Walker Innovation (WLKR) 10-Q 2008 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 (Mark One)

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

For the Quarterly Period Ended September 30, 2008

¨ 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 o

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

Large accelerated filer oAccelerated filer o

Non-accelerated filer o (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 o No x

As of November 12, 2008, there were 10,458,011 shares of the issuer’s common stock outstanding.

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Form 10-Q

September 30, 2008

TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION
ITEM 1.	Financial Statements.
	Condensed Consolidated Balance Sheets as of September 30, 2008 (Unaudited) and December 31, 2007	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2008 and 2007 (Unaudited)	2
	Condensed Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2008 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended  September 30, 2008 and 2007 (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	27
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk.	37
ITEM 4T.	Controls and Procedures.	37
PART II
OTHER INFORMATION
ITEM 1.	Legal Proceedings.	38
ITEM 1A.	Risk Factors.	39
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	39
ITEM 3.	Defaults Upon Senior Securities.	39
ITEM 4.	Submission of Matters to a Vote of Security Holders.	39
ITEM 5.	Other Information.	40
ITEM 6.	Exhibits.	41
SIGNATURES.		42

PART I - Financial Information

Item 1. Condensed Consolidated Financial Statements

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share amount)

	September 30,			December 31,
	2008			2007
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,969		$	4,426
Accounts receivable, net of allowance for doubtful accounts of $2,881 at September 30, 2008 and $2,459 at December 31, 2007		31,287			25,213
Inventories		2,759			2,326
Prepaid expenses and other current assets		896			792
Total current assets		37,911			32,757
Property and equipment, net		5,528			5,570
Intangible assets, net		7,878			7,270
Goodwill		19,968			19,768
Security deposits and other assets		538			578
Total assets	$	71,823		$	65,943
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit	$	6,000		$	-
Notes payable		499			800
Obligation to issue common stock		-			2,160
Accounts payable		6,028			5,723
Deferred revenues		732			543
Accrued compensation and related benefits		5,120			3,740
Other current liabilities		4,262			2,170
Total current liabilities		22,641			15,136
Long-term liabilities:
Notes payable, less current portion		-			396
Other long-term obligations		843			454
Total long-term liabilities		843			850
Total liabilities		23,484			15,986
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 14,900,000 shares authorized; no shares issued or outstanding		-			-
Series D convertible preferred stock, non-voting, $0.001 par value, 100,000 shares authorized, 55,388.37 shares issued and outstanding at September 30, 2008 and 55,989.32 shares issued and outstanding at December 31, 2007, dividends do not accrue, no anti-dilution protection, convertible into 3,692,743 and 3,732,821 shares of common stock at September 30, 2008 and December 31, 2007, respectively, liquidation preference of $0.001 per share or $0		-			-
Common stock, $0.001 par value; 100,000,000 shares authorized;
10,470,957 shares issued and 10,451,390 shares outstanding at September 30, 2008, and 9,660,269 shares issued and outstanding at December 31, 2007		10			10
Additional paid-in capital		107,728			102,537
Accumulated deficit		(59,349	)		(52,590	)
Treasury stock; at cost, 19,567 and 0 shares at September 30, 2008 and December 31, 2007, respectively		(50	)		-
Total stockholders' equity		48,339			49,957
Total liabilities and stockholders' equity	$	71,823		$	65,943

See notes to these condensed consolidated financial statements.

1

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(dollars in thousands, except per share amounts)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Revenues	$	29,488		$	21,574		$	77,241		$	65,428
Cost of revenues		16,876			11,479			44,349			35,833
Gross profit		12,612			10,095			32,892			29,595
Operating expenses:
Selling and marketing		3,154			1,358			8,374			12,258
General and administrative		9,801			13,143			31,103			35,374
Total operating expenses		12,955			14,501			39,477			47,632
Loss from operations		(343	)		(4,406	)		(6,585	)		(18,037	)
Other income (expense):
Interest income		2			16			24			268
Interest (expense)		(74	)		(540	)		(198	)		(745	)
Other income		-			-			-			100
Other income (expense), net		(72	)		(524	)		(174	)		(377	)
Net loss	$	(415	)	$	(4,930	)	$	(6,759	)	$	(18,414	)
Basic and diluted net loss per share	$	(0.04	)	$	(1.45	)	$	(0.70	)	$	(6.21	)
Weighted average number of common shares outstanding - basic and diluted		9,734,067			3,406,520			9,660,684			2,963,709

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, 2008

(Unaudited)

(dollars in thousands)

										Series D
										Convertible					Additional
	Common Stock				Treasury Shares					Preferred Stock					Paid-in		Accumulated
	Shares		Amount		Shares		Amount			Shares			Amount		Capital		Deficit			Total
Balance, January 1, 2008		9,660,269	$	10		-	$	-			55,989.32		$	-	$	102,537	$	(52,590	)	$	49,957
Stock issued to consultants for services		26,984		-		-		-			-			-		167		-			167
Purchase of treasury shares		-		-		19,567		(50	)		-			-		-		-			(50	)
Issuance of common stock to sellers of JLWA in satisfaction of $2,160 obligation to issue common stock		225,000		-		-		-			-			-		2,160		-			2,160
Issuance of common stock to sellers of JLWA, subject to clawback		75,000		-		-		-			-			-		-		-			-
Issuance of common stock in connection with the conversion of Series D Convertible Preferred Stock		40,064		-		-		-			(600.95	)		-		-		-			-
Issuance of common stock to executive employees for future services		437,500		-		-		-			-			-		-		-			-
Issuance of common stock under employee stock purchase plan		6,140		-												10					10
Stock based compensation - restricted stock vested		-		-		-		-			-			-		926		-			926
Stock based compensation - employee stock purchase plan		-		-		-		-			-			-		3		-			3
Amortization of consultant stock option costs		-		-		-		-			-			-		93		-			93
Amortization of employee stock options costs		-		-		-		-			-			-		1,558		-			1,558
Amortization of consultant restricted stock unit costs																2					2
Amortization of employee restricted stock unit costs		-		-		-		-			-			-		272		-			272
Net loss		-		-		-		-			-			-		-		(6,759	)		(6,759	)
Balance, September 30, 2008		10,470,957	$	10		19,567	$	(50	)		55,388.37		$	-	$	107,728	$	(59,349	)	$	48,339

See notes to these condensed consolidated financial statements.

3

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(dollars in thousands)

	For the Nine Months Ended September 30,
	2008			2007
Cash flows from operating activities:
Net loss	$	(6,759	)	$	(18,414	)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for bad debts		148			1,992
Depreciation and amortization		3,262			2,917
Deferred rent		439			(21	)
Stock-based compensation		3,021			2,659
Loss on disposition of equipment		27			-
Changes in operating assets:
Accounts receivable		(5,021	)		(4,663	)
Inventories		(433	)		(103	)
Prepaid expenses and other current assets		(104	)		(60	)
Security deposits and other assets		40			(261	)
Changes in operating liabilities:
Accounts payable		288			(86	)
Deferred revenues		189			259
Accrued compensation and related benefits		1,380			1,249
Due to former members of JLWA for earnout		-			7,732
Other current liabilities		355			(635	)
Other long-term obligations		(41	)		-
Total adjustments		3,550			10,979
Net cash used in operating activities		(3,209	)		(7,435	)
Cash flows from investing activities:
Purchases of property and equipment		(921	)		(1,020	)
Purchase of intangible assets		(42	)		-
Acquisition of FAIS		(2,548	)		-
Acquisition of On Line Consulting		-			(988	)
Acquisition of Facticon		-			(1,300	)
Acquisition of Bode, less cash acquired of $284		-			(12,216	)
Net cash used in investing activities		(3,511	)		(15,524	)

See notes to these condensed consolidated financial statements.

4

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows, continued

(Unaudited)

(dollars in thousands)

	For the Nine Months Ended September 30,
	2008			2007
Cash flows from financing activities:
Net proceeds from line of credit	$	6,000		$	7,828
Repayment of notes payable for acquisitions		(700	)		(3,403	)
Accretion of OCS discounted notes		3			-
Proceeds from exercise of stock options		-			48
Proceeds from issuance of stock in connection with ESPP		10			-
Repurchase of common stock		(50	)		-
Deferred offering costs		-			(67	)
Net cash provided by financing activities		5,263			4,406
Net decrease in cash and cash equivalents		(1,457	)		(18,553	)
Cash and cash equivalents - beginning of period		4,426			21,533
Cash and cash equivalents - end of period	$	2,969		$	2,980
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	208		$	558
Supplemental disclosures of non-cash investing and financing activities:
Common stock issued to settle the obligation to issue common stock	$	2,160		$	-
Accrual of deferred offering costs	$	-		$	175
Common stock issued upon the cashless exercise of stock options	$	-		$	318
Obligation to issue common stock and notes payable issued to fund JLWA earnout liability	$	-		$	12,960

See notes to these condensed consolidated financial statements.

