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 September 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, 27th
      Floor
                        New
      York, New York
                      
                      10019(Address
      of Principal Executive Offices)
                      
                      (Zip
      Code)





(212)
445-6262





(Registrant’s
telephone number, including area code)








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





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




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T 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
November 12, 2010, there were 14,472,828 shares of the issuer’s common stock
outstanding.





GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES


Form
10-Q


September
30, 2010


TABLE
OF CONTENTS





PART
      IFINANCIAL
      INFORMATIONITEM
      1.    Financial Statements.Condensed
      Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and
      December 31, 2009
                1Condensed
      Consolidated Statements of Operations for the Three and Nine Months
      Ended
                  September
      30, 2010 and 2009 (Unaudited)
                2Condensed
      Consolidated Statement of Stockholders’ Equity for the Nine Months
      Ended
                  September
      30, 2010 (Unaudited)
                3Condensed
      Consolidated Statements of Cash Flows for the Nine Months
      Ended
                  September
      30, 2010 and 2009 (Unaudited)
                4Notes
      to Condensed  Consolidated Financial Statements
      (Unaudited)
                5ITEM
      2.   Management’s Discussion and Analysis of Financial
      Condition and Results of Operations.
                25ITEM
      3.  Quantitative and Qualitative Disclosures About Market
      Risk.
                34ITEM
      4.  Controls and Procedures.
                34PART
      IIOTHER
      INFORMATIONITEM
      1.       Legal
    Proceedings.
                36ITEM
      1A.    Risk Factors.
                36ITEM
      2.       Unregistered Sales of Equity
      Securities and Use of Proceeds.
                39ITEM
      3.       Defaults Upon Senior
      Securities.
                39ITEM
      4.       (Removed and
      Reserved).
                39ITEM
      5.       Other
    Information.
                39ITEM
      6.       Exhibits.
                40SIGNATURES.
                41









Part I  FINANCIAL INFORMATION
 Item
1.  Financial Statements
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 
 Condensed
Consolidated Balance Sheets
 (dollars
in thousands, except per share amounts)
 
 September 30,
                                
                                
                                December 31,2010
                                
                                
                                2009(unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                                
                                $
                                9,471
                                
                                
                                $
                                3,221Restricted
      cash equivalents
                                
                                
                                2,506
                                
                                
                                
                                -Prepaid
      expenses and other current assets
                                
                                
                                600
                                
                                
                                
                                350Current
      assets of discontinued operations
                                
                                
                                14,516
                                
                                
                                
                                23,476Total
      current assets
                                
                                
                                27,093
                                
                                
                                
                                27,047Property
      and equipment, net
                                
                                
                                32
                                
                                
                                
                                36Other
      assets of discontinued operations
                                
                                
                                15,356
                                
                                
                                
                                31,731Total
      assets
                                
                                $
                                42,481
                                
                                
                                $
                                58,814LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Line
      of credit
                                
                                $
                                -
                                
                                
                                $
                                2,163Accounts
      payable
                                
                                
                                75
                                
                                
                                
                                358Accrued
      compensation and related benefits
                                
                                
                                1,095
                                
                                
                                
                                195Deferred
      compensation
                                
                                
                                2,506
                                
                                
                                
                                -Other
      current liabilities
                                
                                
                                937
                                
                                
                                
                                795Current
      liabilities of discontinued operations
                                
                                
                                5,653
                                
                                
                                
                                8,180Total
      current liabilities
                                
                                
                                10,266
                                
                                
                                
                                11,691Long-term
      liabilities of discontinued operations
                                
                                
                                281
                                
                                
                                
                                1,300Total
      long-term liabilities
                                
                                
                                281
                                
                                
                                
                                1,300Total
      liabilities
                                
                                
                                10,547
                                
                                
                                
                                12,991Commitments
      and contingenciesStockholders'  equity:Preferred
      stock, $0.001 par value, 14,880,000 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;
                                
                                
                                -
                                
                                
                                
                                -Series
      A junior participating preferred stock, $0.001 par value, 20,000 shares
      authorized, no shares issued or outstanding;
                                
                                
                                -
                                
                                
                                
                                -Common
      stock, $0.001 par value, 100,000,000 shares authorized;
                                  14,796,934
      shares issued and 14,469,586 shares outstanding at September 30,
      2010,  and 14,472,363 shares issued and14,348,469
      shares outstanding at December 31, 2009
                                
                                
                                15
                                
                                
                                
                                14Additional
      paid-in capital
                                
                                
                                114,138
                                
                                
                                
                                111,909Accumulated
      deficit
                                
                                
                                (81,571
                                )
                                
                                
                                (65,857
                                )Treasury
      stock; at cost, 327,348 and 123,894 shares at September 30, 2010 andDecember
      31, 2009, respectively
                                
                                
                                (648
                                )
                                
                                
                                (243
                                )Total
      stockholders' equity
                                
                                
                                31,934
                                
                                
                                
                                45,823Total
      liabilities and stockholders' equity
                                
                                $
                                42,481
                                
                                
                                $
                                58,814
 
 See notes
to these condensed consolidated financial statements.
 
 1
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Condensed
Consolidated Statements of Operations
 (dollars
in thousands, except per share amounts)
 (Unaudited)
 
 For the Three Months Ended September 30,
                                    
                                    
                                    For the Nine Months Ended September 30,2010
                                    
                                    
                                    2009
                                    
                                    
                                    2010
                                    
                                    
                                    2009Operating
      expenses:Selling
      and marketing
                                    
                                    $
                                    237
                                    
                                    
                                    $
                                    508
                                    
                                    
                                    $
                                    1,430
                                    
                                    
                                    $
                                    1,750General
      and administrative
                                    
                                    
                                    7,272
                                    
                                    
                                    
                                    2,156
                                    
                                    
                                    
                                    12,810
                                    
                                    
                                    
                                    6,437Total
      operating expenses
                                    
                                    
                                    7,509
                                    
                                    
                                    
                                    2,664
                                    
                                    
                                    
                                    14,240
                                    
                                    
                                    
                                    8,187Loss
      from operations
                                    
                                    
                                    (7,509
                                    )
                                    
                                    
                                    (2,664
                                    )
                                    
                                    
                                    (14,240
                                    )
                                    
                                    
                                    (8,187
                                    )Other
      income (expense):Interest
      income
                                    
                                    
                                    1
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    1Interest
      (expense)
                                    
                                    
                                    (30
                                    )
                                    
                                    
                                    (107
                                    )
                                    
                                    
                                    (224
                                    )
                                    
                                    
                                    (484
                                    )Other
      expense, net
                                    
                                    
                                    (29
                                    )
                                    
                                    
                                    (107
                                    )
                                    
                                    
                                    (223
                                    )
                                    
                                    
                                    (483
                                    )Loss
      from continuing operations
                                    
                                    
                                    (7,538
                                    )
                                    
                                    
                                    (2,771
                                    )
                                    
                                    
                                    (14,463
                                    )
                                    
                                    
                                    (8,670
                                    )Discontinued
      Operations:Income
      from discontinued operations, net of tax
                                    
                                    
                                    1,564
                                    
                                    
                                    
                                    2,256
                                    
                                    
                                    
                                    663
                                    
                                    
                                    
                                    5,698Gain
      (loss) on disposal, net of tax
                                    
                                    
                                    16
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1,914
                                    )
                                    
                                    
                                    -Income
      (loss) from discontinued operations, net of tax
                                    
                                    
                                    1,580
                                    
                                    
                                    
                                    2,256
                                    
                                    
                                    
                                    (1,251
                                    )
                                    
                                    
                                    5,698Net
      loss
                                    
                                    $
                                    (5,958
                                    )
                                    
                                    $
                                    (515
                                    )
                                    
                                    $
                                    (15,714
                                    )
                                    
                                    $
                                    (2,972
                                    )Basic
      and diluted net loss per shareContinuing
      operations
                                    
                                    $
                                    (0.52
                                    )
                                    
                                    $
                                    (0.21
                                    )
                                    
                                    $
                                    (1.01
                                    )
                                    
                                    $
                                    (0.70
                                    )Discontinued
      operations, net of tax
                                    
                                    
                                    0.11
                                    
                                    
                                    
                                    0.17
                                    
                                    
                                    
                                    (0.09
                                    )
                                    
                                    
                                    0.46Net
      loss per share
                                    
                                    $
                                    (0.41
                                    )
                                    
                                    $
                                    (0.04
                                    )
                                    
                                    $
                                    (1.10
                                    )
                                    
                                    $
                                    (0.24
                                    )Weighted
      average number of common shares outstanding - basic and
      diluted
                                    
                                    
                                    14,418,143
                                    
                                    
                                    
                                    13,270,411
                                    
                                    
                                    
                                    14,274,410
                                    
                                    
                                    
                                    12,459,456
 
 See notes
to these condensed consolidated financial statements.
  2
  GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Condensed
Consolidated Statement of Stockholders' Equity
 For
the Nine Months Ended September 30, 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
                    
                    
                    155,561
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Purchase
      of treasury shares in connection with cashless vesting of restricted stock
      units
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    33,654
                    
                    
                    
                    (69
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (69
                    )Purchase
      of treasury shares in connection with cashless vesting of restricted
      stock
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    169,800
                    
                    
                    
                    (336
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (336
                    )Issuance
      of common stock upon exercise of stock options
                    
                    
                    112,717
                    
                    
                    
                    1
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    201
                    
                    
                    
                    -
                    
                    
                    
                    202Issuance
      of common stock under employee stock purchase plan
                    
                    
                    29,984
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    43
                    
                    
                    
                    -
                    
                    
                    
                    43Stock-based
      compensation – restricted stock vested
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,468
                    
                    
                    
                    -
                    
                    
                    
                    1,468Repurchase
      of stock-based compensation award
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (339
                    )
                    
                    
                    -
                    
                    
                    
                    (339
                    )Stock
      based compensation – employee stock purchase plan
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    15
                    
                    
                    
                    -
                    
                    
                    
                    15Amortization
      of consultant stock option costs
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    95
                    
                    
                    
                    -
                    
                    
                    
                    95Amortization
      of employee stock options costs
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    121
                    
                    
                    
                    -
                    
                    
                    
                    121Amortization
      of consultant restricted stock unit costs
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    7
                    
                    
                    
                    -
                    
                    
                    
                    7Amortization
      of employee restricted stock unit costs
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    573
                    
