemed to be earned. Out of the amount of the
2010 award that was deemed earned through the date of the Sales Event, $270 was
paid on August 13, 2010, and the remaining $230 will be paid in March
2011.  In addition, $1,685 will be paid into a “rabbi trust,” which
amount will be disbursed to Dr. Schiller six months after his separation of
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), representing: (i) salary that would
have been earned for the period August 1, 2010 through January 31, 2012; (ii)
the target cash bonus for the period January 1, 2011 through January 31, 2012;
and (iii) cash in lieu of additional shares of stock, for the number of shares
of stock deemed earned upon the vesting of the target stock bonus awards that
were in excess of the number of shares of restricted stock previously granted to
Dr. Schiller.
  Dr.
Schiller elected to have 113,650 shares, valued at $225, withheld in
satisfaction of his tax obligation in connection with the vesting of the
restricted stock and RSUs.
  On July
16, 2010, upon the occurrence of the Sales Event, 201,813 shares of restricted
stock granted under the Performance Bonus Plan and 14,093 RSUs held by Mr.
Nyweide became fully vested and non-forfeitable, and the target cash bonus award
for the year 2010 was deemed to be earned. Out of the amount of the 2010 award
that was deemed earned through the date of the Sales Event,  $202 was
paid on August 13, 2010, and the remaining $173 will be paid in March
2011.   In addition, $821 will be paid into a “rabbi trust,” and will
be disbursed to Mr. Nyweide six months after his separation of 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 Mr. Nyweide
works part-time), representing: (i) 50% of the salary and 100% of benefits,
including a housing allowance, that would have been earned for the period August
1, 2010 through January 31, 2012; (ii) 50% of the target cash bonus for the
period January 1, 2011 through January 31, 2012 ; and (iii) cash in lieu of
additional shares of stock for 50% of the number of shares of stock deemed
earned upon the vesting of the target stock bonus awards that were in excess of
the number of shares of restricted stock previously granted to
Mr.  Nyweide.
  Mr.
Nyweide elected to have 72,977 shares, valued at $144, withheld in satisfaction
of his tax obligations in connection with the vesting of the restricted stock
and RSUs.
  As a
result of the Sales Event, Mr. Nyweide also became entitled to a $150
performance bonus, half of which was paid on August 11, 2010, and the remainder
of which will be paid on the three month anniversary of the Sales
Event.
  20
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 13.  Subsequent
Events, continued
 