5

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows, continued

(Unaudited)

(dollars in thousands)

	For the Nine Months Ended September 30,
	2008			2007
Supplemental non-cash investing and financing activity - acquisition of FAIS:
Assets acquired and liabilities assumed:
Accounts receivable	$	1,201		$	-
Property and equipment		102			-
Intangible assets		2,790			-
Accounts payable		(17	)		-
Other current liabilities		(322	)		-
Earnout liability		(1,206	)		-
Total purchase price, paid in cash	$	2,548		$	-
Supplemental non-cash investing and financing activity - acquisition of On Line Consulting:
Assets acquired and liabilities assumed:
Property and equipment	$	-		$	97
Intangible assets		-			1,199
Goodwill recognized on purchase business combination		200			1,844
Accounts payable, accrued expenses and deferred revenues		-			(198	)
Other current liabilities		-			(46	)
Total purchase price		200			2,896
Less: Cash paid to acquire On Line Consulting		-			(974	)
Non-cash consideration to seller	$	200		$	1,922
Non-cash consideration consisted of:
Common stock issued to acquire On Line Consulting	$	-		$	1,350
Amount due to seller		-			14
Notes payable issued to seller		-			558
Total non-cash consideration	$	-		$	1,922

See notes to these condensed consolidated financial statements.

6

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows, continued

(Unaudited)

(dollars in thousands)

	For the Nine Months Ended September 30,
	2008		2007
Supplemental non-cash investing and financing activity - acquisition of Bode:
Assets acquired and liabilities assumed:
Accounts receivable	$	-	$	5,511
Inventories		-		2,629
Other current assets (including cash of $284)		-		561
Property and equipment		-		4,133
Intangible assets		-		310
Goodwill recognized on purchase business combination		-		1,267
Accounts payable, accrued expenses and deferred rent obligations		-		(1,219	)
Total purchase price		-		13,192
Less: Cash acquired		-		(284	)
Less: Cash paid to acquire Bode		-		(12,216	)
Non-cash consideration to seller	$	-	$	692
Supplemental non-cash investing and financing activity - acquisition of Facticon:
Assets acquired and liabilities assumed:
Accounts receivable	$	-	$	759
Property and equipment		-		34
Intangible assets		-		120
Goodwill recognized on purchase business combination		-		2,420
Accounts payable, accrued expenses and deferred revenues		-		(533	)
Total purchase price		-		2,800
Less: Cash paid to acquire Facticon		-		(1,300	)
Non-cash consideration to seller	$	-	$	1,500
Non-cash consideration consisted of :
Note payable issued to seller	$	-	$	100
Common stock issued to acquire Facticon		-		1,400
Total non-cash consideration	$	-	$	1,500

See notes to these condensed consolidated financial statements.

7

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

1.  Nature of Operations

GlobalOptions Group, Inc. and Subsidiaries (collectively the “Company” or “GlobalOptions Group”) is an integrated provider of risk mitigation and management services to government entities, Fortune 1000 corporations and high net-worth and high-profile individuals. The Company delivers these services through four business units: Preparedness Services; Fraud and Special Investigative Unit (“SIU”) Services; Security Consulting and Investigations; and International Strategies. The Preparedness Services, Fraud and SIU Services, and Security Consulting and Investigations units represent the Company’s three financial reporting segments. The results of the International Strategies business unit, on the basis of its relative materiality, are included in the Fraud and SIU Services segment.

References herein to “GlobalOptions” refer to GlobalOptions, Inc., an operating subsidiary of the Company.

On August 14, 2005, the Company acquired Confidential Business Resources, Inc. (“CBR”), a privately-held nationwide investigations firm based in Nashville, Tennessee. 

On March 10, 2006, the Company acquired James Lee Witt Associates, LLC (“JLWA”), a nationwide crisis and emergency management consulting firm headquartered in Washington, D.C. with three additional offices nationwide.

On May 12, 2006 the Company acquired Safir Rosetti, LLC (“Safir”). Safir is a security consulting, investigative and intelligence firm headquartered in New York City.

On May 12, 2006, the Company acquired substantially all of the business and certain assets of Secure Source, Inc. (“Secure Source”), a Delaware corporation. Secure Source is an international risk consulting firm with offices in Washington, D.C. and Dallas, Texas.

On August 10, 2006, the Company acquired substantially all of the business and assets of Hyperion Risk, Inc. (“Hyperion Risk”). Hyperion Risk is a security consulting, investigative and intelligence firm with its central corporate office located in Orlando, Florida.

On January 9, 2007, GlobalOptions Group purchased substantially all of the business and assets of SPZ Oakland Corporation, dba On Line Consulting Service, Inc. (“On Line Consulting”), a full service security and fire alarm consulting and design firm based in Oakland, California.

On February 28, 2007, GlobalOptions Group acquired substantially all of the business and assets of Facticon, Inc. (“Facticon”), a Pennsylvania corporation. Facticon is a surveillance, investigative and intelligence firm based in Chadds Ford, Pennsylvania.

On February 28, 2007, GlobalOptions Group purchased all of the common stock of The Bode Technology Group, Inc. (“Bode”), a Virginia corporation. Bode is a leading provider of forensic DNA analysis and proprietary DNA collection tools. Bode is based in Lorton, Virginia.

On April 21, 2008, GlobalOptions Group acquired substantially all of the business and net assets of Omega Insurance Services, Inc. (d/b/a First Advantage Investigative Services) (“FAIS”), a Florida corporation. FAIS is a surveillance, investigative and intelligence firm based in St. Petersburg, Florida.

8

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K filed on March 28, 2008 for the year ended December 31, 2007.

3.  Summary of Significant Accounting Policies

Income Taxes

The Company accounts for income taxes using the liability method as required by Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes” (“SFAS 109”). Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and income tax bases of the underlying assets and liabilities. The Company establishes a valuation allowance for deferred tax assets when it determines that it is more likely than not that the benefits of deferred tax assets will not be realized in future periods. The Company was not required to provide for a provision for income taxes for the three and nine months ended September 30, 2008 and 2007, respectively, as a result of losses incurred during these periods.

Net Loss Per Common Share

Basic net loss per common share is computed based on the weighted average number of shares of common stock outstanding, as adjusted, during the periods presented. Common stock equivalents, consisting of stock options, restricted stock units (“RSUs”), and Series C and D convertible preferred stock were not included in the calculation of the diluted loss per share because their inclusion would have been anti-dilutive.  The basic weighted average number of shares was reduced for non-vested restricted stock awards and contingently returnable escrowed shares issued in connection with acquisitions, and was increased for non-contingent shares to be issued in connection with the JLWA modification agreement. Potentially dilutive securities of 666,923 and 1,210,864 realizable from the exercise of options, 368,433 and 0 realizable from the vesting of RSUs, 3,692,743 and 5,274,032 securities issuable upon the conversion of Series C and D convertible preferred stock, 558,063 and 175,000 shares of performance based restricted stock, 162,500 and 167,865 contingently returnable shares in the aggregate, from the Facticon, Hyperion Risk and JLWA acquisitions at September 30, 2008 and 2007, respectively, have been excluded from the computation of diluted net loss per share, because the effect of their inclusion would have been anti-dilutive.

9

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

3.  Summary of Significant Accounting Policies, continued

Reclassifications

Certain prior period statements of operations amounts have been reclassified in order to conform to the current period presentation.

Recently Implemented Accounting Pronouncements

Effective January 1, 2008, the Company adopted the provisions of SFAS No. 157 ("SFAS 157"), “Fair Value Measurements” for financial assets and liabilities, as well as any other assets and liabilities that are carried at fair value on a recurring basis in financial statements. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, the Financial Accounting Standards Board ("FASB") having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS 157 does not require any new fair value measurements. The Company applied the provisions of the FASB Staff Position (“FSP”) on FASB No. 157, "Effective Date of FASB Statement 157" (“FSP FAS 157-2”) which defers the provisions of SFAS 157 for nonfinancial assets and liabilities to the first fiscal period beginning after November 15, 2008.  The deferred nonfinancial assets and liabilities include items such as goodwill. The Company is required to adopt SFAS 157 for nonfinancial assets and liabilities in the first quarter of fiscal 2009 and is still evaluating the impact on the condensed consolidated financial statements.

Effective January 1, 2008, the Company adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” ("SFAS 159"). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value reporting option for any assets and liabilities not previously recorded at fair value.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS 141R”), which establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, goodwill acquired in the business combination or a gain from a bargain purchase. SFAS 141R is effective for business combinations with an acquisition date on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company expects SFAS 141R to have an impact on the accounting for any future business acquisitions as of the effective date.