                    
                    
                    -
                    
                    
                    
                    573Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (15,714
                    )
                    
                    
                    (15,714
                    )Balance,
      September 30, 2010
                    
                    
                    14,796,934
                    
                    
                    $
                    15
                    
                    
                    
                    327,348
                    
                    
                    $
                    (648
                    )
                    
                    $
                    114,138
                    
                    
                    $
                    (81,571
                    )
                    
                    $
                    31,934
 
 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 Nine Months Ended September 30,2010
                  
                  
                  2009Cash
      flows from operating activities:Net
      loss from continuing operations
                  
                  $
                  (14,463
                  )
                  
                  $
                  (8,670
                  )Adjustments
      to reconcile net loss to net cash (used in) provided by operating
      activities:Depreciation
                  
                  
                  4
                  
                  
                  
                  4Stock-based
      compensation
                  
                  
                  2,324
                  
                  
                  
                  2,086Reserve
      for litigation
                  
                  
                  -
                  
                  
                  
                  40Changes
      in operating assets and liabilities:Prepaid
      expenses and other current assets
                  
                  
                  (250
                  )
                  
                  
                  (71
                  )Accounts
      payable
                  
                  
                  (283
                  )
                  
                  
                  (7
                  )Accrued
      compensation and related benefits
                  
                  
                  900
                  
                  
                  
                  77Deferred
      compensation
                  
                  
                  2,506
                  
                  
                  
                  -Other
      current liabilities
                  
                  
                  144
                  
                  
                  
                  265Total
      adjustments
                  
                  
                  5,345
                  
                  
                  
                  2,394Net
      cash used in continuing operating activities
                  
                  
                  (9,118
                  )
                  
                  
                  (6,276
                  )Net
      cash provided by discontinued operating activities
                  
                  
                  3,776
                  
                  
                  
                  11,891Net
      cash (used in) provided by operating activities
                  
                  
                  (5,342
                  )
                  
                  
                  5,615Cash
      flows from investing activities:Investment
      in restricted cash equivalents
                  
                  
                  (2,506
                  )
                  
                  
                  -Purchases
      of property and equipment
                  
                  
                  -
                  
                  
                  
                  (16
                  )Net
      cash used in investing activities of continuing operations
                  
                  
                  (2,506
                  )
                  
                  
                  (16
                  )Net
      cash provided by (used in) investing activities of discontinued
      operations
                  
                  
                  16,760
                  
                  
                  
                  (1,951
                  )Net
      cash provided by (used in) investing activities
                  
                  
                  14,254
                  
                  
                  
                  (1,967
                  )Cash
      flows from financing activities:Net
      repayments under line of credit
                  
                  
                  (2,163
                  )
                  
                  
                  (3,416
                  )Proceeds
      from issuance of stock in connection with options
exercised
                  
                  
                  202
                  
                  
                  
                  -Proceeds
      from issuance of stock in connection with ESPP
                  
                  
                  43
                  
                  
                  
                  69Repurchase
      of stock-based compensation award
                  
                  
                  (339
                  )
                  
                  
                  -Repurchase
      of common stock
                  
                  
                  (405
                  )
                  
                  
                  (35
                  )Net
      cash used in financing activities of continuing operations
                  
                  
                  (2,662
                  )
                  
                  
                  (3,382
                  )Net
      cash used in financing activities of discontinued
    operations
                  
                  
                  -
                  
                  
                  
                  (400
                  )Net
      cash used in financing activities
                  
                  
                  (2,662
                  )
                  
                  
                  (3,782
                  )Net
      increase (decrease)  in cash and cash
equivalents
                  
                  
                  6,250
                  
                  
                  
                  (134
                  )Cash
      and cash equivalents - beginning of period
                  
                  
                  3,221
                  
                  
                  
                  5,276Cash
      and cash equivalents - end of period
                  
                  $
                  9,471
                  
                  
                  $
                  5,142Supplemental
      disclosure of cash flow information:Cash
      paid during the period for interest
                  
                  $
                  237
                  
                  
                  $
                  575
 
 See notes
to these condensed consolidated financial statements.
  4
 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”) is a holding company operating to provide risk mitigation and management
services.
  References
herein to “GlobalOptions” refer to GlobalOptions, Inc., an operating subsidiary
of the Company.
 
 The
Company sold its SafirRosetti business unit (“SafirRosetti”) on April 30, 2010,
its Preparedness Services business unit (“Preparedness”) on July 16, 2010 and
its Fraud and Special Investigative Unit Services business unit (“FSIU”) on July
20, 2010.  Additionally, the Company’s Forensic DNA Solutions and
Products business unit (“Bode”) and its International Strategies business unit
(“International”) were classified as held for sale as of September 30, 2010 (See
Note 2 - Basis of Presentation).  On August 11, 2010, the Company
entered into an agreement to sell Bode and on August 31, 2010, the Company made
the determination to close International. (See Note 4 – Discontinued Operations,
for a discussion of the sales of SafirRosetti, Preparedness, FSIU, and Bode and
the Company’s decision to close International.)  As of September 30,
2010, continuing operations consist solely of our executive and general
corporate operations.
 
 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 nine months ended September
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 sales of SafirRosetti, Preparedness and FSIU and the Company’s
classification of Bode and International as “held for sale,” the Condensed
Consolidated Balance Sheet as of September 30, 2010, the Condensed Consolidated
Statements of Operations for the three and nine months ended September 30, 2010
and the Condensed Consolidated Statements of Cash Flows for the nine months
ended September 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 to such presentation.
 
 Prior to
the Company’s sales 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, which
provided emergency response plans for disaster mitigation, continuity of
operations and other emergency management issues for governments, corporations
and individuals.  The Fraud and SIU Services segment 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 and The Bode Technology Group, Inc.,
which provided forensic DNA analysis services.  As a result of the
sales of SafirRosetti, Preparedness and FSIU as of June 30, 2010, the Company
determined to cease reporting its operating results in separate
segments.
  5
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 3. 
Summary of Significant Accounting Policies
 
 Restricted
Cash Equivalents
 
 Restricted
cash equivalents include funds held in a "rabbi trust" under a nonqualified
deferred compensation arrangement (the “Deferred Compensation
Arrangement”). Each plan participant’s account is comprised of the
participant’s contribution to the trust and share of earnings or losses in the
plan.  The restricted cash held in the rabbi trust is considered an
asset available for sale and is reported at fair value with an offsetting
liability included in deferred compensation in our Condensed Consolidated
Balance Sheet.  The earnings on the investments are recorded in
interest income with an offsetting amount recorded in general and administrative
expenses in our Condensed Consolidated Statement of
Operations.  During the three and nine months ended September 30, 2010
and 2009, there were no earnings on these investments.  The fair value
of the investments of the Deferred Compensation Arrangement was $2,506 and $0 at
September 30, 2010 and December 31, 2009.
 
 Fair
Value Measurements
  Fair
value is defined as an exit price, representing the amount that would be
received upon the sale of an asset or payment to transfer a liability in an
orderly transaction between market participants. Fair value is a market-based
measurement that is determined based on assumptions that market participants
would use in pricing an asset or liability. A three-tier fair value hierarchy is
used to prioritize the inputs in measuring fair value as follows:
 
 •
                Level
      1.Observable inputs
      such as quoted prices in active
markets;
 
 •
                Level
      2. Inputs, other
      than quoted prices in active markets, that are observable either directly
      or indirectly; and
 
 •
                Level
      3. Unobservable
      inputs for which there is little or no market data, which require the
      reporting entity to develop its own
  assumptions.
  Assets
and liabilities measured at fair value are based on one or more of three
valuation techniques identified in the tables below. The valuation techniques
are as follows:
 
 (a)
                  Market
      approach. Prices and
      other relevant information generated by market transactions involving
      identical or comparable assets or
    liabilities;
  (b)
                  Cost
      approach.Amount that would be
      required to replace the service capacity of an asset (replacement cost);
      and
  (c)
                  Income
      approach.Techniques to convert
      future amounts to a single present amount based on market expectations
      (including present value techniques, option-pricing and excess earnings
      models).
  Assets
(Liabilities) Measured at Fair Value on a Recurring Basis
  September 30,
                      2010
                    
                    
                    Quoted Prices
                      in
                      Active Markets
                    
                    
                    Significant
                      Other
                      Inputs
                    
                    
                    Significant
                      Observable
                      Inputs
                    
                    
                    Unobservable
                      Valuation
                      Technique(Level1)
                    
                    
                    (Level2)
                    
                    
                    (Level3)Restricted
      Cash Equivalents
                    
                    $
                    2,506
                    
                    
                    $
                    2,506
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
  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,
continued
 
 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, Preparedness and FSIU, which were sold on April 30, 2010, July 16,
2010 and July 20, 2010, respectively, and for International and for Bode, which
are classified as “held for sale”, are included in “Income (loss) 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 and restricted stock units
(“RSUs”) 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.
  September 30,2010
                        
                        
                        2009Stock
      options
                        
                        
                        882,134
                        
                        
                        
                        1,037,794Restricted
      stock units
                        
                        
                        8,825
                        
                        
                        
                        229,526Potentially
      dilutive securities realizable from the vesting of performance based
      restricted stock
                        
                        
                        -
                        
                        
                        
                        558,063Total
      potentially dilutive securities
                        
                        
                        890,959
                        
                        
                        
                        1,825,383
  7
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 4.
Discontinued Operations
 
 Introduction
  On April
30, 2010, July 16, 2020 and July 20, 2010, the Company completed the sales of
SafirRosetti, Preparedness and FSIU, respectively.  On August 11,
2010, the Company entered into an agreement to sell Bode.  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 evaluations, 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 was advisable
and in the best interests of the Company and its stockholders and that the form,
terms and provisions of the respective transaction documents were expedient and
in the best interests of the Company and its stockholders and on August 31,
2010, the Company made the determination to close International.
  As a
result of the Company’s sales of SafirRosetti, Preparedness and FSIU, the entry
into an agreement to sell Bode, and the Company’s planned closing of
International, the results and accounts of each of these business operating
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.Contingent consideration
received and recognized through September 30, 2010 was $433.
 