 Stock
Based Compensation
 
 During
July and August 2010, the Company issued 80,227 shares of its common stock
pursuant to the vesting of RSUs, under the Incentive Plan, and issued 22,551
shares of its common stock in connection with the exercise of stock
options.
  Upon the
completion of the sales of SafirRosetti, Preparedness and FSIU, their employees
were no longer deemed to be in service to the Company.  Pursuant to
the terms of the Incentive Plan, options not exercised within ninety days of an
employee’s separation of service are forfeited.   As of June 30,
there were outstanding options for the purchase of 137,785 shares of stock held
by employees of FSIU, and outstanding options for the purchase of 170,444 shares
of stock held by employees of Preparedness.   On July 29, 2010,
109,370 unexercised stock options held by employees of SafirRosetti were
forfeited.
  On July
31, 2010, the Company issued 1,319 shares of its common stock under the Stock
Purchase Plan.  The Company realized proceeds of $2, and recognized
stock based compensation of $1 in connection with the issuance of these
shares.
  Entry
into Agreement to sell Forensic DNA Solutions and Products Services Business
Unit
  On August
11, 2010, pursuant to the approval by the Board of Directors on August 10, 2010,
the Sellers entered into a stock purchase agreement (“Bode Purchase Agreement”)
with LSR Acquisition Corp (“LSR”).
  Pursuant
to the terms of the Bode Purchase Agreement, the Sellers will sell all of the
equity securities and stock of Bode Technology Group, Inc., which constitutes
the Company’s Forensic DNA Solutions and Products Services business unit,
referred to herein as Bode, to LSR for  aggregate consideration of (i)
$24,500 in cash, of which $2,450 will be held in escrow until December 31, 2011,
and (ii) an earnout payment equal to 30% of any revenues over $27,000 earned by
Bode during the 12-month period following the closing of the sale, which payment
may not exceed $5,500.
  In
addition, LSR has agreed to pay the Sellers the amount by which the working
capital of Bode at closing exceeds $5,600, and the Sellers have agreed to pay
LSR the amount by which the working capital of Bode at closing is less than
$5,600, provided that in either case no such payment will be required unless it
is in excess of $150.  The Sellers have also agreed to pay LSR a
“true-up” of up to $1,000, based on accounts receivable that remain uncollected
180 days after the closing and LSR has agreed to transfer to the Sellers all
rights with respect to such uncollected receivables after LSR’s receipt of such
“true-up” payment.  Also, LSR has agreed to pay the Sellers $500, in
the event that LSR makes a tax election under Section338(h)(10) of the Internal
Revenue Code of 1986, as amended, in connection with the Bode
Transaction.
  The sale
of the Bode is subject to approval by the stockholders of the
Company.
  21
  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 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 its subsidiaries (“GlobalOptions Group”) provide risk
mitigation and management services, including forensic DNA analysis, proprietary
DNA collection products, and related research services to law enforcement
agencies, federal and state governments, crime laboratories and disaster
management organizations.
  Our goal
is to offer this industry a very comprehensive mix of forensic DNA related
services and products to government and non-government clients throughout the
United States and internationally.  We have an established base of key
clients, forming a base upon which we intend to grow.  We believe our
reputation, credentials, technical expertise 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 has an
extensive industry background.
  During
the second quarter of 2010, we completed the sale of our SafirRosetti business
unit (“SafirRosetti”) and entered into agreements to sell our Preparedness
Services business unit (“Preparedness”) and our Fraud and Special Investigative
Services Unit business unit (“FSIU”).  Prior to approving our entry
into the purchase agreements with respect to each such transaction, our Board of
Directors, acting with the advice and assistance of its legal advisors,
evaluated the respective purchase agreements and, acting with the advice and
assistance of its legal and financial advisors, evaluated the consideration
negotiated with the buyers and their representatives.  In such
evaluation, the Board of Directors considered a number of substantive factors,
both positive and negative, and potential benefits and detriments of the
specific transaction, including but not limited to the consideration offered,
likelihood of consummation, prospects for the business unit going forward,
opinion of financial advisors (when provided), and effect on our cash
flows.  After careful consideration, the Board of Directors determined
that each of the transactions were advisable and in the best interests of us and
our stockholders and the form, terms and provisions of the respective
transaction documents were expedient and in the best interests of us and our
stockholders.
  As a
result of our sale of SafirRosetti and entry into agreements to sell
Preparedness and FSIU, the results and accounts of these three business units
are shown as discontinued operations in our financial statements.
  We
completed the sales of Preparedness on July 16, 2010 and FSIU on July 20,
2010.  Additionally, on August 11, 2010, we entered into an agreement
to sell our Forensic DNA Solutions and Products Services business unit
(“Bode”).  The sales of SafirRosetti, Preparedness and FSIU and our
entry into an agreement to sell Bode are discussed in detail in “Corporate
Developments” below.
  22
  Prior to
the Company’s sale of SafirRosetti and entry into agreements to sell
Preparedness and FSIU, we reported operating results in three financial
reporting segments: Preparedness; Fraud and SIU Services; and Security
Consulting and Investigations (which was re-named Forensic DNA Solutions and
Products following the sale of SafirRosetti).  The Preparedness
segment consisted of the operations of Preparedness, which implemented crisis
management and emergency response plans and other emergency management issued
for governments, corporations and individuals.  The Fraud and SIU
Services segment consisted of the operations of FSIU and our International
Strategies business unit, which provided multidisciplinary, international risk
management and business solutions.  The Security Consulting and
Investigations segment consisted of the operations of SafirRosetti, which
provided security and investigative services, and The Bode Technology Group,
Inc., which provides forensic DNA analysis services.  As a result of
the sale of SafirRosetti and entry into agreements to sell Preparedness and
FSIU, we no longer report operating results in separate
segments.
  Corporate
Developments
  Sale
of SafirRosetti Business Unit
  On April
30, 2010, we completed the sale of SafirRosetti in accordance with an asset
purchase agreement dated April 23, 2010 (the “SafirRosetti Purchase Agreement”),
by and among us, GlobalOptions, Inc., our wholly-owned subsidiary
(“GlobalOptions”, and together with us, 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, SafirRosetti was sold for
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) a secured
promissory note (the “SafirRosetti Note”) in the aggregate face amount of
$1,750, with an interest rate of 0.79% per annum , payable in equal installments
at December 31, 2010 and June 30, 2011; and (iii) 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.
  The
SafirRosetti 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 us on June 30, 2011, subject to a purchase right by
Guidepost.
  Sale
of Preparedness Business Unit
  On July
16, 2010, we completed the sale of Preparedness in accordance with an asset
purchase agreement dated May 13, 2010 (the “Preparedness Purchase Agreement”),
by and among the Sellers and Witt Group Holdings, LLC, (“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
Preparedness are principals.
  Pursuant
to the terms of the Preparedness Purchase Agreement, the Sellers sold
Preparedness to Witt Holdings for 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, which payment may not
exceed $12,000; and (iii) the assumption of all of Preparedness’ liabilities,
including all termination and severance payments due to James Lee Witt, Mark
Merritt, Barry Scanlon and Pate Felts upon the sale of Preparedness under their
respective employment agreements, less $286, representing a payment in
connection with the Seller’s sublease of a portion of Preparedness’ Washington
DC facility for a period of twelve months after closing.  The maximum
total consideration payable to the Sellers under the Preparedness Purchase
Agreement is $22,000.
  23
  In
addition, Witt Holdings has agreed to pay the Sellers, within six months of the
date of closing, the amount by which the working capital of Preparedness at
closing exceeds $6,800, and the Sellers have agreed to pay Witt Holdings, within
six months of the date of closing, the amount by which the working capital of
Preparedness is less than $5,800.  The 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 has
agreed upon such “true-up” payment to transfer to the Sellers all rights with
respect to such uncollected receivables.
  Additionally,
in connection with the Preparedness Purchase Agreement, we entered into (i) a
license agreement pursuant to which it granted Witt Holdings a world-wide,
perpetual, irrevocable, exclusive, royalty free, fully paid-up right and license
to use our GlobalTrak software in the field of emergency preparedness and
disaster relief recovery, and we agreed not to license the Preparedness
Application of the GlobalTrak software to any other business in such field, and
(ii) a transition service agreement pursuant to which we will provide Witt
Holdings with certain specified transition services following the closing,
including but not limited to certain information technology
services.
  The sale
of Preparedness was subject to the approval of our stockholders, which approval
was obtained at a special meeting of our stockholders held on July 15,
2010.
  Sale
of Fraud and Special Investigative Unit Services Business Unit
  On July
20, 2010, we completed the sale of FSIU in accordance with an asset purchase
agreement, dated June 11, 2010 (the “FSIU Purchase Agreement”), by and among the
Sellers and GlobalOptions Services, Inc. (“Global Services”), of which Frank
Pinder, the President of FSIU, together with David Finney, James Buscarini,
Kevin McGinn and Mike Brantley, respectively the Vice Presidents of Operations,
Business Development, Finance and IT, are officers and
shareholders.  Balmoral Advisors, LLC, Private Equity Partners LLC and
the North Atlantic Value LLP unit of JO Hambro Capital Management Ltd were the
private equity sponsors.
  Pursuant
to the terms of the FSIU Purchase Agreement, the Sellers sold FSIU to Global
Services for aggregate consideration of (i) $8,340 in cash at closing, inclusive
of $100 for an estimated adjustment for working capital and $6 for the purchase
real estate lease deposits, of which $825 is to be held in escrow for 15 months
following the closing and (ii) the assumption of substantially all of the
liabilities of FSIU.  The cash purchase price is subject to a post
closing adjustment for the actual working capital of FSIU at
closing.
  In
connection with the FSIU Purchase Agreement, we entered into certain license
agreements with Global Services pursuant to which we granted Global Services
worldwide, perpetual, irrevocable, exclusive, royalty-free, fully paid-up rights
and licenses to certain of our intellectual property, including but not limited
to the “GlobalOptions” corporate name, logo and websites (all of which Global
Services has the right to purchase in the future for nominal consideration), and
our Rapid Data Module and Rapid Video Module software and related source
materials.  Additionally, we entered into a transition service
agreement with Global Services pursuant to which the Sellers and Global Services
will provide each other with certain transition services following the
closing.
  24
  Entry into Agreement to sell Forensic
DNA Solutions and Products Services Business Unit
 