10

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

3. Summary of Significant Accounting Policies, continued

Recent Accounting Pronouncements, continued

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 requires (a) the ownership interest in the subsidiary held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within equity, but separate from the parent’s equity, (b) the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations and (c) changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently. Entities must provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Company does not expect SFAS 160 to have a material impact on its consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flow. The guidance in SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. At this time management is evaluating the implications of SFAS 161 and its impact on the financial statements has not yet been determined.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with Generally Accepted Accounting Principles (“GAAP”) for nongovernmental entities. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The Company does not expect SFAS 160 to have a material impact on its consolidated financial statements.

4. Acquisitions

On April 21, 2008, the Company purchased substantially all of the assets and business activities of FAIS. The aggregate purchase price paid for the assets and business was $2,548.

The aggregate purchase price of $2,548 consisted of cash in the amount of $2,164, a broker fee of $350 acquisition and related legal expenses of $34.

The agreement provides for the sellers to obtain up to an additional $2,000 upon the attainment of certain revenue goals subsequent to the closing of the transaction. The terms and conditions of this earnout are outlined below:

FAIS Revenue for the Twelve Months  Ending April 20, 2009	Amount to be Paid on the 90th Day from the First Anniversary of the Closing Date
Less then $10,500	$	-
Between $10,500 and $12,500	$	250
Between $12,500 and $14,500	$	1,000
Greater than $14,500	$	2,000

11

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

4. Acquisitions, continued

The assets and liabilities of FAIS were recorded in the Company’s condensed consolidated balance sheet at their fair values at the date of acquisition. As part of the purchase of FAIS on April 21, 2008, the Company acquired certain identifiable intangible assets valued in the aggregate at $2,790. Of the identifiable intangibles acquired, approximately $290 has been assigned to a non-compete agreement and $2,500 to client relationships.

The calculated value of these intangible assets created an excess of the fair value of assets acquired over the purchase price. SFAS No. 141 – “Business Combinations” (“SFAS 141”), requires that when a business combination involves contingent consideration that might result in recognition of additional cost of the acquired entity when the contingency is resolved, an amount equal to the lesser of the maximum contingent consideration or the excess of fair value over the cost of the acquired entity shall be recognized as if it were a liability. When the contingency is resolved and the consideration is issued, any excess of consideration over the amount that was recognized as a liability shall be recognized as additional cost of the acquired entity. If the amount initially recognized as if it were a liability exceeds the consideration issued, that excess shall be allocated as a pro rata reduction of the amounts assigned to property and equipment and intangible assets acquired. In accordance with SFAS 141, the Company has recorded a liability of $1,206 representing the difference between the fair value of the assets acquired and the consideration paid excluding contingent consideration. As such, the purchase price and allocation of the purchase price to the assets acquired is preliminary and will not be finalized until 90 days after the one year anniversary of the acquisition, when the contingent consideration is determinable. When the contingent consideration if any, is determined, the Company will account for the additional consideration as an adjustment to the purchase price and adjust the preliminary purchase price allocation appropriately. This may affect the preliminary allocation of the purchase price for assets that are depreciated and amortized thus having an impact on depreciation and amortization expense related to those assets. Any adjustment to depreciation and amortization expense will be recorded during the period that it becomes determinable.

The Company also recorded a liability of approximately $274 as a reserve for exit activities pursuant to Emerging Issues Task Force (“EITF”) Issue No. 95-3 – “Recognition of Liabilities in Connection With a Purchase Business Combination” (“EITF 95-3"). Under EITF 95-3, the estimated costs of certain salary and severance expenses of transitional employees were accrued and accounted for as part of the purchase price.

The following details amortization periods for the identifiable, amortizable intangibles:

Intangible Asset Category	Amortization Period in years
Non-compete agreements		3 years
Client relationships		7 years

The following details the allocation of the purchase price for the acquisition of FAIS:

	Fair Value
Accounts receivable	$	1,201
Property and equipment		102
Intangible asset –  non-complete agreements		290
Intangible asset –  client relationships		2,500
Accounts payable		(17	)
Accrued liabilities		(48	)
Cost of exit activities		(274	)
Earnout liability		(1,206	)
Net fair value assigned to assets acquired and liabilities assumed	$	2,548

12

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

4.Acquisitions, continued

The following represents a summary of the purchase price consideration:

	Fair Value
Cash	$	2,164
Broker fee		350
Legal fee		34
Total Purchase Price Consideration	$	2,548

The results of operations of FAIS for the period from April 21, 2008 to September 30, 2008 are reflected in the Company’s consolidated results for the three and nine months ended September 30, 2008, in the accompanying condensed consolidated statements of operations.

Unaudited Pro-Forma Financial Information

The following presents the unaudited pro-forma combined results of operations for the three and nine months ended September 30, 2008 and 2007 of the Company with On Line Consulting, Bode, Facticon and FAIS, for the periods preceding the acquisition of their respective net assets or common stock. The respective acquisition dates are January 9, 2007 for On Line Consulting, February 28, 2007 for Bode and Facticon, and April 21, 2008 for FAIS.

	For the Three  Months Ended  September 30,			For the Three  Months Ended  September 30,			For the Nine  Months Ended  September 30,			For the Nine  Months Ended  September 30,
	2008			2007			2008			2007
Revenues	$	29,488		$	24,634		$	80,233		$	68,620
Net loss	$	(415	)	$	(5,658	)	$	(7,916	)	$	(20,208	)
Pro-forma basic and diluted net loss per common share (not rounded)	$	(0.04	)	$	(1.66	)	$	(0.82	)	$	(6.81	)
Pro-forma weighted average common shares outstanding - basic and diluted		9,734,067			3,406,520			9,660,684			2,967,459

The pro forma combined results of operations are not necessarily indicative of the results of operations that actually would have occurred if the acquisitions of On Line Consulting, Bode, Facticon and FAIS had been completed as of the beginning of 2007, nor are they necessarily indicative of future consolidated results.

13

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

5. Inventories

Inventories are comprised of the following: 

	As of
	September 30, 2008		December 31, 2007
Raw materials	$	1,327	$	900
Work in progress – DNA Analysis		300		480
Finished goods		1,132		946
Total	$	2,759	$	2,326

 6.  Intangible Assets and Goodwill

Intangible Assets

Intangible assets are comprised of the following:

	Trade Names		Developed Technology		Non- Compete Agreements		Client Relationships		Patents			Gross Amounts		Accumulated Amortization			Total
Balance as of January 1, 2008	$	2,560	$	440	$	1,499	$	7,360	$	70		$	11,929	$	(4,659	)	$	7,270
Additions:
Acquisition of FAIS (See Note 4)		-		-		290		2,500		-			2,790		-			2,790
Costs of patents		-		-		-		-		42			42		-			42
Amortization		-		-		-		-		-			-		(2,224	)		(2,224	)
Balance as of September 30, 2008	$	2,560	$	440	$	1,789	$	9,860	$	112		$	14,761	$	(6,883	)	$	7,878
Weighted average amortization period at September 30, 2008 (in years)		7.2		2.8		1.7		5.0		-	(1)

(1) Patents not yet approved and as such, the amortization period has not yet begun as of September 30, 2008.

The Company recorded amortization expense related to the acquired amortizable intangibles of $777 and $656, and $2,224 and $2,060 for the three and nine months ended September 30, 2008 and 2007, respectively.

14

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

6.  Intangible Assets and Goodwill, continued

Goodwill

A summary of Goodwill is comprised of the following as of September 30, 2008 and December 31, 2007:

	Preparedness Services		Fraud and SIU Services		Security Consulting and Investigations		Consolidated
Balance as of December 31, 2007	$	883	$	6,022	$	12,863	$	19,768
Purchase Price Adjustment- On Line Consulting		-		-		200		200
Balance as of September 30, 2008	$	883	$	6,022	$	13,063	$	19,968

On September 30, 2008, the Company agreed to pay $200 of additional purchase consideration to the sellers of On Line Consulting as a result of having finalized a working capital purchase price adjustment specified in the asset purchase agreement dated January 9, 2007. Payment is due on November 14, 2008.

7.Accrued Compensation and Related Benefits

A summary of accrued compensation and related benefits is comprised of the following:

	As of
	September 30, 2008		December  31,  2007
Accrued performance based bonuses	$	2,139	$	1,942
Accrued payroll and commissions		1,924		801
Accrued employee benefits		1,057		997
Total	$	5,120	$	3,740

8.  Line of Credit

On April 16, 2008, effective as of March 31, 2008, GlobalOptions, Inc. and Bode entered into an amendment to the agreement with the financial institution that provides such entities with a line of credit, for which the Company has provided an unconditional guarantee (“Loan Agreement”).