 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.
  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 SafirRosetti, continued
 
 The
Company recorded a cumulative loss of $1,497 on the sale of SafirRosetti,
pursuant to the following:
 
 Cash
      selling price (of which $525 was held in escrow)
                      
                      $
                      3,500Note
      receivable, net
                      
                      
                      1,670Contingent
      cash consideration received
                      
                      
                      433Gross
      proceeds from sale
                      
                      
                      5,603Less:
      expenses of sale
                      
                      
                      (355
                      )Net
      proceeds from sale
                      
                      
                      5,248Less:
      net book value of assets sold to buyer or written off in connection with
      the sale
                      
                      
                      (6,745
                      )Net
      (loss) on the sale of SafirRosetti
                      
                      $
                      (1,497
                      )
 
 The net
loss amount above reflects the benefit of $433 in contingent proceeds received
through September 30, 2010.  This loss does not reflect the full
benefit of contingent proceeds on the sale, which will be recorded when
realized.
 
 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) $10,006 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 Witt Holdings’ assumption of the lease for Preparedness’
Washington D.C. facility.  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.  At September 30, 2010, the Company
has estimated that Witt Holdings will pay to Sellers a working capital
adjustment of approximately $1,644, which amount was subject to change pending
further negotiations between Witt Holdings and the Company.  On
October 29, 2010, Witt Holdings agreed to pay to Sellers a working capital
adjustment of $1,652.   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 software in the field of emergency preparedness and
disaster relief recovery, and the Company agreed not to license the Preparedness
application of 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.
  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 Preparedness, continued
 
 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 held on
July 15, 2010.
 
 The
Company has recorded $6,570 as an estimate for contingent cash consideration,
which has been offset by a deferred gain to the extent that such recognition
would result in a gain.
 
 In future
periods, the Company expects to record contingent consideration as
realized.
 
 The
Company recorded a gain of $0 on the sale of Preparedness, pursuant to the
following:
 
 Cash
      selling price (of which $1,000 was held in escrow)
                        
                        $
                        10,006Estimate
      of working capital adjustment
                        
                        
                        1,644Contingent
      cash consideration, net
                        
                        
                        6,570Deferred
      gain
                        
                        
                        (6,263
                        )Liabilities
      assumed
                        
                        
                        3,225Gross
      proceeds from sale
                        
                        
                        15,182Less:
      expenses of sale
                        
                        
                        (1,152
                        )Net
      proceeds from sale
                        
                        
                        14,030Less:
      net book value of assets sold to buyer or written off in connection with
      the sale
                        
                        
                        (14,030
                        )Net
      gain on the sale of Preparedness
                        
                        $
                        -
 
 This net
gain of $0 reflects the recognition of contingent consideration not yet
realized, net, of $307.  The company expects to reverse the deferred
gain in future periods, as actual contingent consideration is
realized.
  10
 
 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 of 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 closing
date working capital of FSIU.  Global Services has agreed to pay the
Sellers the amount by which the working capital of FSIU at closing exceeded
$1,985.  At closing, Global services paid $34 towards the amount of
the post closing adjustment.  As of September 30, 2010, the final post
closing working capital adjustment has not been determined, pending further
negotiations between Global Services and the Sellers.
  In connection with FSIU being
classified as held for sale, during the three months ended 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 that are embedded within the
GlobalTrak system for the FSIU business only.  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.
 
 The
Company recorded a loss of $417 on the sale of FSIU, pursuant to the
following:
 
 Cash
      selling price (of which $825 was held in escrow)
                        
                        $
                        8,340Liabilities
      assumed
                        
                        
                        3,151Gross
      proceeds from sale
                        
                        
                        11,491Less:
      expenses of sale
                        
                        
                        (922
                        )Net
      proceeds from sale
                        
                        
                        10,569Less:
      net book value of assets sold to buyer or written off in connection with
      the sale
                        
                        
                        (10,986
                        )Net
      loss on the sale of FSIU
                        
                        $
                        (417
                        )
  11
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 4.
Discontinued Operations, continued
  Entry
into Agreement to sell Bode
  On August
11, 2010, pursuant to the Board of Directors’ approval 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 The Bode Technology Group, Inc., which
constitutes the Company’s Forensic DNA Solutions and Products 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,  (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, and (iii) a cash payment of $500 in
connection with LSR’s tax election under Section 338(h)(10) of the Internal
Revenue Code of 1986, as amended (the “Internal Revenue Code”).
  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.
  The sale
of Bode is subject to approval by the stockholders of the Company, which
approval was obtained at a special meeting of the Company’s stockholders held on
November 11, 2010.
 
 Results
of Discontinued Operations
 
 Results and net income (loss) from
discontinued operations are as follows, reflecting results of SafirRosetti,
Preparedness, FSIU, Bode, and International:
 
 Forthethreemonthsended
                        September30,
                      
                      
                      Fortheninemonthsended
                        September30,2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009Revenues
                      
                      $
                      10,329
                      
                      
                      $
                      26,005
                      
                      
                      $
                      60,209
                      
                      
                      $
                      77,949Income
      from operations
                      
                      $
                      1,647
                      
                      
                      $
                      2,251
                      
                      
                      $
                      242
                      
                      
                      $
                      5,703Income (loss)
      before tax
                      
                      $
                      1,580
                      
                      
                      $
                      2,256
                      
                      
                      $
                      (1,761
                      )
                      
                      $
                      5,698Income
      (loss) net of tax
                      
                      $
                      1,580
                      
                      
                      $
                      2,256
                      
                      
                      $
                      (1,251
                      )
                      
                      $
                      5,698
  12
 
 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 September 30, 2010 and
December 31, 2009 are as follows:
 
 As ofSeptember 30, 2010
                              
                              
                              December 31, 2009AssetsAccounts
      receivable, net
                              
                              $
                              5,716
                              
                              
                              $
                              19,632Due
      from buyer related to sale of business unit
                              
                              
                              5,361
                              
                              
                              
                              -Inventories,
      net
                              
                              
                              3,120
                              
                              
                              
                              3,354Prepaid
      expenses and other current assets
                              
                              
                              319
                              
                              
                              
                              490Property
      and equipment, net
                              
                              
                              3,431
                              
                              
                              
                              6,958Goodwill
      and intangible assets, net
                              
                              
                              11,030
                              
                              
                              
                              24,236Noncurrent
      portion of escrowed amount, related to sale of business
    unit
                              
                              
                              825
                              
                              
                              
                              -Deposits
      and other assets
                              
                              
                              70
                              
                              
                              
                              537Total
      assets of discontinued operations
                              
                              $
                              29,872
                              
                              
                              $
                              55,207LiabilitiesAccounts
      payable
                              
                              $
                              736
                              
                              
                              $
                              3,207Accrued
      compensation
                              
                              
                              1,814
                              
                              
                              
                              3,449Deferred
      Revenues
                              
                              
                              950
                              
                              
                              
                              590Accrued
      expenses and other current  liabilities
                              
                              
                              2,153
                              
                              
                              
                              934Other
      long term liabilities
                              
                              
                              281
                              
                              
                              
                              1,300Total
      liabilities of discontinued operations
                              
                              $
                              5,934
                              
                              
                              $
                              9,480
  13
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 5.  Accrued Compensation and Related
Benefits
 
 A summary of accrued compensation and
related benefits is comprised of the following:
 
 As ofSeptember 30, 2010
                      
                      
                      December 31, 2009Accrued
      performance based bonuses
                      
                      $
                      993
                      
                      
                      $
                      150Accrued
      payroll and commissions
                      
                      
                      43
                      
                      
                      
                      30Accrued
      employee benefits
                      
                      
                      59
                      
                      
                      
                      14Total
                      
                      $
                      1,095
                      
                      
                      $
                      194
 
 6. 
Deferred Compensation
 
 The Company has established a Deferred
Compensation Arrangement for the benefit of its Chief Executive Officer and its
Chief Financial Officer (See Note 8 - Employment
Agreements).  The deferred compensation is held in a separate trust
account, established by the Company to administer the Deferred Compensation
Arrangement.  The assets of the trust are subject to the claims of the
Company’s creditors in the event that the Company becomes
insolvent.   The trust qualifies as a grantor trust for income
tax purposes (known as a “rabbi trust”).  The assets and liabilities
of the Deferred Compensation Arrangement are valued at $2,506 as of September
30, 2010.
 
 7. 
Line of Credit
 
 The
Company maintains a working capital line of credit (the “Facility”), which
matures on January 27, 2011, is secured by accounts receivable and is subject to
a liquidity financial covenant. The Company has granted a first priority
security interest in substantially all of its assets to the financial
institution that provides this Facility.
  On March
29, 2010, the financial institution that provides the Facility, GlobalOptions
and The Bode Technology Group, Inc. 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.
  On  July
12, 2010, the financial institution that provides the Facility, GlobalOptions
and The Bode Technology Group, Inc. 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
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, the financial institution that provides the Facility, 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 Chief Executive Officer
and Chief Financial Officer, and the Chief Executive Officer of Bode; and
(iii) the early termination fee under the loan agreement would be reduced to
$25.
 
 On
September 27, 2010, the financial institution that provides the Facility,
GlobalOptions and The Bode Technology Group, Inc. entered into a modification of
the agreement providing for the Facility, which provided that among other
things: (i) the maturity date of the Facility was extended to January 27, 2011;
(ii) the applicable interest rate with respect to the amount outstanding under
the Facility was set at 1%, plus the greater of (A) 6.25% or (B) the
financial institution’s most recently announced “prime rate”; (iii) the
collateral handling fee and the early termination fee under the agreement were
eliminated; (iv) the minimum EBDA (as defined under the agreement) financial
covenant under the agreement was replaced with a financial covenant requiring
minimum Liquidity (as defined under the agreement) of $5,000; and (v) the
Company was granted permission to repurchase up to $3,000 of its capital stock
on the open market, provided that no event of default under the agreement exists
or would result from any such repurchase.
  14
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 7. 
Line of Credit, continued
 
 The
interest rate on the line of credit at September 30, 2010 was
7.25%.  As of September 30, 2010, the Company’s net borrowings were $0
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 $3,956 under the
Facility.
 
 8.  Commitments
and Contingencies
 
 Consulting
Agreements
  On March
9, 2010, effective as of April 1, 2010, the Company entered into consulting
agreements (the “Safir Consulting Agreements”) with each of Howard Safir, then
the Chief Executive Officer of the Company’s Security Consulting and
Investigations unit, and Adam Safir, Howard Safir’s son, then 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, Howard
Safir and Adam 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.  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 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, Howard Safir and Adam Safir were
notified that their consulting agreements were terminated, effective on June 30,
2010.
 