 On August 11, 2010, we entered into a
stock purchase agreement (“Bode Purchase Agreement”) with LSR Acquisition Corp
(“LSR”).
  Pursuant
to the terms of the Bode Purchase Agreement, we will sell all of the equity
securities and stock of Bode to LSR for an aggregate consideration of (i)
$24,500 in cash,  of which $2,450 will be held in escrow until
December 31, 2011, and (ii) an earnout payment equal to 30% of any revenues over
$27,000 earned by Bode during the 12-month period following the closing of the
sale, which payment may not exceed $5,500.
  In
addition, LSR has agreed to pay the the sellers the amount by which the working
capital of Bode at closing exceeds $5,600, and the the sellers have agreed to
pay LSR the amount by which the working capital of Bode at closing is less than
$5,600, provided that in either case no such payment will be required unless it
is in excess of $150.  The sellers have also agreed to pay LSR a
“true-up” of up to $1,000, based on accounts receivable that remain uncollected
180 days after the closing and LSR has agreed to transfer to the sellers all
rights with respect to such uncollected receivables after LSR’s receipt of such
“true-up” payment.  Also, LSR has agreed to pay the sellers $500, in
the event that LSR makes a tax election under Section 338(h)(10) of the Internal
Revenue Code of 1986, as amended, in connection with the Bode
Transaction.
  The sale
of the Bode is subject to approval by the stockholders of the
Company.
 
 Distribution
of Proceeds from the Sales of SafirRosetti, Preparedness, FSIU and
Bode
  As we previously disclosed in our press
release issued on August 12, 2010, subject to our satisfaction of and compliance
with existing contractual and banking obligations, and the establishment of
appropriate reserves, we intend to distribute the net proceeds from the
sales of SafirRosetti, FSIU and Preparedness to our stockholders.  However,
we have not made a final decision as to, and continue to explore the most
efficient form of, any such distribution.  If the sale of Bode is
completed, we intend to distribute the proceeds of that transaction as well,
less comparable deductions.
  In
addition to the fixed portion of the purchase price for SafirRosetti,
Preparedness, FSIU and Bode, each agreement provides for contingent proceeds in
the form of earnouts and/or the return of an escrow deposit. The following table
represents the minimum and maximum aggregate contingent proceeds that may be
realized from the sales of SafirRosetti, FSIU, Preparedness, and
Bode.
 