The Loan Agreement provides a working capital line of credit (the “Facility”) in an amount up to a maximum of $20,000, based upon eligible receivables, as defined.  The applicable interest rate with respect to the amount outstanding under the Facility consists of a base rate of the greater of 6.25% per annum or the Bank’s most recently announced “prime rate,” plus a range from 0.75% to 1.50% per annum, which is based upon GlobalOptions, Inc. and Bode’s liquidity (as defined in the Loan Agreement).  The Loan Agreement also contains certain affirmative and negative covenants and grants to the financial institution a security interest in all of the GlobalOptions, Inc. and Bode’s property and security interest in all of the GlobalOptions, Inc. and Bode’s rights, titles and interests in, to and under the GlobalOptions, Inc. and Bode’s intellectual property.

The interest rate on the line of credit at September 30, 2008 was 7.0%. The balance under the line of credit was $6,000 at September 30, 2008. Based upon the amount of eligible accounts receivable balances and the authorized line, the Company had the availability to draw a maximum of $19,585 and $8,782 against the line of credit at September 30, 2008 and December 31, 2007, respectively.

15

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

9.  Notes Payable

Notes payable consisted of the following:

	As of
	September 30, 2008		December 31, 2007
Note payable to seller for Secure Source Acquisition	$	250	$	500
Note payable to seller for Facticon Acquisition		100		100
Notes payable to seller for On Line Consulting Acquisition		149		596
Total		499		1,196
Less – current portion		499		800
Long-term portion	$	-	$	396

On January 7, 2008, the Company repaid $450, consisting of $447 and $3 of principal and interest, respectively, in satisfaction of a note payable issued in connection with the purchase of On Line Consulting.

On May 6, 2008, the Company repaid $275, consisting of $250 and $25 of principal and interest, respectively, in satisfaction of a note payable issued in connection with the purchase of Secure Source.

10. Commitments and Contingencies

Operating Leases

In connection with the acquisitions of CBR, JLWA, Safir, Secure Source, Hyperion Risk, On Line Consulting, Bode and Facticon, GlobalOptions assumed the obligations for various office leases. Such lease obligations expire at various dates through June 2015.

On July 19, 2007, the Company entered into an agreement to lease 15,294 rentable square feet of office space in Washington, D.C, to replace the Company’s expiring Washington D.C. office lease. The lease commenced on February 27, 2008 and expires on November 30, 2015. The Company has the option to extend the lease for an additional five years. Rent payments have been abated during the first six months of the lease.

On September 12, 2008, the Company entered into an agreement to lease 8,204 of rentable square feet of office space in Carrollton, TX, to replace the Company’s prior Carrollton, TX office lease. The new lease effectively terminated the old lease without penalty. The new lease commenced on August 1, 2008 and expires on May 31, 2014.

Future minimum lease payments under these operating leases are as follows:

For the Year Ending September 30,	Amount
2009	$	2,830
2010		2,804
2011		2,625
2012		2,240
2013		2,104
Thereafter		4,788
Total	$	17,391

16

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

10. Commitments and Contingencies, continued

Operating Leases, continued

Rent expense charged to operations amounted to $918 and $903, for the three months ended September 30, 2008 and 2007, and $2,805 and $2,208 for the nine months ended September 30, 2008 and 2007, respectively.

The terms of certain of the Company’s lease obligations provide for scheduled escalations in the monthly rent. In accordance with SFAS No. 13, “Accounting for Leases,” the non-contingent rent increases are being amortized over the life of the leases on a straight line basis. Deferred rent of $568 and $346 represents the long-term unamortized rent adjustment amount at September 30, 2008 and at December 31, 2007 and is reflected within other long-term obligations in the condensed consolidated balance sheet. In addition, the current portion of deferred rent was $247 and $30 as of September 30, 2008 and December 31, 2007, respectively, and is reflected within other current liabilities in the condensed consolidated balance sheets.

Litigation, Claims and Assessments

From time to time, in the normal course of business, the Company may be involved in litigation.  Except for certain claims as described below, the Company’s management has determined any asserted or unasserted claims to be immaterial to the condensed consolidated financial statements. 

The Company is currently defendants in federal and state litigation matters related to Facticon, which were filed prior to the Company’s acquisition of the assets of Facticon.

In the federal matter, Anchondo vs. Facticon Inc. and GlobalOptions Group, Inc. in the U.S. District Court for the Central District of California, Peter Anchondo (the“Federal Plaintiff”), in a class action, is alleging that Facticon failed to pay overtime wages. Subsequent to the acquisition of the assets of Facticon by the Company, the Company was added as a defendant in said case, under the successor liability theory. A Motion for Summary Judgment was filed for the Court to contest the Company’s liability as a successor liable company. On March 7, 2008, the Court issued a ruling denying the Company’s Motion for Summary Judgment and issued a ruling granting a Motion for Summary Judgment in favor of the Federal Plaintiff ruling that the Company was in fact a successor party to the Plaintiffs actions. This ruling by the Court is in opposition to the Court’s original ruling dated March 3, 2008, wherein it granted the Company’s Motion for Summary Judgment. The Company filed a Motion for Reconsideration and the Judge reversed his opinion but ruled that the issue of successor liability must be litigated. In July 2008, the Company reached a tentative agreement with the Federal Plaintiff to settle this matter with a cash payment of $635, which the Court approved on November 10, 2008. 

The State Court case Wonsch, et al. vs. Facticon Inc. and GlobalOptions Group, Inc.was filed in the State Court for the Central District of California, wherein Wonsch, the plaintiffs in the class action (the “State Plaintiffs”), have alleged that Facticon failed to pay overtime wages under the California Civil Code. This action is similar to the Anchondo case, but is limited to the state laws of California. Subsequent to the acquisition, the Company was added as a defendant in said case, under the successor liability theory; however, the Company has not filed a response under the successor liability claim, since the Company filed a motion with the California State Court to remove such case from the California State Court and for such case to be merged with the Anchondo case, and the California State Court has granted such motion. Although the cases have been merged, the Company must settle with each of the two plaintiff groups separately. Based upon preliminary discussions with the State Plaintiffs, the Company believes that it will be able to reasonably settle the Wonsch matter.

Under the terms of an escrow agreement, as amended, entered into by and between GlobalOptions and Facticon, the escrow agreement provides that 85,700 shares of the Company’s common stock and $100 in cash funds shall be held to satisfy this and other pre-acquisition obligations of Facticon. The Company and the stockholders of Facticon have agreed that the Company will not distribute any funds or stock as provided under the asset purchase agreement until the Anchondo and the Wonsch cases are resolved, and if necessary, the Company shall use such stock and cash to offset such matters. The Company has established a reserve in the amount of $776 to cover the Company for any additional costs in connection with the Anchondo and Wonsch cases that are not recoverable through the escrow amounts. 

17

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

11.Stockholders’ Equity

Common Stock

On December 19, 2006, the Company awarded 100,000 and 75,000 shares of unvested restricted stock to Dr. Harvey Schiller and Mr. Jeffrey Nyweide, 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 Dr. Harvey Schiller, and Mr. Jeffrey Nyweide, respectively, in connection with the 2006 Executive Compensation Performance Bonus Plan.

On December 12, 2007, the Compensation Committee determined that, effective January 1, 2008, 6,250 shares and 4,687 shares of restricted stock held by Dr. Schiller and Mr. Nyweide, respectively, were no longer subject to forfeiture. Dr. Schiller and Mr. Nyweide elected to have the Company withhold 2,278 and 1,585 shares, respectively, in satisfaction of their tax obligations in connection with the vesting of their restricted stock. Such withheld shares valued at $10 and $7, respectively, are reflected as treasury shares in the Company’s books and records (See Note 12).

Effective August 19, 2008, an additional 25,000 and 18,500 shares of restricted stock held by Dr. Schiller and Mr. Nyweide respectively, were no longer subject to forfeiture. Dr. Schiller and Mr. Nyweide elected to have the Company withhold 9,451 and 6,253 shares, respectively, in satisfaction of their tax obligations in connection with the August 19, 2008 vesting of their restricted stock. Such withheld shares valued at $20 and $13, respectively are reflected as treasury shares in the Company’s books and records (See Note 12).

Accordingly, an aggregate 558,063 of the restricted shares awarded to these executives remain subject to vesting based on certain performance and stock price targets that have been established by the Compensation Committee of the Board of Directors.