 Following
the sale of the Company’s SafirRosetti business unit on April 30, 2010 and the
announcement of the Company’s entry into an agreement to sell all of the equity
securities of Bode, constituting the Company’s Forensic DNA Solutions and
Products Services business unit, to LSR Acquisition Corp., Howard Safir and Adam
Safir informed the Company they believed they had earned their respective
payments of $600 and $300 under their consulting agreements.  The
Company believed that the payments were not owed because the consulting
agreements were terminated prior to the Company’s entry into the definitive
agreement to sell Bode.  (See Note 11 – Subsequent Events, for a
discussion of the Company’s entry into a settlement agreement with respect to
this matter.)
  Employment
Agreements
 
 Effective
May 11, 2010, the Company modified its employment agreements with each of Dr.
Schiller, its Chief Executive Officer 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 sale of
Preparedness was completed on July 16, 2010.
 
 As a result of the sale of Preparedness,
the Company’s employment agreement with Dr. Schiller, as modified (the “Schiller
Employment Agreement”), provides that Dr. Schiller will continue to serve
as its Chairman and Chief Executive Officer for one year following the sale of
Preparedness, and devote the necessary working time and efforts, but less than
substantial working time and efforts, to the business of GlobalOptions
Group.  Dr. Schiller began receiving 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 became eligible for a
discretionary cash bonus one year after the sale of
Preparedness.  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.
  15
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 8.  Commitments
and Contingencies, continued
 
 Employment Agreements,
continued
  On July
16, 2010, upon the sale of Preparedness, 268,750 shares of restricted stock
granted under the 2006 Executive Compensation Performance Bonus Plan (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 sale of Preparedness, $270 was paid on August 13,
2010, and the remaining $230 will be paid in March 2011.  In addition,
$1,685,  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, was paid into
a “rabbi trust” on August 20, 2010 and 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)
(See Note 6 - Deferred Compensation, for a discussion of the
Deferred Compensation Arrangement).  For Dr. Schiller, $252 of the
cash paid in lieu of additional shares of stock was deemed to be a repurchase of
his stock-based award.
  Dr.
Schiller elected to have 113,650 shares, valued at $225, withheld in
satisfaction of his tax obligations in connection with the vesting of the
restricted stock and RSUs.
  As a
result of the Sale of Preparedness, the Company’s employment agreement with
Mr. Nyweide, as modified (the “Nyweide Employment Agreement”), provides
that Mr. Nyweide will continue to serve as its Chief Financial Officer and
Executive Vice President for 18 months following the sale of
Preparedness.  Mr. Nyweide began receiving 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 earned a performance bonus of $150 in connection
with the sale of Preparedness of which $75 was paid on August 20, and the
remaining $75 was paid on October 15, 2010, 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.
  On July
16, 2010, upon the sale of Preparedness, 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 sale of Preparedness, $202 was paid on
August 13, 2010, and the remaining $173 will be paid in March 2011.  
In addition, $821, 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, was
paid into a “rabbi trust” on August 23, 2010 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) (See
Note 6 - Deferred Compensation, for a discussion of the Deferred
Compensation Arrangement). For Mr. Nyweide, $87 of the cash paid in lieu of
additional shares of stock was deemed to be a repurchase of his stock-based
award.
  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.
  16
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 8.   Commitments and Contingencies,
continued
  Operating
Leases
 
 The
Company has a month to month obligation for an office lease.
 
 Rent
expense charged to continuing operations amounted to $54 and $54 for the three
months ended September 30, 2010 and 2009, respectively, and $162 and $158 for
the nine months ended September 30, 2010 and 2009, respectively.
 
 Litigation,
Claims and Assessments
 
 From time
to time, in the normal course of business, the Company may be involved in
litigation.  The Company’s management has determined any asserted or
unasserted claims to be immaterial to the consolidated financial
statements.
 
 9. 
Stockholders’
Equity
 
 Common
Stock Issued
  During
the nine months ended September 30, 2010, the Company issued 29,984 shares of
its common stock under the Amended and Restated 2006 Employee Stock Purchase
Plan (the “Stock Purchase Plan”).  The Company realized proceeds of
$42 and recognized stock based compensation of $15 in connection with the
issuance of these shares.
  During
the nine months ended September 30, 2010, the Company issued 112,717 shares of
its common stock upon the exercise of stock options and realized proceeds of
$202.
  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.
  During
July and August 2010, the Company issued 109,554 shares of its common stock upon
the vesting of RSUs issued under the Incentive Plan.  (See Note 7 –
Commitments and Contingencies – Employment Agreements, for a discussion of the
issuance of shares of the Company’s common stock pursuant to the vesting of RSUs
held by the Company’s Chief Executive Officer and Chief Financial Officer as a
result of the sale of Preparedness.)
  17
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 9. 
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
Officer and Chief Financial Officer, respectively, in connection with the
Performance Bonus Plan.
  As a
result of the sale of Preparedness,  the remaining 268,750 and 201,813
unvested shares held by Dr. Schiller and Mr. Nyweide, respectively, were no
longer subject to forfeiture, and 31,912 and 14,094 RSUs became vested,
respectively.  Dr. Schiller and Mr. Nyweide elected to have the
Company withhold 113,650 and 72,977 shares, respectively, in satisfaction of
their tax obligations in connection with the vesting of their restricted stock
and RSUs.  Such withheld shares, valued at $201 and $135,
respectively, are reflected as treasury shares in the Company’s books and
records.  As of September 30, 2010 Dr. Schiller and Mr. Nyweide have
no more non-vested shares of restricted stock.  (See Note 7 –
Commitments and Contingencies – Employment Agreements, for additional discussion
regarding these shares.)
 
 Stockholder
Rights Plan
 
 On
September 7, 2010, the Company entered into a stockholder rights plan, dated as
of September 7, 2010 (the “Rights Agreement”), with Continental Transfer &
Trust Company, as rights agent.
  On
September 7, 2010, in connection with the Company’s entry into the Rights
Agreement, the Board of Directors authorized the issuance of one right (a
“Right”) to purchase one one-thousandth of a share of the Company’s Series A
Junior Participating Preferred Stock, par value $0.001 per share (“Series A
Preferred Stock”), at a purchase price of $4.10 (as may be adjusted from time to
time as provided in the Rights Agreement) for each share of the Company’s
outstanding common stock  to stockholders of record as of the close of
business on September 17, 2010.  The Rights will expire on September
7, 2013.
 
 Series
A Junior Participating Preferred Stock
 
 On
September 7, 2010, the Company filed a certificate of designation with the State
of Delaware authorizing the designation of a total of 20,000 shares of Series A
Preferred Stock.
 
 Voting
Rights
 
 No voting
rights shall attach to the Series A Preferred Stock.
  Liquidation
Rights
 
 In the
event of any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, holders of Series A Preferred Stock, no distribution shall be made
to the holders of any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred
Stock.
  Dividends
 
 Subject
to the superior rights of the holders of shares of any other series of preferred
stock or other class of capital stock of the Company ranking superior to the
shares of Series A Preferred Stock with respect to dividends, the holders of
shares of Series A Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of the assets of the Company legally
available therefor, dividends payable in cash on the payment date for each cash
dividend declared on the shares of common stock (currently 1,000) of the Company
in an amount per whole share (rounded to the nearest cent) equal to the Formula
Number then in effect times the cash dividends then to be paid on each share of
common stock.
  18
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 10.
Stock Based Compensation
 
 Amended and Restated 2006 Long-Term
Incentive Plan(“Incentive Plan”)
  Under the Incentive Plan, the Company
may issue up to 3,000,000 shares of the Company’s common stock.  The
Compensation Committee has the authority to determine the amount, type and terms
of each award, but may not grant awards under the Incentive Plan, in any
combination, for more than 625,000 shares of the Company’s common stock to any
individual during any calendar year, increased from 312,500 under the Company’s
original 2006 Long-Term Incentive Plan.
  As of
September 30, 2010, 1,090,474 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.
  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 September 30, 2010 and 2009, 2,863 and 14,770 shares were
issued under the Stock Purchase Plan, resulting in proceeds of $5 and $23,
respectively.  Stock based compensation recognized in connection with
the issuance of these shares was $2 and $8, respectively.  For the
nine months ended September 30, 2010 and 2009, 29,984 and 51,394 shares were
issued under the Stock Purchase Plan, resulting in proceeds of $43 and $69,
respectively. Stock based compensation recognized in connection with the
issuance of these shares was $15 and $23, respectively.
 
 (See Note
10 – Subsequent Events – Stock Based Compensation, for a discussion of stock
issuances under the Stock Purchase Plan in October 2010.)
  As of
September 30, 2010, 1,878,917 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 $1,246 and $634 for the three
months ended September 30, 2010 and 2009, respectively, and $2,177 and $1,909
for the nine months ended September 30, 2010 and 2009,
respectively.  For the three months ended September 30, 2010 and 2009,
$0 and $130, respectively, were reflected in selling and marketing expenses, and
$1,246 and $504, respectively, were reflected in general and administrative
expenses.  For the nine months ended September 30, 2010 and 2009, $205
and $245, respectively, were reflected in selling and marketing expenses, and
$1,971 and $1,664, 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 $26 and $20 for the three months ended September
30, 2010 and 2009, respectively, and $147 and $177 for the nine months ended
September 30, 2010 and 2009, respectively.  For the three months ended
September 30, 2010 and 2009, all stock based compensation for non-employees was
reflected in general and administrative expenses.  For the nine months
ended September 30, 2010 and 2009, $0 and $98, respectively, were reflected in
selling and marketing expenses, and $147 and $79, respectively, were reflected
in general and administrative expenses.
  19
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 10.
Stock Based Compensation, continued
 
 Stock
Based Compensation, continued
  The
following tables summarize total stock based compensation costs recognized for
the three and nine months ended September 30, 2010 and 2009.
 