 SafirRosetti
                    
                    
                    FSIU
                    
                    
                    Preparedness
                    
                    
                    Bode
                    
                    
                    TotalMin
                    
                    
                    Max
                    
                    
                    Min
                    
                    
                    Max
                    
                    
                    Min
                    
                    
                    Max
                    
                    
                    Min
                    
                    
                    Max
                    
                    
                    Min
                    
                    
                    MaxEarnout
                    
                    $
                    -
                    
                    
                    $
                    1,600
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    12,000
                    
                    
                    $
                    -
                    
                    
                    $
                    5,500
                    
                    
                    $
                    -
                    
                    
                    $
                    19,100Return
      of escrow
                    
                    
                    -
                    
                    
                    
                    525
                    
                    
                    
                    -
                    
                    
                    
                    825
                    
                    
                    
                    -
                    
                    
                    
                    1,000
                    
                    
                    
                    -
                    
                    
                    
                    2,450
                    
                    
                    
                    -
                    
                    
                    
                    4,800Totals
                    
                    $
                    -
                    
                    
                    $
                    2,125
                    
                    
                    $
                    -
                    
                    
                    $
                    825
                    
                    
                    $
                    -
                    
                    
                    $
                    13,000
                    
                    
                    $
                    -
                    
                    
                    $
                    7,950
                    
                    
                    $
                    -
                    
                    
                    $
                    23,900
  There is
no assurance that any of these contingent proceeds will be
realized.  Accordingly, in each case, the minimum amount is
$0.    Neither the maximum nor the minimum amounts represent
management’s expectation of the amount of contingent proceeds to be realized.
Additionally, these contingent proceeds do not reflect certain potential working
capital adjustments and accounts receivable guarantees that we provided with
respect to the above mentioned transactions.
  If we
receive the contingent proceeds discussed above, we intend to distribute them to
stockholders.  However, we have not made a final decision as to, and
continue to explore the most efficient form of, any such
distribution.
  25
  Modifications
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 its assets to the financial institution that provides the
Facility.
  On July
12, 2010, we entered into a modification of the agreement providing for the
Facility which provided that upon the sale of FSIU, among other things: (i) the
maximum amount available under the Facility would be reduced from $10,000 to
$7,500; (ii) the financial covenants would be revised to incorporate gains or
losses related to the sale of certain our business units; and (iii) the early
termination fee under the loan agreement would be reduced to $38. These changes
became effective following the completion of the sale of FSIU on July 20,
2010.
 