 On January 30, 2008, the Company issued 300,000 shares of common stock to the former owners of JLWA (“JLWA Sellers”) including 225,000 shares of common stock, in full satisfaction of the $2,160 obligation to issue common stock. The cost of the remaining 75,000 shares shall be recorded as earn-out expense upon the expiration of the 12 months period for which the shares are subject to forfeiture.

On February 15, 2008, the Company issued 21,843 shares of common stock, valued at $153 for services rendered during the year ended December 31, 2007, and 5,141 shares of common stock valued at $15 for services rendered during January and February 2008, to a group of the Company’s service providers including 1,567 shares of common stock valued at $15 to Verus International Group, of which John Oswald, a director of the Company, is Chief Executive Officer.

On May 29, 2008, the Company issued 40,064 shares of its common stock upon the conversion of 600.95 shares of Series D convertible preferred stock.   

12. Stock Based Compensation

Amended and Restated 2006 Long-Term Incentive Plan

On July 24, 2008, at the Company’s 2008 Annual Meeting of Stockholders (the “Annual Meeting”), stockholders approved the Amended and Restated 2006 Long-Term Incentive Plan (the “Incentive Plan”), which became effective immediately following its approval and replaced the Company’s original 2006 Long-Term Incentive Plan. The Incentive Plan provides for the issuance of up to 3,000,000 shares of the Company’s common stock, increased from 1,500,000 under the Company’s original 2006 Long-Term Incentive Plan. As of September 30, 2008, 1,361,530 shares of common stock remain eligible to be issued under the Incentive Plan. 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.

18

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

12. Stock Based Compensation, continued

Amended and Restated 2006 Employee Stock Purchase Plan

At the Annual Meeting, stockholders approved the Stock Purchase Plan, which became effective immediately following its approval and replaced the Company’s original 2006 Employee Stock Purchase Plan. The Stock Purchase Plan permits eligible employees of the Company 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, increased from 250,000 under the Company’s original 2006 Employee Stock Purchase Plan. As of September 30, 2008, 1,993,860 shares of common stock remain unissued under the Stock Purchase Plan.

Stock based compensation for non-employees accounted for under EITF Issue No. 96-18 “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF 96-18”) was $24 and $95 for the three and nine months ended September 30, 2008 and $8 and $54 for the three and nine months ended September 30, 2007, respectively. Stock based compensation recognized under EITF 96-18 is reflected in general and administrative expenses.

Stock based compensation for employees accounted for under SFAS No. 123R “Share-Based Payment” (“SFAS 123R”) was approximately $734 and $2,759 for the three and nine months ended September 30, 2008 and $845 and $2,496 for the three and nine months ended September 30, 2007, respectively. For the three and nine months ended September 30, 2008, $85 and $189 respectively of stock based compensation under SFAS 123R was reflected in selling and marketing expenses, and $649 and $2,570, respectively, was reflected in general and administrative expenses. Stock based compensation for the three and nine months ended September 30, 2007 was reflected in general and administrative expenses.

The following table summarizes total stock based compensation costs recognized under EITF 96-18 and SFAS 123R for the three and nine months ended September 30, 2008 and 2007, respectively.

	For the Three Months Ended September 30,
	2008						2007
	EITF 96-18		SFAS 123R		Total		EITF 96-18		SFAS 123R		Total
Stock options	$	22	$	133	$	155	$	8	$	548	$	556
RSUs		2		256		258		-		-		-
Stock purchase plan		-		3		3		-		-		-
Vesting of restricted shares under performance based executive bonus award		-		342		342		-		297		297
Total	$	24	$	734	$	758	$	8	$	845	$	853

	For the Nine Months Ended September 30,
	2008						2007
	EITF 96-18		SFAS 123R		Total		EITF 96-18		SFAS 123R		Total
Stock options	$	93	$	1,558	$	1,651	$	54	$	1,953	$	2,007
RSUs		2		272		274		-		-		-
Stock purchase plan		-		3		3		-		-		-
Vesting of restricted shares under performance based executive bonus award		-		926		926		-		543		543
Total	$	95	$	2,759	$	2,854	$	54	$	2,496	$	2,550

19

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

12. Stock Based Compensation, continued

Stock Options

The fair value of each option grant during the three and nine months ended September 30, 2008 and the nine months ended September 30, 2007 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used: 

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2008		2007		2008		2007
Dividend yield		0%		0%		0%		0%
Expected volatility		99.8%		87%		87.0%		87.0%
Risk-free interest rate		3.37%		4.20%		2.97%		4.34%
Expected lives		4 years		5 years		5 years		5 years

The Company has determined that the expected life of options granted is the same as the contractual term for options granted prior to July 1, 2008. The expected life of options granted after June 30, 2008 was calculated using the simplified method set out in SEC Staff Accounting Bulleting No. 110 using the vesting term of 3 years and the contractual term of 5 years. The simplified method defines 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 was $1.64 and $1.80, respectively, for the three and nine months ended September 30, 2008, and $5.09 and $6.05, respectively, for the three and nine months ended September 30, 2007.

Effective on January 1, 2008, the Company granted, in the aggregate, options for the purchase of 75,000 shares of its common stock at an exercise price of $4.50 per share, under the 2006 Long-Term Incentive Plan, to three members of the Board of Directors. The options have a five year term, vest ratably at the end of each of the four quarterly periods following the date of grant and have a value of $235 utilizing the Black Scholes option pricing model with the following assumptions used: expected life of five years, volatility of 87%, dividends of 0% and a risk free interest rate of 3.45%.

Effective on January 1, 2008, the Company issued stock options for the purchase of 100,000 shares of its common stock at an exercise price of $4.50 per share, under the 2006 Long-Term Incentive Plan to certain members of its advisory boards for their advisory services to the Company.   The options have a five year term, vest ratably at the end of each of the four quarterly periods following the date of grant and have a value of $314 utilizing the Black Scholes option pricing model with the following assumptions used: expected life of five years, volatility of 87%, dividends of 0% and a risk free interest rate of 3.45%.

20

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

12. Stock Based Compensation, continued

Stock Options, continued

On February 13, 2008, the Company granted, in the aggregate, options for the purchase of 295,000 shares of its common stock at an exercise price of $1.70 per share under the 2006 Long-Term Incentive Plan to certain of its officers and employees.   The options have a five year term, vest ratably upon the first, second and third anniversaries of the date of grant and have a value of $347 utilizing the Black Scholes option pricing model with the following assumptions used: expected life of five years, volatility of 87%, dividends of 0% and a risk free interest rate of 2.71%.

On March 5, 2008, the Company granted an option for the purchase of 50,000 shares of its common stock at an exercise price of $1.86 under the 2006 Long-Term Incentive Plan to an officer of Bode.   The option has a five year term, vests ratably upon the first, second, third, and fourth anniversaries of the date of grant, certain vesting is accelerated upon the achievement of certain performance based criteria and upon a change in control all such options vest immediately. The option has a value of $64 utilizing the Black Scholes option pricing model with the following assumptions used: expected life of five years, volatility of 87%, dividends of 0% and a risk free interest rate of 2.59%.

On May 7, 2008, the Company granted stock options for the purchase of an aggregate of 7,000 shares of its common stock at an exercise price of $2.23 to certain employees. The options have a five year term, vest ratably on the first, second and third anniversaries of the date of grant and have a value of $11 utilizing the Black Scholes option pricing model with the following assumptions used; expected life of fives years, volatility of 87%, dividends of 0% and a risk free interest rate of 3.09%.

On May 7, 2008 the Company granted, in the aggregate, options for the purchase of 90,000 shares of common stock at an expense price of $2.23 to employees of FAIS. The options have a five year term, vest ratably on the first, second and third anniversaries of the date of grant and have a value of $139 utilizing the Black Sholes option pricing model with the following assumptions used; expected life of five years, volatility of 87%, dividends of 0% and a risk free interest rate of 3.09%.

On July 24, 2008 the Company granted an option for the purchase of 2,334 shares of common stock at an exercise price of $2.33 to two employees. The option has a five year term, vests ratably on the first, second and third anniversaries of the date of grant and has a value of $4 utilizing the Black Sholes option pricing model with the following assumptions used; expected life of four years, volatility of 99.8%, dividends of 0% and a risk free interest rate of 3.37%.

On June 26, 2008, options for the purchase of 1,105,188 shares of Company’s common stock were accepted for exchange and cancellation, and the Company thereupon issued 368,475 RSUs (See Restricted Stock Units below).

At September 30, 2008, the unamortized value of employee stock options under SFAS 123R was approximately $745. The unamortized portion will be expensed over a weighted average period of 1.8 years. For the three and nine months ended September 30, 2008, costs of $133 and $1,558, and for the three and nine months ended September 30, 2007, costs of $548 and $1,953, respectively, were recognized in connection with the vesting of these employee stock options.