 For the Three Months Ended September 30,2010
                      
                      
                      2009Employees
                      
                      
                      Non
                        Employees
                      
                      
                      Total
                      
                      
                      Employees
                      
                      
                      Non
                        Employees
                      
                      
                      TotalStock
      options
                      
                      $
                      (81
                      )
                      
                      $
                      26
                      
                      
                      $
                      (55
                      )
                      
                      $
                      103
                      
                      
                      $
                      20
                      
                      
                      $
                      123RSUs
                      
                      
                      289
                      
                      
                      
                      -
                      
                      
                      
                      289
                      
                      
                      
                      247
                      
                      
                      
                      -
                      
                      
                      
                      247Stock
      purchase plan
                      
                      
                      2
                      
                      
                      
                      -
                      
                      
                      
                      2
                      
                      
                      
                      8
                      
                      
                      
                      -
                      
                      
                      
                      8Amortization
      of restricted shares under performance based executive bonus
      award
                      
                      
                      1,036
                      
                      
                      
                      -
                      
                      
                      
                      1,036
                      
                      
                      
                      276
                      
                      
                      
                      -
                      
                      
                      
                      276Shares
      issued to consultants for services
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Total
                      
                      $
                      1,246
                      
                      
                      $
                      26
                      
                      
                      $
                      1,272
                      
                      
                      $
                      634
                      
                      
                      $
                      20
                      
                      
                      $
                      654
  For the Nine Months Ended September 30,2010
                      
                      
                      2009Employees
                      
                      
                      Non
                        Employees
                      
                      
                      Total
                      
                      
                      Employees
                      
                      
                      Non
                        Employees
                      
                      
                      TotalStock
      options
                      
                      $
                      121
                      
                      
                      $
                      95
                      
                      
                      $
                      216
                      
                      
                      $
                      322
                      
                      
                      $
                      75
                      
                      
                      $
                      397RSUs
                      
                      
                      573
                      
                      
                      
                      7
                      
                      
                      
                      580
                      
                      
                      
                      825
                      
                      
                      
                      4
                      
                      
                      
                      829Stock
      purchase plan
                      
                      
                      15
                      
                      
                      
                      -
                      
                      
                      
                      15
                      
                      
                      
                      23
                      
                      
                      
                      -
                      
                      
                      
                      23Amortization
      of restricted shares under performance based executive bonus
      award
                      
                      
                      1,468
                      
                      
                      
                      -
                      
                      
                      
                      1,468
                      
                      
                      
                      739
                      
                      
                      
                      -
                      
                      
                      
                      739Shares
      issued to consultants for services
                      
                      
                      -
                      
                      
                      
                      45
                      
                      
                      
                      45
                      
                      
                      
                      -
                      
                      
                      
                      98
                      
                      
                      
                      98Total
                      
                      $
                      2,177
                      
                      
                      $
                      147
                      
                      
                      $
                      2,324
                      
                      
                      $
                      1,909
                      
                      
                      $
                      177
                      
                      
                      $
                      2,086
  20
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 10.
Stock Based Compensation, continued
 
 Stock Options
 
 The fair
value of each option grant during the nine months ended September 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 nine months ended
September 30, 2010 and 2009 were as follows:
 For
      the Nine Months EndedSeptember
      30,2010
                  
                  2009Dividend
      yield
                  
                  
                  0%
                  
                  
                  0%Expected
      volatility
                  
                  
                  103.2%
                  
                  
                  104%Risk-free
      interest rate
                  
                  
                  2.69%
                  
                  
                  1.86%Expected
      lives
                  
                  3
      years
                  
                  3.6
      years
 
 The
Company has determined that the expected life of options granted prior to July
1, 2008 is the same as the contractual term for such options because the
recipients were expected to remain with the Company for the full term of the
option award.  The expected life of options granted on and after July
1, 2008 was calculated using the simplified method, calculating the expected
life as the average of the contractual term and the vesting period.
 
 The
weighted average fair value of the options on the date of grant, using the fair
value based methodology for the nine months ended September 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
September 30, 2010, the unamortized value of stock options held by employees was
approximately $165.  The unamortized portion will be expensed over a
weighted average period of 0.5 years.
  21
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 10.
Stock Based Compensation, continued
 
 Stock Options, continued
 
 A summary
of the status of the Company’s stock option plans and the changes during the
nine months ended September
30, 2010, is presented in the table below:
 Number of
                            Options
                          
                          
                          Weighted
                            Average
                            Exercise
                            Price
                            (per share)
                          
                          
                          Weighted
                            Average
                            Remaining
                            Contractual
                            Life
                          
                          
                          Intrinsic
                            ValueOptions
      outstanding at January 1, 2010
                          
                          
                          967,781
                          
                          
                          $
                          2.57
                          
                          
                          
                          3.5Granted
                          
                          
                          175,000Exercised
                          
                          
                          (112,717
                          )Forfeited
                          
                          
                          (147,930
                          )Options
      outstanding at September 30, 2010
                          
                          
                          882,134
                          
                          
                          $
                          2.33
                          
                          
                          
                          3.1
                          
                          
                          $
                          210Exercisable
      September 30, 2010
                          
                          
                          638,306
                          
                          
                          $
                          2.57
                          
                          
                          
                          3.0
                          
                          
                          $
                          122
  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 90 days of an
employee’s separation of service are forfeited.   As of September
30, 2010 there were outstanding options for the purchase of 124,333 shares of
common stock held by employees of FSIU, outstanding options for the purchase of
154,493 shares of common stock held by employees of Preparedness, outstanding
options for the purchase of 47,108 shares of stock by the employees of Bode, and
outstanding options for the purchase of 18,700 shares of common stock held by
the employees of International.  On July 29, 2010, unexercised stock
options for the purchase of 87,184 shares of common stock held by employees of
SafirRosetti were forfeited.  Of the 334,634 options held by employees
of discontinued operations, 161,223 are vested and exercisable.
 
 Restricted
Stock Units (RSUs)
 
 At
September 30, 2010, the unamortized value of RSUs held by employees was
approximately $5. The unamortized portion will be expensed over a weighted
average period of 0.8 years.
 
 A summary
of the activity related to RSUs for the nine months ended September 30, 2010 is
presented below:
 
 Total
                        
                        
                        Weighted
                          Average
                          GrantDate
                          Fair ValueNonvested
      at January 1, 2010
                        
                        
                        228,819
                        
                        
                        $
                        2.12RSUs
      vested
                        
                        
                        (155,561
                        )RSUs
      forfeited
                        
                        
                        (64,433
                        )Nonvested
      at September 30, 2010
                        
                        
                        8,825
                        
                        
                        $
                        2.12
  22
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 11.  Subsequent
Events
 
 Stock
Based Compensation
 
 During
October 2010, the Company issued 2,310 shares of its common stock in
connection with the exercise of stock options.
  On
October 31, 2010, the Company issued 932 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.
  Stock
Repurchase Program
  On
October 27, 2010, the Board of Directors authorized the repurchase of up to
$3,000 of the Company’s common stock over a period of 18 months, at such times,
amounts and prices as the Company deems appropriate.  The repurchases
may take place in the open market or in privately negotiated transactions, and
may be made under a Rule 10b5-1 plan.
  Settlement
Agreement with Howard Safir and Adam Safir
  On
November 4, 2010, the Company entered into a Settlement and Release Agreement
(the “Settlement Agreement”) with Howard Safir and Adam Safir regarding (a) a
default judgment in the original amount of approximately $482 against Safir
Rosetti, LLC in the Circuit Court for Miami-Dade County, Florida (the “Florida
Litigation”) as well as any potential or threatened claims arising out of the
Florida Litigation, and (b) Howard Safir and Adam Safir’s respective consulting
agreements with the Company.  Pursuant to the Settlement Agreement,
the parties settled any and all past, present, future, potential or threatened
disputed legal claims between them arising from the Florida Litigation and the
Safir Consulting Agreements.  The default judgment in the Florida
Litigation is a result of a case for breach of contract against Safir Rosetti,
LLC that pre-dated the Company’s acquisition of Safir Rosetti, LLC in May 2006,
and the plaintiff previously threatened to seek to recover the default judgment
from the Company.  In consideration for the settlement, the Company
deposited $375 in an escrow account on November 9, 2010, which amount will be
paid to Howard Safir and Adam Safir upon evidence that that they have entered
into an effective settlement agreement with the plaintiff in the Florida
Litigation, waiving any and all of the plaintiff’s legal claims against the
Company.  The waiver must be obtained by November 1, 2011 or the
escrow funds will be distributed to the Company and the Safir Consulting
Agreements will be deemed null and void.
 Litigation,
Claims and Assessments
 
 On
October 2, 2010, the Company, along with others, was notified that it is a
defendant in a lawsuit filed by a third party for alleged conversion of assets,
tortuous interference and defamation, among other claims.  The suit
asks for actual and punitive damages totaling $4,200,000.  The Company
believes the suit is completely without merit and intends to vigorously defend
its position.
  Limited
Waiver of Rights Agreement and Stockholder Support Agreement
 
 On
October 27, 2010, the Company entered into a Support Agreement (the “Support
Agreement”) with Weiss Asset Management LP, a Delaware limited partnership
acting solely in its capacity as investment manager to certain funds managed by
it (the “Stockholder”).  As of market close on October 27, 2010,
certain funds managed by the Stockholder beneficially owned an aggregate of
5,766,324 shares of the Company’s common stock, or approximately 40% of the
common stock outstanding.  Because the record date of the special
meeting of the Company’s stockholders scheduled to take place on November 11,
2010 (the “Special Meeting”) was set as September 15, 2010, as of October
28, 2010 the Stockholder had the right to vote 936,897 shares, or
approximately 6.5%, of the common stock entitled to be voted at the Special
Meeting.  The Stockholder is entitled to obtain the right to vote an
additional 4,237,561 shares (resulting in an aggregate of approximately 35.9% of
the common stock outstanding and entitled to be voted at the Special Meeting
over which the Stockholder expects to have voting rights), and pursuant to the
Support Agreement, the Stockholder will vote or cause to be voted all of the
shares of common stock over which the Stockholder has voting
power:
  23
 
 GLOBALOPTIONS
GROUP, INC. AND SUBSIDIARIES
 Notes to
Condensed Consolidated Financial Statements
 (dollars
in thousands except per share amounts)
 
 11.  Subsequent
Events, continued
  Limited
Waiver of Rights Agreement and Stockholder Support Agreement,
continued
 
 ·
                in favor of approval of the
      Company’s proposed sale of all of the outstanding capital stock of The
      Bode Technology Group, Inc. pursuant to that certain Stock Purchase
      Agreement, dated August 11, 2010, by and among the Company,
      GlobalOptions, The Bode Technology Group, Inc. and LSR (the “Bode
      Transaction”);
 