 On July
16, 2010, we entered into a modification of the agreement providing for the
Facility which provided that in response to the sale of Preparedness, among
other things: (i) the maximum amount available under the Facility would be
further reduced from $7,500 to $5,000; (ii) the financial covenants would
be further revised to incorporate severance and bonus payments under the
employment agreements of the our CEO, CFO and the CEO of our Bode unit; and
(iii) the early termination fee under the loan agreement would be reduced to
$25.
  Modification
of Employment Agreements and Occurrence of a Sales Event
  Effective
May 11, 2010, we modified our employment agreements with each of Dr. Schiller,
our CEO and Chairman, and Mr. Nyweide, our Chief Financial Officer and Executive
Vice President of Corporate Development, to induce them to remain with us in the
event that they became entitled to terminate their employment agreements as a
result of the occurrence of a “change of control,” as defined under their
employment agreements, which the Compensation Committee of our Board of
Directors determined would result from the completion of the sale of
Preparedness (the “Sales Event”).
  Our
employment agreement with Dr. Schiller, as modified (the “Schiller
Employment Agreement”), provides that in the event of a Sales Event,
Dr. Schiller will continue to serve as our Chairman and Chief Executive
Officer for one year following the Sales Event, and devote the necessary working
time and efforts, but less than substantial working time and efforts, to the
business of GlobalOptions Group.  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 certain living expenses, for the duration of the
term.  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
Employment Agreement, we will have 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, we are required to pay to Dr. Schiller all funds
that would have been required to be paid under the Schiller Employment Agreement
had he terminated his employment for “good reason” (as defined under the
Schiller Employment Agreement). As result of the Sales Event,  for Dr.
Schiller, 268,750 shares of restricted stock granted under the Executive
Compensation Performance Bonus Plan (the “Performance Bonus Plan”) and 31,912
RSU awards were immediately vested, and target cash bonus awards for the year
2010 were deemed to be earned.  Out of the amount of the 2010 award
that was deemed earned through the date of Sales Event, $270 was paid on August
13, 2010, and the remaining $230 will be paid in March 2011. In addition, $1,685
will be paid into a “rabbi trust,” which amount will be disbursed to Dr.
Schiller six months after his separation of 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)
, representing: (i) salary that would have been earned for the period August 1,
2010 through January 31, 2012; (ii) the target cash bonus for the period January
1, 2011 through January 31, 2012; and (iii) cash in lieu of additional shares of
stock, for the number of shares of stock deemed earned upon the vesting of the
target stock bonus awards that were in excess of the number of shares of
restricted stock previously granted to Dr. Schiller.
  Dr.
Schiller elected to have 113,650 shares, valued at $225, withheld in
satisfaction of his tax obligation in connection with the vesting of the
restricted stock and RSUs.
  26
  Our
employment agreement with Mr. Nyweide, as modified (the “Nyweide Employment
Agreement”), provides that in the event of a Sales Event, Mr. Nyweide will
continue to serve as our Chief Financial Officer and Executive Vice President
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 (half payable on the date of the Sales Event and
the remainder payable on the three-month anniversary thereof), and a performance
bonus of $250 in the event of a sale of our fourth and final business division
(half payable upon the sale of such business division and the remainder payable
at the completion of the term of the Nyweide Employment
Agreement).  Following the completion of the term of the Nyweide
Employment Agreement, we will have 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, we are required to pay to Mr. Nyweide all funds that would
have been required to be paid 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, for Mr. Nyweide, 201,813
shares of restricted stock granted under the Performance Bonus Plan and 14,093
RSU awards were immediately vested, and target cash bonus awards for the year
2010 were deemed to be earned.  Out of the amount of the 2010 award
that was deemed earned through the date of the change of control, $202 was
paid on August 13, 2010, and the remaining $173 will be paid in March
2011.  In addition, $821 will be paid into a “rabbi trust,” which
amount will be disbursed to Mr. Nyweide six months after his separation of
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 Mr. Nyweide works part-time), representing: (i) 50% of the salary and 100%
of benefits, including a housing allowance, that would have been earned for the
period August 1, 2010 through January 31, 2012; (ii) 50% of the target cash
bonus for the period January 1, 2011 through January 31, 2012 ; and (iii) cash
in lieu of additional shares of stock for 50% of the number of shares of stock
deemed earned upon the vesting of the target stock bonus awards that were in
excess of the number of shares of restricted stock previously granted to
Mr.  Nyweide.
  Mr.
Nyweide elected to have 72,977 shares, valued at $144, withheld in satisfaction
of his tax obligations in connection with the vesting of the restricted stock
and RSUs.
  As a
result of the Sales Event, Mr. Nyweide also became entitled to a $150
performance bonus, half of which was paid on August 11, 2010, and the remainder
of which will be paid on the three month anniversary of the Sales
Event.
 
 Results
of Operations
 
 Revenues
  Principally,
we generate our revenues through providing DNA analysis and 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 situations in
which we are considered by our clients to be the sole source provider, based
principally upon the experience of our personnel and our technical expertise.
Our clients consist of government entities and corporations. We provide our
services principally through our own employees. Currently, approximately 9% of
our revenues are generated from services provided outside the United
States.
  Gross Profit
  Our gross
profit represents our revenues less the costs of revenues incurred to provide
services to our clients. The most significant components of our costs of
revenues are the costs of our direct labor and our direct materials. Variable
costs of revenues are based upon the type of services performed or the amount of
revenues generated. Fixed costs of revenues relate to our equipment and
dedicated personnel. Due to the amount of fixed costs incurred, variability in
our gross margins result may result from increases or decreases in revenues
generated, as well as from changes in our product mix.
  27
  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.
  Discontinued
Operations
  As a
result of our sale of SafirRosetti and classification of Preparedness and FSIU
as “held for sale” following our entry into agreements to sell Preparedness and
FSIU, the results and accounts of these business units are now presented in our
financial statements as discontinued operations for the three and six months
ended June 30, 2010 and all prior periods.
  On July
16, 2010, we completed the sale of Preparedness, and on July 20, 2010, we
completed the sale of FSIU.
  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 June 30,
                  
                  
                  For the Six Months
                    Ended June 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009Revenues
                  
                  
                  100
                  %
                  
                  
                  100
                  %
                  
                  
                  100
                  %
                  
                  
                  100
                  %Cost
      of revenues
                  
                  
                  55
                  
                  
                  
                  58
                  
                  
                  
                  54
                  
                  
                  
                  59Gross
      profit
                  
                  
                  45
                  
                  
                  
                  42
                  
                  
                  
                  46
                  
                  
                  
                  41Operating
      expenses:Selling
      and marketing expenses
                  
                  
                  12
                  
                  
                  
                  14
                  
                  
                  
                  14
                  
                  
                  
                  17General
      and administrative
                  
                  
                  76
                  
                  
                  
                  72
                  
                  
                  
                  76
                  
                  
                  
                  78Total
      operating expenses
                  
                  
                  88
                  
                  
                  
                  86
                  
                  
                  
                  90
                  
                  
                  
                  95Loss
      from operations
                  
                  
                  (43
                  )
                  
                  
                  (44
                  )
                  
                  
                  (44
                  )
                  