21

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

12. Stock Based Compensation, continued

Stock Options, continued

A summary of the status of the Company’s stock option plans and the changes during the nine months ended September 30, 2008, is presented in the table below:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Intrinsic Value
				(per share)		(in years)
Options outstanding at December 31, 2007		1,191,665		$	13.72		3.6
Granted		619,334
Forfeited		(38,888	)
Canceled		(1,105,188	)
Options outstanding at September 30, 2008		666,923		$	3.44		4.3		89
Exercisable September 30, 2008		152,303		$	5.68		4.1		-

Restricted Stock Units (“RSUs”)

On May 28, 2008, the Company issued an offer to holders of outstanding stock options issued prior to January 1, 2008 (“Eligible Options”), to exchange their Eligible Options for RSUs on a 3 for 1 basis. Each RSU represents one share of the Company’s common stock to be issued in the future, based on certain vesting requirements. The offer expired on June 25, 2008. As result of this offer, as of June 26, 2008, 1,105,188 stock options were accepted for exchange and cancellation, and the Company issued 368,475 RSUs with a grant date fair value of $2.12 per share to participants in the offer. The grant date fair value of the restricted stock units was determined by using the closing price of the Company’s common stock on the day immediately preceding the grant date.

All of the Company’s executive officers and directors participated in the exchange offer, as a group accounting for approximately 78% of the stock options exchanged and cancelled and RSUs issued in the offer.

The excess of the aggregate grant date fair value of the RSUs of $781 over the fair value of the stock options canceled of $672, has been added to the unamortized value of the canceled options of $2,863 and will be amortized over the vesting period of the RSUs.

RSUs held by executive officers and directors vest ratably on each of the first, second and third anniversaries of the grant date. RSUs held by all other employees and consultants vest ratably on the first and second anniversaries of the grant date.

At September 30, 2008, the unamortized value of RSUs held by employees under SFAS 123R was approximately $2,684. The unamortized portion will be expensed over a weighted average period of 2.6 years. For the three and nine months ended September 30, 2008, costs of $256 and $272 were recognized in connection with the vesting of these employee RSUs.

22

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

12. Stock Based Compensation, continued

A summary of the activity related to RSUs for the nine months ended September 30, 2008 is presented below:

	Total			Weighted  Average Grant  Date Fair Value
Nonvested at January 1, 2008		-			-
RSUs issued upon cancellation of options tendered, June 26, 2008		368,475		$	2.12
RSUs vested		-
RSUs forfeited		(42	)
Nonvested at September 30, 2008		368,433		$	2.12

Stock Purchase Plan

The Stock Purchase Plan was established for eligible employees to purchase shares of the Company’s common stock on a monthly basis at 85% of the lower of the market value of the Company’s common stock on the first or last business day of each month. Under the Stock Purchase Plan, employees may authorize the Company to withhold up to 15% of their compensation during any monthly offering period for common stock purchases, subject to certain limitations. The Stock Purchase Plan was implemented during July 2008 and is qualified under Section 423 of the Internal Revenue Code. For the three and nine months ended September 30, 2008, 6,140 shares were issued under the Stock Purchase Plan. Stock based compensation recognized in connection with the issuance of these shares was $3 for the three and nine months ended September 30, 2008.

Vesting of Restricted Shares under Performance Based Executive Bonus Award

During the three and nine months ended September 30, 2008, in connection with expected performance under this bonus program for senior executives, stock-based compensation of approximately $342 and $927 was recognized for the estimated pro rata vesting of restricted shares. During the three and nine months ended September 30, 2007, $297 and $543, respectively was recognized for the estimated pro rata vesting of these restricted shares.

23

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

13.   Client and Segment Data

The Company’s reportable operating segments consist of the following three business segments: Preparedness Services, Fraud and SIU Services, and Security Consulting and Investigations. The Company’s reportable segments are organized, managed and operated along key product and service lines. These product and service lines provided to similar clients are offered together as packaged offerings, generally produce similar margins and are managed under a consolidated operations management.

The Preparedness Services segment develops and implements crisis management and emergency response plans for disaster mitigation, continuity of operations and other emergency management issues for governments, corporations and individuals.

The Fraud and SIU Services segment provides investigative surveillance, anti-fraud solutions and business intelligence services to the insurance industry, law firms and multinational organizations. The results of the Company’s International Strategies business unit, on the basis of its relative materiality, are included in the Fraud and SIU Services segment.

The Security Consulting and Investigations segment delivers specialized security and investigative services to governments, corporations and individuals.

The names of the Company’s reportable segments have changed from the prior year. See the Company’s Form 10-K for the year ended December 31, 2007, filed on March 28, 2008, for additional information.

Total revenues by segment include revenues to unaffiliated clients. The Company evaluates performance based on income (loss) from operations. Operating income (loss) is gross profit less operating expenses.

The following tables summarize financial information about the Company’s business segments for the three and nine months ended September 30, 2008 and 2007.  

For the Three Months Ended September 30, 2008

	Preparedness  Services		Fraud & SIU  Services			Security  Consulting &  Investigations			Corporate		Consolidated
Revenues	$	11,820	$	8,657		$	9,011		$	-	$	29,488
Income (loss) from Operations	$	1,191	$	(1,117	)	$	(417	)	$	-	$	(343	)
Depreciation and Amortization	$	320	$	383		$	432		$	-	$	1,135
Interest Expense , net	$	-	$	-		$	-		$	72	$	72

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GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

13.   Client and Segment Data, continued

For the Three Months Ended September 30, 2007
	Preparedness Services			Fraud & SIU Services			Security Consulting & Investigations			Corporate		Consolidated
Revenues	$	6,769		$	6,384		$	8,421		$	-	$	21,574
Income (loss) from Operations	$	(686	)	$	(1,547	)	$	(2,173	)	$	-	$	(4,406	)
Depreciation and Amortization	$	314		$	251		$	490		$	-	$	1,055
Interest Expense, net	$	-		$	-		$	-		$	524	$	524

For the Nine Months Ended September 30, 2008
	Preparedness  Services		Fraud & SIU  Services			Security  Consulting & Investigations			Corporate		Consolidated
Revenues	$	27,070	$	24,173		$	25,998		$	-	$	77,241
Income (loss) from Operations	$	962	$	(3,466	)	$	(4,081	)	$	-	$	(6,585	)
Depreciation and Amortization	$	948	$	1,036		$	1,278		$	-	$	3,262
Interest Expense, net	$	-	$	-		$	-		$	174	$	174

For the Nine Months Ended September 30, 2007
	Preparedness  Services			Fraud & SIU  Services			Security  Consulting & Investi gations			Corporate		Consolidated
Revenues	$	24,032		$	18,248		$	23,148		$	-	$	65,428
Income (loss) from Operations	$	(7,659	)	$	(5,493	)	$	(4,885	)	$	-	$	(18,037	)
Depreciation and Amortization	$	930		$	861		$	1,126		$	-	$	2,917
Interest Expense, net	$	-		$	-		$	-		$	477	$	477
Other Income	$	100		$	-		$	-		$	-	$	100

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GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(In thousands except share and per share amounts)

14. Major Clients/Customers

Revenues from the Company’s services to a limited number of clients have accounted for a substantial percentage of the Company’s total revenues. The Company’s largest client, which is within the Preparedness Services segment and represents work performed under government contracts, accounted for approximately 26% and 27% of the Company’s revenues for the three months ended September 30, 2008 and 2007, and 25% and 32% for the nine months ended September 30, 2008 and 2007 respectively.

For the three months ended September 30, 2008 and 2007, work performed under government contracts represented 51% and 50% of the Company’s revenues, respectively, the most significant of which, in 2008 and 2007, represented 64% and 96%, respectively, of the Company’s revenues within the Preparedness Services segment.

For the nine months ended September 30, 2008 and 2007, work performed under government contracts represented 47% and 42% of the Company’s revenues, respectively, the most significant of which, in 2008 and 2007, represented 71% and 98%, respectively, of the Company’s revenues within the Preparedness Services segment.

15. Subsequent Events

On October 31, 2008 6,621 shares were issued under the Stock Purchase Plan. Stock based compensation recognized in connection with the issuance of these shares was $3.

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

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

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

Forward-Looking Statements

Information included or incorporated by reference in this Quarterly Report on Form 10-Q may contain forward-looking statements. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may," "should," "expect," "anticipate," "estimate," "believe," "intend" or "project" or the negative of these words or other variations on these words or comparable terminology.