 ·
                in favor of the proposal to
      adjourn the Special Meeting to a later date, if necessary or appropriate,
      to allow for the solicitation of additional proxies in favor of the
      proposal to approve the Bode Transaction (if the Company, in its
      reasonable discretion, determines such votes are necessary in order to
      ensure passage of the proposal);
and
 
 ·
                in favor of the election of all
      director nominees recommended by the Company’s Board of Directors at the
      Company’s 2010 annual meeting of
  stockholders.
  In
connection with the Support Agreement as a condition to the Stockholder’s
obligations under the Support Agreement, on October 27, 2010, the Company
adopted resolutions providing that:
  ·
                the Stockholder, together with
      the funds managed by the Stockholder, will not be deemed to be an
      “Acquiring Person” for the purposes of the Rights Agreement unless and
      until the Stockholder becomes the Beneficial Owner (as defined under the
      Rights Agreement) of in excess of 44% of the common shares (as defined
      under the Rights Agreement) then outstanding;
  and
 
 ·
                solely for the purposes of
      Section 203 of the Delaware General Corporation Law, the acquisition of up
      to 44% of the common stock by the Stockholder and the funds managed by the
      Stockholder is approved by the Board of
  Directors.
  The
Board of Directors adopted such resolutions on October 27,
2010.  Further, the Company agreed that, if requested by the
Stockholder, within 10 business days of such request the Board of
Directors will appoint one designee of the Stockholder (the “Stockholder
Designee”) to serve on the Board of Directors, and until such date as the
Stockholder beneficially owns less than 15% of the common stock then
outstanding, the Board of Directors will nominate and recommend the election of
the Stockholder Designee to the Board of Directors, and solicit proxies for the
election of the Stockholder Designee to the Board of Directors, at any meeting
of the Company’s stockholders at which they are asked to vote for the election
of directors.
  Additionally,
the Stockholder agreed to certain standstill restrictions with respect to, among
other things, (i) effecting, proposing or participating in any tender offer or
exchange offer involving the common stock other than a tender offer made by the
Company, (ii) participating in a merger, asset sale or other extraordinary
transaction with or involving the Company and (iii) nominating individuals for
election to the Board of Directors.  The standstill restrictions will
expire on the earlier of the 18-month anniversary of the date of the Support
Agreement and the date the Company fails to meet any of a number of requirements
set forth in the Support Agreement, including but not limited to making certain
cash distributions to the Company’s stockholders on a specified
timeframe.
  Stockholder
Meeting
  During
the Company’s stockholder meeting on November 11, 2010, the stockholders
approved the Bode Transaction.
  24
  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 (collectively the “Company” or “GlobalOptions
Group”) is a holding company operating to provide risk mitigation and management
services. References
herein to “GlobalOptions” refer to GlobalOptions, Inc., an operating subsidiary
of the Company.




We completed the sale of our
SafirRosetti business unit (“SafirRosetti”) on April 30, 2010, our Preparedness
Services business unit (“Preparedness”) on July 16, 2010 and our Fraud and
Special Investigative Unit business unit (“FSIU”) on July 20,
2010.  Additionally, the Company’s Forensic DNA Solutions and Products
Services business unit (“Bode”) and the International Strategies business unit
(“International”) were classified as held for sale as of September 30,
2010.  On August 11, 2010, we entered into an agreement to sell Bode
and on August 31, 2010, we made the determination to close
International.




As a result of our sales of
SafirRosetti, Preparedness and FSIU, our entry into an agreement to sell Bode
and our determination to close International, the results and accounts of these
business units are shown as discontinued operations in our financial
statements.  As of September 30, 2010, continuing operations consist
solely of our executive and general corporate operations.




The sales
of SafirRosetti, Preparedness and FSIU, our entry into an agreement to sell Bode
and the closing of International are discussed in detail in “Corporate
Developments” below.




We have
publicly announced that we currently intend to return the net proceeds from the
sales of the SafirRosetti, Preparedness and FSIU and the contemplated sale of
Bode to our stockholders after satisfying existing contractual and banking
obligations and establishing appropriate reserves for contingencies and ongoing
operating costs.  However, we have not made a final decision as to,
and continue to explore the most efficient form of, any such
distribution.  We have not made a decision as to an alternative use of
the net proceeds from the sales of SafirRosetti, Preparedness and FSIU and the
contemplated sale of Bode in the event that we determine not to make a
distribution to our stockholders.




25




Prior to
our 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 sales of these
business units, we no longer report operating results in separate
segments.




Corporate
Developments




Sale
of SafirRosetti




On April
30, 2010, we 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 us, GlobalOptions 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.  Contingent consideration received and recognized through
September 30, 2010 was $433.




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




On July
16, 2010, we 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 us, GlobalOptions  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, we sold Preparedness to
Witt Holdings for aggregate consideration of (i) $10,006 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 Witt
Holdings, assumption of the lease for Preparedness’ Washington D.C. facility.
The maximum total consideration payable to the Sellers under the Preparedness
Purchase Agreement is $22,000.


26


In
addition, Witt Holdings has agreed to pay us, within six months of the date of
closing, the amount by which the working capital of Preparedness at closing
exceeds $6,800, and we 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. At September 30, 2010, we have estimated that Witt
Holdings will pay to us a working capital adjustment of approximately $1,644,
which amount was subject to change pending further negotiations between Witt
Holdings and us.  On October 29, 2010, Witt Holdings agreed to pay to
us a working capital adjustment of $1,652.      We
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 software in the field of emergency preparedness and disaster relief
recovery, and we agreed not to license the Preparedness application of the
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 FSIU




On July
20, 2010, we 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 us, GlobalOptions 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, we 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 of
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 closing
date working capital of FSIU.  Global Services has agreed to pay us
the amount by which the working capital of FSIU at closing exceeded
$1,985.  At closing, Global services paid us $34 towards the amount of
the post closing adjustment.  As of September 30, 2010, the final post
closing working capital adjustment has not been determined, pending further
negotiations between us and Global Services.





In connection with FSIU being
classified as held for sale, during the three months ended June 30, 2010, we
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, 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 that are embedded within the GlobalTrak system for the FSIU business
only.  Additionally, we entered into a transition service agreement
pursuant to which we and Global Services will provide each other with certain
transition services following the closing.


27




Entry into Agreement to sell
Bode





On August 11, 2010, we, GlobalOptions
and The Bode Technology Group, Inc. 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 aggregate consideration of (i)
$24,500 in cash,  of which $2,450 will be held in escrow until
December 31, 2011,  (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, and (iii) a cash
payment of $500 in connection with LSR’s tax election under Section 338(h)(10)
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code").




In
addition, LSR has agreed to pay the us the amount by which the working capital
of Bode at closing exceeds $5,600, and we 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.  We 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 us all rights with respect to such uncollected
receivables after LSR’s receipt of such “true-up” payment.




The sale
of Bode is subject to approval by our stockholders, which approval was obtained
at a special meeting of our stockholders held on November 11, 2010.





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, Preparedness and FSIU to our stockholders. If the sale of
Bode is completed, we intend to distribute the proceeds of that transaction as
well, less comparable deductions. However, we have not made a final decision as
to, and continue to explore the most efficient form of, any such
distribution.




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
                  
                  $
                  433
                  
                  
                  $
                  1,600
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  12,000
                  
                  
                  $
                  -
                  
                  
                  $
                  5,500
                  
                  
                  $
                  433
                  
                  
                  $
                  19,100Return
      of escrow
                  
                  
                  -
                  
                  
                  
                  525
                  
                  
                  
                  -
                  
                  
                  
                  825
                  
                  
                  
                  -
                  
                  
                  
                  1,000
                  
                  
                  
                  -
                  
                  
                  
                  2,450
                  
                  
                  
                  -
                  
                  
                  
                  4,800Totals
                  
                  $
                  433
                  
                  
                  $
                  2,125
                  
                  
                  $
                  -
                  
                  
                  $
                  825
                  
                  
                  $
                  -
                  
                  
                  $
                  13,000
                  
                  
                  $
                  -
                  
                  
                  $
                  7,950
                  
                  
                  $
                  433
                  
                  
                  $
                  23,900




In the table above, the minimum amount
in connection with the sale of SafirRosetti includes $433 of contingent
consideration that was realized and recognized through September 30,
2010.  There is no assurance that any of these contingent proceeds in
excess of amounts already received will be realized.  Accordingly, in
each case, except in the case of the sale of SafirRosetti, 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 for with respect to the above mentioned
transactions.




If we
receive the contingent proceeds discussed above, we intend to distribute them to
stockholders, less deductions comparable to those described above with respect
to the distribution of the other proceeds of the
transactions.  However, we have not made a final decision as to, and
continue to explore the most efficient form of, any such
distribution.




28


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 a liquidity covenant, and have granted a
first priority security interest in substantially all of our 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 our Chief Executive Officer, our Chief Financial Officer, and the
Chief Executive Officer of our Bode unit; and (iii) the early termination fee
under the loan agreement would be reduced to $25.




On
September 27, 2010, we entered into a modification of the agreement providing
for the Facility, which provided that among other things: (i) extend the
maturity date of the Facility to January 27, 2011; (ii) set the applicable
interest rate with respect to the amount outstanding under the Facility at
1%, plus the greater of (A) 6.25% or (B) the financial institution’s most
recently announced “prime rate”; (iii) eliminate the collateral handling fee and
early termination fee under the agreement; (iv) replace the minimum EBDA (as
defined under the agreement) financial covenant under the agreement with a
financial covenant requiring minimum Liquidity (as defined under the agreement)
of $5,000; and (v) permit us to repurchase up to $3,000 of our capital stock on
the open market, provided that no event of default under the agreement exists or
would result from any such repurchase.





Modification
of Employment Agreements





Effective
May 11, 2010, we modified our employment agreements with each of Dr. Schiller,
our Chief Executive Officer 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 sale of Preparedness was completed on July 16,
2010.





As a result of the sale of Preparedness,
our employment agreement with Dr. Schiller, as modified (the “Schiller
Employment Agreement”), provides that Dr. Schiller will continue to serve
as our Chairman and Chief Executive Officer for one year following the sale of
Preparedness, and devote the necessary working time and efforts, but less than
substantial working time and efforts, to the business of GlobalOptions
Group.  Dr. Schiller began receiving 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 became eligible for a
discretionary cash bonus one year after the sale of
Preparedness.  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.