                  
                  (54
                  )Other
      expense, net
                  
                  
                  (2
                  )
                  
                  
                  (4
                  )
                  
                  
                  (2
                  )
                  
                  
                  (4
                  )Loss
      from continuing operations
                  
                  
                  (45
                  )%
                  
                  
                  (48
                  )%
                  
                  
                  (46
                  )%
                  
                  
                  (58
                  )%Income
      (loss) from discontinued operations, net of tax
                  
                  
                  (79
                  )
                  
                  
                  33
                  
                  
                  
                  (32
                  )
                  
                  
                  34Net
      loss
                  
                  
                  (124
                  )%
                  
                  
                  (15
                  )%
                  
                  
                  (78
                  )%
                  
                  
                  (24
                  )%
  28
  GlobalOptions
Group Three Months Ended June 30, 2010 Compared to the Three Months Ended June
30, 2009
  Revenues
  We had
overall revenues from continuing operations of $6,503 for the three months ended
June 30, 2010, as compared to revenues of $5,405 for the three months ended June
30, 2009, for an overall increase of $1,098 or 20%.  The increase was
the result of an increase in research and development projects for our
government clients as well an increase in DNA analysis services, and an increase
related to the sale of software.
  Gross
Profit
  Our
consolidated gross profit for the three months ended June 30, 2010 and 2009 was
$2,907 and $2,256, respectively, reflecting an increase of $651 or
29%.  Our gross profit margins for the three months ended June 30,
2010 and 2009 were 45% and 42% respectively.  The increase in profit
margin was primarily a result of increase in revenues from the sale of software,
for which the associated costs of revenues were relatively low during the three
months ended June 30, 2010.
  Operating
Expenses
  Selling
and marketing expenses were $802 or 12% of revenues for the three months ended
June 30, 2010, as compared to $771 or 14% of revenues for the three months ended
June 30, 2009. The increase in selling expenses for the three months ended June
30, 2010 was primarily related to a client conference.  General and
administrative expenses were $4,945 or 76% of revenues for the three months
ended June 30, 2010, as compared to $3,892 or 72% of revenues for the three
months ended June 30, 2009.  The increase of $1,053 or 27% was
primarily related to the cost of evaluating strategic alternatives and with
regard to the potential sales of our business units.
  Results
of Discontinued Operations
 
 (Loss)
income from discontinued operations, net of tax, was $(5,103) and $1,780 for the
three months ended June 30, 2010 and 2009, respectively.  The increase
in losses is primarily due to an impairment charge taken with respect to FSIU,
and the loss on the sale of SafirRosetti.
  Net
Loss
 