Overview

GlobalOptions Group, Inc. and Subsidiaries (collectively the “Company” or “GlobalOptions Group”) is an integrated provider of risk mitigation and management services to government entities, Fortune 1000 corporations and high net-worth and high-profile individuals. We enable clients to identify, assess and prevent natural and man-made threats to the well-being of individuals and the operations of governments and corporations. In addition, we assist our clients in recovering from the damages or losses resulting from the occurrence of acts of terror, natural disasters, fraud and other risks. Our vision is to continue to build a comprehensive risk mitigation solutions company through both organic growth and acquisitions. In pursuit of our strategy, we have acquired and integrated nine complementary risk mitigation businesses since August 2005 that contributed an aggregate of approximately $29,288 and $76,290 in revenues to our business during the three and nine months ended September 30, 2008 and an aggregate of approximately $21,100 and $63,400 during the three and nine months ended September 30, 2007. 

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

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

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

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

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

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

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

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
Segment	2008			2007			2008			2007
Preparedness Services		40.1	%		31.4	%		35.0	%		36.7	%
Fraud and SIU Services		29.4			29.6			31.3			27.9
Security Consulting and Investigations		30.5			39.0			33.7			35.4
Total		100.0	%		100.0	%		100.0	%		100.0	%

Growth Strategy

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

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

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

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

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

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

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Corporate Developments

Modification to the Line of Credit Agreement

On April 16, 2008, effective as of March 31, 2008, GlobalOptions, Inc., an operating subsidiary of the Company, and Bode entered into an amendment to the agreement with the financial institution that provides the line of credit, for which we provided an unconditional guarantee (“Loan Agreement”).

The Loan Agreement provides a working capital line of credit (the “Facility”) in an amount up to a maximum of $20,000, based upon eligible receivables.  The applicable interest rate with respect to the amount outstanding under the Facility consists of a base rate of the greater of 6.25% per annum or the Bank’s most recently announced “prime rate,” plus a range from 0.75% to 1.50% per annum, which is based upon our liquidity (as defined in the Loan Agreement).  The Loan Agreement also contains certain affirmative and negative covenants and grants to the financial institution a security interest in all of our property and security interest in all of our rights, titles and interests in, to and under our intellectual property.

Acquisition

On April 21, 2008, we purchased substantially all of the assets and business activities of First Advantage Investigative Services, a Florida corporation (“FAIS”), related to our investigation and surveillance businesses.

The acquisition was made pursuant to an Asset Purchase Agreement (the “Purchase Agreement”), dated April 21, 2008 by and among FAIS, First Advantage Corporation, a Delaware corporation and parent company of FAIS (“FAC”), and the Company.  The aggregate purchase price under the Purchase Agreement was (i) $2,164 in cash, (ii) a broker fee of $350, (iii) acquisition related legal expenses of $34 and (iv) an earnout payment (the “Earnout”) to be paid on the twelve-month anniversary of the transaction.  In addition, in the Purchase Agreement, FAC and FAIS covenanted that they will not compete with or solicit employees or customers of ours for a period of two years from the date of the transaction.  In a separate license agreement dated April 21, 2008 by and between FAIS and the Company, we also obtained the non-exclusive perpetual right to use FAIS’s Riskminder™ software.

The amount of the Earnout will be based on the revenues during the twelve months following the transaction that are generated by the assets purchased under the Purchase Agreement, as well as the revenues generated under an alliance agreement that are directly related to FAIS's previous investigation and surveillance business. The earnout amount will range from $0 to $2,000.  The business alliance agreement dated April 21, 2008, outlines our agreement with FAC to further develop the alliance relationship between the two companies in the future.

The calculated value of the FAIS intangible assets created an excess of the fair value of assets acquired over the purchase price. Statement of Financial Accounting Standards (“SFAS”) No. 141 - “Business Combinations” (“SFAS 141”), requires that when a business combination involves contingent consideration that might result in recognition of additional cost of the acquired entity when the consideration is resolved, an amount equal to the lesser of the maximum contingent consideration or the excess of fair value over the cost of the acquired entity shall be recognized as if it were a liability. When the contingency is resolved and the consideration is issued, any excess of consideration over the amount that was recognized as a liability shall be recognized as additional cost of the acquired entity. If the amount initially recognized as if it was a liability exceeds the consideration issued, that excess shall be allocated as a pro rata reduction of the amounts assigned to property and equipment and intangible assets acquired. In accordance with SFAS 141, the Company has recorded a liability of $1,206 representing the difference between the fair value of the assets acquired and the consideration paid excluding contingent consideration. As such, the purchase price and allocation of the purchase price to the assets acquired is preliminary and will not be finalized until 90 days after the one year anniversary of the acquisition, when the contingent consideration is determinable. When the contingent consideration if any, is determined, the Company will account for the additional consideration as an adjustment to the purchase price and adjust the preliminary purchase price allocation appropriately. This may affect the preliminary allocation of the purchase price for assets that are depreciated and amortized thus having an impact on depreciation and amortization expense related to those assets. Any adjustment to depreciation and amortization expense will be recorded during the period that it becomes determinable.

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Registration of Additional Shares for Resale

On February 14, 2008, we registered for resale a total of 1,223,565 shares of our common stock, 300,000 shares of which were required to be registered pursuant to the second amendment, dated May 11, 2007, to our asset purchase agreement with WSFM, LLC (f/k/a James Lee Witt Associates, LLC (“JLWA”)) and the remainder of which were held by our employees, directors, or their affiliates, including certain shares purchased in our underwritten public offering.

Conversion of Series D Convertible Preferred Stock

On May 29, 2008, we issued 40,064 shares of common stock upon the conversion of 600.95 shares of Series D convertible preferred stock.   

Stock Options Exchanged for Restricted Stock

On May 28, 2008, the Company issued a tender offer to holders of outstanding stock options issued prior to January 1, 2008 (“Eligible Options”), to exchange their Eligible Options for Restricted Stock Units (“RSUs”) on a 3 for 1 basis. Each RSU represents one share of the Company’s common stock to be issued in the future, based on certain vesting requirements. The offer expired on June 25, 2008. As a result of this offer, on June 26, 2008, 1,105,188 stock options were accepted for exchange and cancellation, and the Company issued 368,475 RSUs. RSUs held by executive officers and directors vest ratably on each of the first, second and third anniversaries of the grant date. RSUs held by all other employees and consultants vest ratably on the first and second anniversaries of the grant date.

Amended and Restated 2006 Long-Term Incentive Plan

On July 24, 2008, at the Company’s 2008 Annual Meeting of Stockholders (the “Annual Meeting”), stockholders approved the Amended and Restated 2006 Long-Term Incentive Plan (the “Incentive Plan”), which became effective immediately following its approval and replaced the Company’s original 2006 Long-Term Incentive Plan. The Incentive Plan provides for the issuance of up to 3,000,000 shares of the Company’s common stock, increased from 1,500,000 under the Company’s original 2006 Long-Term Incentive Plan. 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, 2008, 1,361,530 shares remain eligible to be issued under Incentive Plan.

Amended and Restated 2006 Employee Stock Purchase Plan

At the Annual Meeting, stockholders approved the Amended and Restated 2006 Employee Stock Purchase Plan (the “Stock Purchase Plan”), which became effective immediately following its approval and replaced the Company’s original 2006 Employee Stock Purchase Plan. The Stock Purchase Plan permits eligible employees of the Company 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, increased from 250,000 under the Company’s original 2006 Employee Stock Purchase Plan. As of September 30, 2008, 1,993,860 shares of common stock remain eligible to be issued under the Stock Purchase Plan.

Registration of Additional Shares Issuable Under Incentive Plan and Stock Purchase Plan

On August 20, 2008, the Company filed a registration statement on Form S-8 (Registration No. 333-153097) to register an aggregate of 1,500,000 and 1,750,000 shares of our common stock issuable under the Incentive Plan and the Stock Purchase Plan, respectively.

Election of Directors

At the Annual Meeting, stockholders elected Harvey W. Schiller, Ph.D., Per-Olof Lööf, John P. Oswald, Ronald M. Starr and John P. Bujouves to the Company’s Board of Directors, to serve until their successors have been duly elected and qualify.

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Ratification of Independent Registered Public Accounting Firm

At the Annual Meeting, stockholders ratified the appointment of Marcum & Kliegman LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2008.

Restricted Stock Awards

On July 24, 2008, the Compensation Committee awarded 437,500 shares of unvested restricted stock to the Company’s two senior officers under the Company’s performance based 2007 Executive Compensation Plan, as revised in 2008.

Purchase Price Adjustment - Acquisition of On Line

On September 30, 2008, in connection with finalizing the SPZ Oakland Corporation, dba On Line Consulting Service, Inc. (“On Line Consulting”) working capital purchase price adjustment, GlobalOptions Group reached an agreement with the seller to pay the additional sum of $200 in cash by November 14, 2008. At September 30, 2008, the amount is recorded as additional goodwill and as an amount due to seller within other current liabilities.