On July
16, 2010, upon the sale of Preparedness, 268,750 shares of restricted stock
granted under the 2006 Executive Compensation Performance Bonus Plan (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 sale of Preparedness, $270 was paid on August 13,
2010, and the remaining $230 will be paid in March 2011.  In addition,
$1,685,  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, was paid into
a “rabbi trust” on August 20, 2010 and 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).  For Dr. Schiller, $252 of the cash paid in lieu of
additional shares of stock was deemed to be a repurchase of his stock-based
award.


29




Dr.
Schiller elected to have 113,650 shares, valued at $225, withheld in
satisfaction of his tax obligations in connection with the vesting of the
restricted stock and RSUs.




As a
result of the Sale of Preparedness, our employment agreement with
Mr. Nyweide, as modified (the “Nyweide Employment Agreement”), provides
that Mr. Nyweide will continue to serve as our Chief Financial Officer and
Executive Vice President for 18 months following the sale of
Preparedness.  Mr. Nyweide began receiving 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 earned a performance bonus of $150 in connection
with the sale of Preparedness of which $75 was paid on August 20, and the
remaining $75 was paid on October 15, 2010, 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.




On July
16, 2010, upon the sale of Preparedness, 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 sale of Preparedness, $202 was paid on
August 13, 2010, and the remaining $173 will be paid in March 2011.  
In addition, $821, 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, was
paid into a “rabbi trust” on August 23, 2010 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). For
Mr. Nyweide, $87 of the cash paid in lieu of additional shares of stock was
deemed to be a repurchase of his stock-based award.




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.





Settlement
Agreement with Howard Safir and Adam Safir





On
November 4, 2010, we entered into a Settlement and Release Agreement (the
“Settlement Agreement”) with Howard Safir and Adam Safir regarding (a) a default
judgment in the original amount of $482 against Safir Rosetti, LLC in the
Circuit Court for Miami-Dade County, Florida (the “Florida Litigation”) as well
as any potential or threatened claims arising out of the Florida Litigation, and
(b) Howard Safir and Adam Safir’s respective consulting agreements with
us.  Pursuant to the Settlement Agreement, the parties settled any and
all past, present, future, potential or threatened disputed legal claims between
them arising from the Florida Litigation and Consulting
Agreements.  The default judgment in the Florida Litigation is a
result of a case for breach of contract against Safir Rosetti, LLC that
pre-dated our acquisition of Safir Rosetti, LLC in May 2006, and the plaintiff
previously threatened to seek to recover the default judgment from
us.  In consideration for the settlement, we deposited $375 in an
escrow account on November 9, 2010, which amount will be paid to Howard Safir
and Adam Safir upon evidence that that they have entered into an effective
settlement agreement with the plaintiff in the Florida Litigation, waiving any
and all of the plaintiff’s legal claims against us.  The waiver must
be obtained by November 1, 2011 or the escrow funds will be distributed to us
and the consulting agreements will be deemed null and void.


Results
of Operations




Continuing
Operations




Our
continuing operations consist of administrative and executive corporate
functions, consisting principally of salaries and professional
fees.


30




Operating
Expenses




Our
selling and marketing expenses primarily include salaries, stock based
compensation, as well as travel and other expenses. Our general and
administrative expenses consist primarily of salaries, bonuses and stock-based
compensation, as well as corporate support expenses such as legal and
professional fees, investor relations, human resources, facilities,
telecommunication support services and information technology.




Discontinued
Operations




As a
result of our sales of SafirRosetti, Preparedness, FSIU, our entry into an
agreement to sell Bode, and our decision to close International, the results and
accounts of these business units are now presented in our financial statements
as discontinued operations for the three and nine months ended September 30,
2010 and all prior periods.




GlobalOptions
Group Three Months Ended September 30, 2010 Compared to the Three Months Ended
September 30, 2009




Operating
Expenses




Selling
and marketing expenses were $237 for the three months ended September 30, 2010,
as compared to $508 for the three months ended September 30, 2009. The decrease
in selling and marketing expenses for the three months ended September 30, 2010
was primarily related to decreased emphasis on selling, upon our decision to
sell our operating units.  General and administrative expenses were
$7,272 for the three months ended September 30, 2010, as compared to $2,156 for
the three months ended September 30, 2009.  The increase of $5,116 was
primarily related to the cost of evaluating strategic alternatives with regard
to the sales of our business units and the compensation costs incurred in
connection with the sale of Preparedness.




Results
of Discontinued Operations





Income
from discontinued operations, net of tax, was $1,580 and $2,256 for the three
months ended September 30, 2010 and 2009, respectively.  The decrease
in net income was primarily due to the sales of FSIU and Preparedness during the
period.




Net
Loss





Net loss for the three months ended
September 30, 2010 and 2009 was $5,958 and $515, respectively.  Net
loss for the three months ended September 30, 2010 was comprised of a loss from
continuing operations of $7,538 and income from discontinued operations, net of
tax, of $1,580.  Net loss for the three months ended September 30,
2009 was comprised of a loss from continuing operations of $2,771 and income
from discontinued operations, net of tax, of $2,256.  The increase in
net loss is principally the result of additional professional fees incurred in
connection with the elimination of the sales of business units and the
compensation costs incurred in connection with the sale of
Preparedness.


31





GlobalOptions
Group Nine Months Ended September 30, 2010 Compared to the Nine Months Ended
September 30, 2009




Operating
Expenses




Selling
and marketing expenses were $1,430 for the nine months ended September 30, 2010,
as compared to $1,750 for the nine months ended September 30, 2009, representing
a $320 decrease.  General and administrative expenses were $12,810 for
the nine months ended September 30, 2010, as compared to $6,437 for the nine
months ended September 30, 2009.  The increase of $6,373 is
attributable to an increase in costs related to evaluating strategic
alternatives with regard to the sales of our business units, as well
as the compensation costs incurred in connection with the sale of
Preparedness.




Results
of Discontinued Operations




We
had a loss from discontinued operations, net of tax, of
$1,251 for the nine months ended September 30, 2010 compared to income from
discontinued operations of $5,698 for the nine months ended September 30,
2009.  The increase in the loss for the nine months ended September
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.




Net
Loss




Net loss
for the nine months ended September 30, 2010 and 2009 was $15,714 and $2,972,
respectively.  Net loss for the nine months ended September 30, 2010
was comprised of a loss from continuing operations of $14,463 and a loss from
discontinued operations, net of tax, of $1,251.  Net loss for the nine
months ended September 30, 2009 was comprised of a loss from continuing
operations of $8,670 and income from discontinued operations, net of tax, of
$5,698.  The increase in net loss is principally the result of a loss
of $1,497 on the sale of SafirRosetti and, a $4,475 impairment charge taken with
respect to FSIU.


32


Liquidity
and Capital Resources





For
the Nine Months Ended September 30, 2010




We had a
cash and cash equivalent balance of $9,471 as of September 30,
2010.




Cash used
in operating activities of continuing operations was approximately $9,118 and
$6,276 for the nine months ended September 30, 2010 and 2009,
respectively.  Cash used in operating activities for the nine months
ended September 30, 2010 resulted primarily from our net loss from continuing
operations of $14,463, offset by stock based compensation of
$2,324.




Cash used
in investing activities by continuing operations was $2,506 and $16 for the nine
months ended September 30, 2010 and 2009, respectively.  Of the cash
used in investing activities for the nine months ended September 30, 2010,
$2,506 represented investments of the rabbi trust holding our nonqualified
deferred compensation plan assets.




Cash used
in financing activities by continuing operations was $2,662 and $3,382 for the
nine months ended September 30, 2010 and 2009, respectively.  The net
cash used in financing activities for the nine months ended September 30, 2010
is primarily due to repayments from the line of credit of $2,163.




We
maintain a working capital line of credit facility, maturing on January 27,
2011, which is secured by accounts receivable.  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 September 30, 2010 our net borrowings under the
Facility were $0.




For the
nine months ended September 30, 2010, we have met our cash needs through
borrowings under the Facility and by cash generated by the sales of
SafirRosetti, Preparedness and FSIU. At September 30, 2010, we had working
capital of $7,964.




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, Preparedness and
FSIU 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. 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 financial and
operating costs, 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 September 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.


33





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:




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, Preparedness and FSIU and to the
classification of Bode and International 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 our
Consolidated Balance Sheet as “Current assets of discontinued operations”,
“Assets of discontinued operations”, “Current liabilities of discontinued
operations” and “Liabilities of discontinued operations”.





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.


34




In
connection with the preparation of this Quarterly Report on Form 10-Q for the
quarter ended September 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 September 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 third quarter ended September
30, 2010, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.


35





PART
II




OTHER
INFORMATION




Item
1. Legal Proceedings.




On
October 2, 2010, we along with others, were notified that we are a defendant in
a lawsuit filed by a third party for alleged conversion of assets, tortuous
interference and defamation, among other claims.  The suit asks for
actual and punitive damages totaling $4,200,000.  We believe that the
suit is completely without merit and intend to vigorously defend our
position.




Item 1A. Risk
Factors.




Reserves
may not be adequate to maintain our operations.
 
 Following
the sales of our SafirRosetti, Preparedness and FSIU business units and the
contemplated sale of Bode, we will have no business operating
units.  Other than (i) the cash proceeds received upon the closings of
such sales, (ii) an earnout from the sale of Preparedness and contemplated sale
of Bode, (iii) the receipt of payment from a promissory note issued in
connection with the sale of SafirRosetti, (iv) the receipt of payment of a
percentage of account receivables collected by the purchaser of SafirRosetti,
(v) potential working capital adjustments from the sale of Preparedness and FSIU
and contemplated sale of Bode, and (vi) payments from escrow accounts
established in connection with the sales of SafirRosetti, Preparedness and FSIU
and contemplated sale of Bode, we will have no future cash flows and we may not
receive any of the payments set forth in (ii) through (vi) above.  In
addition, following the contemplated sale of Bode, we may not have any
arrangements with any bank or financial institution to secure additional
financing.
 
 We have
stated our current intention that we currently intend to return the net proceeds
from these sales to our stockholders after satisfying existing contractual and
banking obligations and establishing appropriate reserves for contingencies and
ongoing operating costs.  If we make such distribution, there is no
guaranty that the amount of such reserves that we decide to maintain will be
enough to cover our future expenses, including, (i) reporting obligations under
the Exchange Act, (ii) other general and administrative expenses in connection
with the continued operations of our business, and/or (iii) the repayment of
certain of the proceeds received from the sales either pursuant to a working
capital adjustment, a guaranty of receivables or any other claim by a purchaser
of any of the units.
 