 Net loss
for the three months ended June 30, 2010 and 2009 was $8,062 and $821,
respectively.  Net loss for the three months ended June 30, 2010 was
comprised of a loss from continuing operations of $2,959 and a loss from
discontinued operations, net of tax, of $5,103.  Net loss for the
three months ended June 30, 2009 was comprised of a loss from continuing
operations of $2,601 and income from discontinued operations, net of tax, of
$1,780.  The increase in net loss is principally the result of a loss
of $1,930 on the sale of SafirRosetti and a $4,475 impairment charge taken with
respect to FSIU, offset by a credit related to the provision for income taxes of
$602.
  29
  GlobalOptions
Group Six Months Ended June 30, 2010 Compared to the Six Months Ended June 30,
2009
  Revenues
  We had
revenues from continuing operations of $12,529 for the six months ended June 30,
2010, as compared to revenues of $10,011 for the six months ended June 30, 2009,
for an overall increase of $2,518 or 25%.  The increase in revenue
resulted from an increase in research and development projects for our
government clients as well an increase in DNA analysis services, and an increase
related to a sale of a software application.
  Gross
Profit
  Our
consolidated gross profit for the six months ended June 30, 2010 and 2009 was
$5,709 and $4,056, respectively, reflecting an increase of $1,653 or 41%,
principally resulting from the increase in revenues as discussed
above.  For the six months ended June 30, 2010 and 2009, our gross
profit margins were 46% and 41%, respectively.  The increase in gross
margin is principally due to the increase in revenues from the sale of a
software application, for which the associated costs of revenues were relatively
low.
  Operating
Expenses
  Selling
and marketing expenses were $1,730 or 14% of revenues for the six months ended
June 30, 2010, as compared to $1,718 or 17% of revenues for the six months ended
June 30, 2009, representing a $12 or 1% increase.  General and
administrative expenses were $9,544 or 76% of revenues for the six months ended
June 30, 2010, as compared to $7,784 or 78% of revenues for the six months ended
June 30, 2009.  The increase of $1,760 or 23% is attributable to an
increase in costs related to evaluating strategic alternatives and with regard
to the potential sales of the company’s business units.
  Results
of Discontinued Operations
  (Loss)
income from discontinued operations, net of tax, was $(3,996) and $3,369 for the
six months ended June 30, 2010 and 2009 respectively.  The increase in
the loss for the six months ended June 30, 2010 is primarily due to losses from
discontinued operations, an impairment charge taken with respect to FSIU, and
the loss on the sale of SafirRosetti, offset by a credit related to the
provision for income taxes of $511.
  Net
Loss
  Net loss
for the six months ended June 30, 2010 and 2009 was $9,755 and $2,457,
respectively.  Net loss for the six months ended June 30, 2010 was
comprised of a loss from continuing operations of $5,759 and a loss from
discontinued operations, net of tax, of $3,996.  Net loss for the six
months ended June 30, 2009 was comprised of a loss from continuing operations of
$5,826 and income from discontinued operations, net of tax, of
$3,369.  The increase in net loss is principally the result of a loss
of $1,930 on the sale of SafirRosetti and, a $4,475 impairment charge taken with
respect to FSIU, offset by a credit related to the provision for income taxes of
$511.
  30
  Liquidity
and Capital Resources
  For
the Six Months Ended June 30, 2010
  We had a
cash and cash equivalent balance of $3,828 as of June 30, 2010.
  Cash used
in operating activities of continuing operations was approximately $3,056 and
$4,024 for the six months ended June 30, 2010 and 2009,
respectively.  Cash used in operating activities for the six months
ended June 30, 2010 resulted primarily from our net loss from continuing
operations of $5,759, offset by non-cash charges for depreciation and
amortization of $899 and for stock based compensation of $1,051.
  Cash used
in investing activities by continuing operations was $580 and $942 for the six
months ended June 30, 2010 and 2009, respectively.  Of the cash used
in investing activities for the six months ended June 30, 2010, $548 represented
purchases of property and equipment.
  Cash
provided by (used in) financing activities by continuing operations was $2,122
and $(2,475) for the six months ended June 30, 2010 and 2009,
respectively.  The net cash provided by financing activities for the
six months ended June 30, 2010 is primarily due to proceeds from the line of
credit of $2,008.
  We
maintain a working capital line of credit facility, maturing on September 29,
2010, which is secured by accounts receivable.  As of June 30, 2010,
our net borrowings under the Facility were $4,171.  On July 16, 2010,
in connection with the sale of Preparedness, the Facility was modified to, among
other things, reduce the amount that we are eligible to draw under the Facility
to $5,000. At July
31, 2010 our net borrowings under the Facility were
$1,114.
  For the
six months ended June 30, 2010, we have met our cash needs through borrowings
under the Facility and by cash generated by the sale of SafirRosetti. At June
30, 2010, we had working capital of $3,543.
  As we
previously disclosed in our press release issued on August 12,  2010,
subject to our satisfaction of and compliance with existing contractual and
banking obligations, and the establishment of the appropriate reserves, we
intend to distribute the net proceeds from the sales of SafirRosetti, FSIU
and Preparedness to our stockholders.  If the sale of Bode is
completed, we intend to distribute the proceeds of that transaction as well,
less comparable deductions and reserves.  However, we have not made a final
decision as to, and continue to explore the most efficient form of, any such
distribution.
  We
believe that a likely scenario would have GlobalOptions returning some portion
of the net proceeds to shareholders shortly after, and contingent upon, the
completion of the sale of Bode Technology. We currently estimate that this
distribution could be between $23,000 and $25,000 with later distributions in
late 2011 or early 2012 after the various earnouts are received and the last
escrow payment is collected.  We expect that any later distributions
would be in an aggregate amount between $0, to the extent that no earnouts are
achieved and no proceeds are released from escrow, to as much as
$23,900.
  We also
note that these distribution amounts are net of our current estimates of the
amounts needed for required reserves for contingencies and for the financial and
operating costs of the Company, but do not consider the effects of working
capital adjustments, guarantees of receivables sold, tax or other reserves which
we may later conclude are necessary.
 We
believe that the cash generated by the sales of  SafirRosetti,
Preparedness and FSIU, the cash that we expect to receive from the release of
escrow amounts, the earnouts, and the payment of SafirRosetti Note, less any
distributions to our stockholders, will be sufficient to finance our operations
through June 30, 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.
  31
  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 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 our
DNA related services, revenue is recognized when it is realized or realizable
and earned. We consider revenue to be realized or realizable and earned when
there is persuasive evidence that an agreement exists, prices are fixed or
determinable, services and products are provided to the client, and
collectability is reasonably assured. We reduce 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. We recognize 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 we have satisfied specific obligations
under the terms of the respective agreements. Revenues from the sales of DNA
collection products are recognized upon delivery of the products to the
client.
  Forensic
DNA analysis is billed on a per sample fixed fee arrangement. Research and
development projects are billed on a cost plus fixed fee
arrangement.
  Costs
incurred in the performance of forensic DNA analysis are recorded as inventories
and charged to cost of revenues upon the completion of the project, which
generally ranges from one to three months. Costs related to research and
development projects are expensed as incurred and costs related to DNA
collection products are maintained as inventory and charged to operations when
the products are delivered.
  Intangible Assets, Goodwill and
Impairment
  In
accordance with 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.
  32
   Stock-Based
Compensation
  We have
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. We recognize 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, we 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.
 
 Discontinued
Operations
 
 We
account for our discontinued operations under the provisions of ASC 205-20
“Presentation of Financial Statements – Discontinued Operations”. Accordingly,
the results of operations and related charges for discontinued operations with
respect to the sale of SafirRosetti and to the classification of Preparedness
and FSIU as “held for sale” are reflected in net loss discontinued
operations.  Assets and liabilities of the discontinued operations
have been reclassified and are reflected on the our Consolidated Balance Sheet
as “Current assets of discontinued operations”, “Assets of discontinued
operations”, “Current liabilities of discontinued operations” and “Liabilities
of discontinued operations”.
  33
   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 June 30, 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 June 30, 2010.
 
 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 second quarter ended June 30,
2010, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
  34
  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.
 
 On June
24, 2010, we issued 26,309 shares of its common stock valued at $45 to
Lippert/Heilshorn and Associates, Inc. for services rendered to us during the
first half of 2010.  These securities were issued in reliance on the
exemption from registration set forth in Section 4(2) of the Securities Act of
1933, as amended.
 
 Item
3. Default Upon Senior Securities.
  None.
  Item
4.  (Removed and Reserved).
  Item
5. Other Information.
  There are
no items required to be disclosed on Current Report on Form 8-K during the
quarterly period ended June 30, 2010 that were not so reported.
  35
  Item
6. Exhibits.
  The
following is a list of exhibits filed as part of this Quarterly Report on Form
10-Q.
 
 Exhibit
      No.
                  
                  Description10.1
                  
                  Employment
      Agreement Modification, dated May 13, 2010, by and between GlobalOptions
      Group, Inc. and Harvey W. Schiller.10.2
                  
                  Employment
      Agreement Modification, dated May 13, 2010, by and between GlobalOptions
      Group, Inc. and Jeffrey O. Nyweide.10.3
                  
                  License
      Agreement, dated July 16, 2010, by and between GlobalOptions Group, Inc.
      and Witt Group Holdings, LLC.10.4
                  
                  License
      Agreement, dated July 19, 2010, by and between GlobalOptions Group, Inc.
      and GlobalOptions Services, Inc.10.5
                  
                  Rapid
      Data License Agreement, dated July 19, 2010, by and between GlobalOptions
      Group, Inc. and GlobalOptions Services, Inc.10.6
                  
                  Intellectual
      Property Assignment, dated July 19, 2010, between GlobalOptions Group,
      Inc., GlobalOptions, Inc. and GlobalOptions Services,
  Inc.10.7
                  
                  Fifth
      Loan Modification Agreement, dated July 12, 2010, by and among
      GlobalOptions, Inc., The Bode Technology Group, Inc. and Silicon Valley
      Bank.10.8
                  
                  Sixth
      Loan Modification Agreement, dated July 16, 2010, by and among
      GlobalOptions, Inc., The Bode Technology Group, Inc. and Silicon Valley
      Bank.31.1
                  
                  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.
  36
  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: August 16, 2010
                          By:
                          /s/ Harvey W. SchillerHarvey
      W. Schiller
                            Chairman,
      Chief Executive Officer and Director
                            (Principal
      Executive Officer)Dated: August 16,
    2010
                          By:
                          /s/ Jeffrey O. NyweideJeffrey
      O. Nyweide
                            Executive
      Vice President-Corporate Development,
                              Chief
      Financial Officer and Secretary
                              (Principal
      Financial Officer and Principal Accounting
  Officer)
  37
  EXHIBIT
INDEX
 
 Exhibit
      No.
                  
                  Description10.1
                  
                  Employment
      Agreement Modification, dated May 13, 2010, by and between GlobalOptions
      Group, Inc. and Harvey W. Schiller.10.2
                  
                  Employment
      Agreement Modification, dated May 13, 2010, by and between GlobalOptions
      Group, Inc. and Jeffrey O. Nyweide.10.3
                  
                  License
      Agreement, dated July 16, 2010, by and between GlobalOptions Group, Inc.
      and Witt Group Holdings, LLC.10.4
                  
                  License
      Agreement, dated July 19, 2010, by and between GlobalOptions Group, Inc.
      and GlobalOptions Services, Inc.10.5
                  
                  Rapid
      Data License Agreement, dated July 19, 2010, by and between GlobalOptions
      Group, Inc. and GlobalOptions Services, Inc.10.6
                  
                  Intellectual
      Property Assignment, dated July 19, 2010, between GlobalOptions Group,
      Inc., GlobalOptions, Inc. and GlobalOptions Services,
  Inc.10.7
                  
                  Fifth
      Loan Modification Agreement, dated July 12, 2010, by and among
      GlobalOptions, Inc., The Bode Technology Group, Inc. and Silicon Valley
      Bank.10.8
                  
                  Sixth
      Loan Modification Agreement, dated July 16, 2010, by and among
      GlobalOptions, Inc., The Bode Technology Group, Inc. and Silicon Valley
      Bank.31.1
                  
                  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.
  38