 We
are highly dependent on the release of funds from escrow accounts.
 
 In connection with the sales of our
SafirRosetti, Preparedness and FSIU business units and the contemplated sale of
Bode, a portion of the proceeds from each of the sales of SafirRosetti,
Preparedness and FSIU have been placed into escrow and a portion of the proceeds
of Bode will be placed into escrow upon the completion of the sale of Bode, to
protect against indemnification claims brought by the purchasers of such
business units.  If such purchasers bring any claims pursuant to the
agreements, such claims will first be against such escrow amounts, but could be
brought in excess of such escrow amounts.  If such claims are proven
successful, we may not receive the anticipated amounts from the escrow accounts
or may have to pay claims in excess of the escrow amounts directly from the
Company, and the receipt of funds in the escrow account may be delayed pending
the final outcome of such claims.
 
 We
are highly dependent on earnout payments.
 
 In connection with the sale of
Preparedness and the contemplated sale of Bode, a substantial part of the
purchase price from the sale of Preparedness and a portion of the purchase price
from the contemplated sale of Bode, consist of an earnout
payment.  Depending on the revenue actually earned by Preparedness and
Bode during the earnout period, there could be no earnouts received by
us.
  36
 
 We
are dependent on the collection of Accounts Receivable.
 
 In connection with the sales of
SafirRosetti and Preparedness and the contemplated sale of Bode, part of the
proceeds of each transaction is dependent upon the ability of the purchasers of
each such unit to collect the accounts receivable existing at the time of
closing of the respective units.  The purchasers of SafirRosetti are
collecting the accounts receivable of SafirRosetti from which we will receive a
portion of the proceeds of such collection.  The purchaser of
Preparedness and contemplated purchaser of Bode, have the right to have us pay
them up to a certain amount if they are unable to collect the accounts
receivable for such unit within a given period of time.  If the
purchasers of SafirRosetti or Preparedness or the contemplated purchaser of
Bode, do not collect the accounts receivable existing on the books of each such
unit at the time of closing of the respective transactions, we may receive no
additional proceeds from the sale of SafirRosetti or we may have to return a
portion of the proceeds received from the Preparedness sale or contemplated Bode
sale.
 
 Our
arrangements with members of our senior management team, or our failure to
retain or recruit key personnel, could negatively impact our ability to sell our
products and services and grow our business.
  Our
future success will depend to a significant extent upon the abilities, level of
service, reputation and relationships of our Chairman and Chief Executive
Officer and Chief Financial Officer, the members of senior management of our
former business units (with respect to the maintenance and growing of their
respective business units in order to maximize our potential earnouts and to
collect the outstanding accounts receivable) and our Board of Directors. Some
members of our senior management team work on a part-time basis. These
arrangements, or any reduction or loss of these individuals’ services, could
have a material adverse effect upon our business.
  If
we are deemed to be an investment company, we must meet burdensome compliance
requirements and restrictions on our activities, which may increase the
difficulty of completing a business combination.
 
 If we are
deemed to be an investment company under the Investment Company Act of 1940 (the
‘‘Investment Company Act’’), the nature of our investments may be subject to
various restrictions. In addition, we may be subject to burdensome compliance
requirements and may have to:
  · register
as an investment company;
 · adopt a
specific form of corporate structure; and
 · report,
maintain records and adhere to voting, proxy, disclosure and other
requirements.
  We do not
believe that our planned principal activities will subject us to the Investment
Company Act. If we are deemed to be subject to the Investment Company Act,
compliance with these additional regulatory burdens would increase our operating
expenses.
 
 We
may not distribute net proceeds to our stockholders.
  Although
we have publicly announced that we currently intend to return the net proceeds
from the sales of the SafirRosetti, Preparedness and FSIU and contemplated sale
of Bode to our stockholders after satisfying existing contractual and banking
obligations and establishing appropriate reserves for contingencies and ongoing
operating costs, there is no guaranty that we will do so.  In the
event that we decide to retain the proceeds from such sales, we may pursue a
business combination or other type of corporate transaction.  We
currently do not have any arrangement, agreement or understanding with respect
to engaging in a business combination with a specific entity and there can be no
assurance that we will be successful in identifying and evaluating or in
concluding a business combination.
 
 We
may be unable to realize the benefits of our net operating loss (“NOL”) and
capital loss carryforwards.
 
 The amount of NOL and capital loss
carryforwards that we have claimed have not been audited or otherwise validated
by the U.S. Internal Revenue Service (the “IRS”).  The IRS could challenge
our calculation of the amount of our NOL and capital loss or our determinations
as to when a prior change in ownership occurred and other provisions of the Code
may limit our ability to utilize our NOL and capital loss to offset taxable
income and capital gains.  If the IRS was successful with respect to any
such challenge, the tax benefit of our NOL and capital loss carryforwards to us
could be substantially reduced.
  37
 
 Our
stockholders may not be able to resell their shares at or above the price at
which their shares were purchased since our common stock price has fluctuated
considerably.
 
 Since our
reverse merger in June 2005, the high and low bid price for our common stock has
been $32.00 and $1.14 per share, respectively (as adjusted for our reverse stock
split on March 6, 2007). The market price of our common stock may fluctuate
significantly in response to a number of factors, some of which are beyond our
control, including the following:
  The stock
market in general has experienced extreme price fluctuations. The market prices
of shares of companies in the security industry have experienced fluctuations
that often have been unrelated or disproportionate to the operating results of
these companies. Continued market fluctuations could result in extreme
volatility in the price of our common stock, which could cause a decline in the
value of our common stock. Price volatility might be worse if the trading volume
of our common stock continues to be low.
 
 Also
restricting the ability of our stockholders to sell their shares is that
following the sales of our SafirRosetti, Preparedness and FSIU business units
and contemplated sale of Bode we will have no business operating
units.  As a result of having no business operating units we may be
delisted from Nasdaq and our shares may not be salable pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended.
 
 Our
common stock has historically been sporadically or thinly traded.  As
a result of the sales of our SafirRosetti, Preparedness and FSIU business units
and contemplated sale of Bode, our trading volume may decrease. As a result, the
number of persons interested in purchasing our common stock at or near ask
prices at any given time may be relatively small or non-existent. In addition to
the sales and potential sale, this situation is attributable to a number of
factors, including the fact that stock analysts, stock brokers, institutional
investors and others in the investment community that generate or influence
sales volume may be reluctant to follow a company with limited, if any,
operations, or purchase or recommend the purchase of our common stock until we
demonstrate that we can consistently operate profitably. As a consequence, there
may be periods of several days or more when trading activity in our shares is
low and a stockholder may be unable to sell his shares of common stock at an
acceptable price, or at all. We cannot give stockholders any assurance that a
broader or more active public trading market for our common stock will develop
or be sustained, that current trading levels will be sustained or that we will
continue to meet the requirements for listing on the NASDAQ Capital
Market.
  38




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





In the
third quarter of 2010, the Company withheld shares to pay taxes due upon the
vesting of certain employees’ restricted stock and RSUs.  The
following table provides information about such withholding during the quarter
ended September 30, 2010:





Period
                    
                    (a)
                        Total Number of Shares
                        (or Units) Withheld
                    
                    
                    (b)
                      Average Price Paid perShare (or Unit)
                    
                    
                    (c)
                        Maximum Number (or
                        Approximate Dollar Value) of
                        Shares (or Units) that May Yet Be
                        Withheld Under the Plans or
                        Programs7/1/10-7/31/10
                    
                    186,627
                    (1)
                    
                    1.98
                    (2)
                    
                    –
                    (3)8/1/10-8/31/10
                    
                    
                    –
                    
                    
                    $
                    –
                    
                    
                    
                    –9/1/10-9/30/10
                    
                    
                    –
                    
                    
                    
                    –
                    
                    
                    
                    –Total
                    
                    
                    186,627
                    (1)
                    
                    $
                    1.98
                    (2)
                    
                    
                    –
                    (3)





(1)  As
a result of the sale of Preparedness, 268,750 and 201,813 unvested shares held
by Dr. Schiller and Mr. Nyweide, respectively, were no longer subject to
forfeiture, and 31,912 and 14,094 RSUs became vested,
respectively.  Dr. Schiller and Mr. Nyweide elected to have the
Company withhold 113,650 and 72,977 shares, respectively, for payment of taxes
in connection with the vesting of their restricted stock and RSUs.





(2)  The
closing price of the Company’s common stock on the last business day prior to
their vesting, July 15, 2010.





(3)  The
Company does not have a plan or program with respect to
withholding.  With respect to shares of restricted common stock held
by Messrs. Schiller and Nyweide, each of them may choose upon the vesting of
such shares to have the Company withhold a portion of the shares for the payment
of taxes.





Item
3. Default Upon Senior Securities.




None.




Item
4.  (Removed and Reserved).




Item
5. Other Information.




None


39




Item
6. Exhibits.




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





Exhibit
      No.
                
                Description31.1
                
                Certification
      of Principal Executive Officer pursuant to Section 302 of The
      Sarbanes-Oxley Act of 2002.31.2
                
                Certification
      of Principal Financial Officer pursuant to Section 302 of The
      Sarbanes-Oxley Act of 2002.32.1
                
                Certification
      of Principal Executive Officer pursuant to Section 906 of The
      Sarbanes-Oxley Act of 2002.32.2
                
                Certification
      of Principal Financial Officer pursuant to Section 906 of The
      Sarbanes-Oxley Act of
2002.




40




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: November 15,
      2010
                            By:
                            /s/
      Harvey W. SchillerHarvey
      W. Schiller
                              Chairman,
      Chief Executive Officer and Director
                              (Principal
      Executive Officer)Dated: November 15,
      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)


41




EXHIBIT
INDEX





Exhibit
      No.
                
                Description31.1
                
                Certification
      of Principal Executive Officer pursuant to Section 302 of The
      Sarbanes-Oxley Act of 2002.31.2
                
                Certification
      of Principal Financial Officer pursuant to Section 302 of The
      Sarbanes-Oxley Act of 2002.32.1
                
                Certification
      of Principal Executive Officer pursuant to Section 906 of The
      Sarbanes-Oxley Act of 2002.32.2
                
                Certification
      of Principal Financial Officer pursuant to Section 906 of The
      Sarbanes-Oxley Act of
2002.


42