Statements of Operations

Revenues

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

Gross Profit

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

Operating Expenses

Our selling and marketing expenses primarily include salaries, commissions, stock based compensation, as well as travel and other expenses, incurred by our employees who are involved in selling and promoting our services. The accrued earnout expenses related to the acquisition of JLWA were also reflected in our selling and marketing expenses for the nine months ended September 30, 2007. Our general and administrative expenses consist primarily of salaries, bonuses and stock-based compensation for our employees not performing work directly for our clients, as well as depreciation expense of facilities and amortization of intangible assets. Also included in general and administrative expenses are corporate support expenses such as legal and professional fees, investor relations, human resources, facilities, telecommunication support services, information technology, and impairment losses recognized on goodwill and intangibles.

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Results of Operations

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2008			2007			2008			2007
Revenues		100	%		100	%		100	%		100	%
Cost of revenues		57			53			57			55
Gross profit		43			47			43			45
Operating expenses:
Selling and marketing expenses		11			6			11			19
General and administrative		33			61			40			54
Total operating expenses		44			67			51			73
Loss from operations		(1	)		(20	)		(8	)		(28	)
Other income (expense), net		-			(3	)		-			-
Net loss		(1	)%		(23	)%		(8	)%		(28	)%

GlobalOptions Group Three Months Ended September 30, 2008 Compared to the Three Months Ended September 30, 2007

Revenues

We had overall revenues of $29,488 for the three months ended September 30, 2008, as compared to revenues of $21,574 for the three months ended September 30, 2007, for an overall increase of $7,914 or 37%.

Preparedness Services revenues were $11,820 for the three months ended September 30, 2008, as compared to $6,769 for the three months ended September 30, 2007. Of the $5,051 or 75% increase in revenues, $4,941 was primarily attributable to our relief and recovery efforts in Louisiana and Iowa.

Fraud and SIU Services revenues were $8,657 for the three months ended September 30, 2008, as compared to $6,384 for the three months ended September 30, 2007. The increase of $2,273 or 36% was primarily attributable to expansion of our client base and growth in our contract account relationships.

Security Consulting and Investigations revenues were $9,011 for the three months ended September 30, 2008, as compared to $8,421 to the three months ended September 30, 2007. The increase of $590, or 7%, was primarily attributable to the increase in our client base.

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Gross Profit

Our consolidated gross profit for the three months ended September 30, 2008 and 2007 was $12,612 and $10,095, respectively, reflecting an increase of $2,517, or 25%. This increase was principally due to an increase in revenue, as discussed above. For the three months ended September 30, 2008 and 2007, our gross profit margins were 43% and 47%, respectively. The decrease in profit margin is primarily a result of variations in product mix during the period.

Preparedness Services gross profit was $5,225 or 44% of this segment’s revenues for the three months ended September 30, 2008, as compared to $2,830 or 42% of this segment’s revenues for the three months ended September 30, 2007. The increase in gross profit margin in this segment was primarily attributable to changes in the labor mix associated with the Louisiana contract. Fraud and SIU Services gross profit was $3,285 or 38% of this segment’s revenues for the three months ended September 30, 2008, as compared to $3,077 or 48% of this segment’s revenues for the three months ended September 30, 2007. The decrease in gross profit margin in this segment was primarily due to increased use of third party consultants. Security Consulting and Investigations gross profit was $4,102 or 46% of this segment’s revenues for the three months ended September 30, 2008, as compared to $4,188 or 50% of this segment’s revenues for the three months ended September 30, 2007. The decrease in profit margin was primarily a result of changes in product mix during the period.

Operating Expenses

Selling and marketing expenses were $3,154 or 11% of revenues for the three months ended September 30, 2008, as compared to $1,358 or 6% of revenues for the three months ended September 30, 2007. The increase in selling expenses for the three months ended September 30, 2008 related to an increased emphasis on our selling and marketing activities as well as the acquisition of FAIS. General and administrative expenses were $9,801 or 33% of revenues for the three months ended September 30, 2008, as compared to $13,143 or 61% of revenues for the three months ended September 30, 2007. The decrease of $3,342 or 25% is attributable to improved efficiencies resulting from the integration of operations and reductions in accounting and legal fees which in 2007 were associated with our equity restructuring and equity financing.

GlobalOptions Group Nine Months Ended September 30, 2008 Compared to the Nine Months Ended September 30, 2007

Revenues

We had overall revenues of $77,241 for the nine months ended September 30, 2008, as compared to revenues of $65,428 for the nine months ended September 30, 2007, for an overall increase of $11,813 or 18%.

Preparedness Services revenues were $27,070 for the nine months ended September 30, 2008, as compared to $24,032 for the nine months ended September 30, 2007. The increase of $3,038 or 13%, was primarily attributable to our relief and recovery efforts in Louisiana and Iowa.

.

Fraud and SIU Services revenues were $24,173 for the nine months ended September 30, 2008, as compared to $18,248 for the nine months ended September 30, 2007. The increase of $5,925 or 32% was primarily attributable to the expansion of our client base through the acquisitions of Facticon, Inc., a Pennsylvania corporation (“Facticon”), on February 28, 2007, FAIS on April 21, 2008, revenues from our purchased customer list and newly acquired customer contracts.

Security Consulting and Investigations revenues were $25,998 for the nine months ended September 30, 2008, as compared to $23,148 for the nine months ended September 30, 2007. The increase of $2,850 or 12% was primarily attributable to the client base that we acquired in connection with the acquisition of Bode at the end of February 2007 for data banking and DNA investigations, as well as an increase in the client base at On Line Consulting.

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Gross Profit

Our consolidated gross profit for the nine months ended September 30, 2008 and 2007 was $32,892 and $29,595, respectively, reflecting an increase of $3,297, or 11%. This increase was principally due to an increase in revenues as discussed above. Gross profit margin percentages for the nine months ended September 30, 2008 and 2007 were 43% and 45%, respectively. The decrease in profit margin for the period was primarily attributable to variations in product mix.

Preparedness Services gross profit was $12,050 or 45% of this segment’s revenues for the nine months ended September 30, 2008, as compared to $10,600 or 44% of this segment’s revenues for the nine months ended September 30, 2007. The increase in profit margin for this segment is primarily attributable to program changes during the period. Fraud and SIU Services gross profit was $10,118 or 42% of this segment’s revenues for the nine months ended September 30, 2008, as compared to $8,450 or 46% of this segment’s revenues for the nine months ended September 30, 2007. The decrease in gross profit margin in this segment was primarily due to increased use of third party consultants. Security Consulting and Investigations gross profit was $10,724 or 41% of this segment’s revenues for the nine months ended September 30, 2008, as compared to $10,545 or 46% of this segment’s revenues for the nine months ended September 30, 2007. The decrease in gross profit margin within this segment was primarily attributable to variations in product mix within our Bode unit.

Operating Expenses

Selling and marketing expenses were $8,374 or 11% of revenues for the nine months ended September 30, 2008, as compared to $12,258 or 19% of revenues for the nine months ended September 30, 2007. Of the $3,884 decrease in selling and marketing expenses, $7,732 is attributable to earnout expenses incurred during the nine months ended September 30, 2007 in connection with the May 11, 2007 JLWA modification agreement. This benefit was offset by an increased emphasis on our selling and marketing activities as well as the acquisition of FAIS on April 21, 2008. General and administrative expenses were $31,103 or 40% of revenues for the nine months ended September 30, 2008, as compared to $35,374 or 54% of revenues for the nine months ended September 30, 2007. The decrease of $4,271 or 12% is attributable to a reduction in professional and advisory fees related to our equity restructuring and equity financing, our acquisition of three companies during 2007, as well as improved efficiencies resulting from the integration of operations.

Liquidity and Capital Resources

For the Nine Months Ended September 30, 2008

We had a cash and cash equivalent balance of $2,969 as of September 30, 2008.

Cash used in operating activities was approximately $3,209 and $7,435 for the nine months ended September 30, 2008 and 2007, respectively, for a decrease of $4,226. The decrease was principally the result of a reduction in our net loss of $11,655, offset by decreases in our non-cash bad debt provision of $1,844 and in our amount due to the former members of JLWA for earnout of $7,732.

Cash used in investing activities for the nine months ended September 30, 2008 was $3,511, of which 2,548 was used for the purchase of FAIS and $921 represented purchases of property and equipment. Cash used in investing activities for the nine months ended September 30, 2007 was $15,524, of which $14,504 related to our acquisitions of Bode, Facticon and On Line Consulting. On April 21, 2008, we acquired substantially all of the business and net assets of FAIS to expand our investigation and surveillance business. The aggregate purchase price for this transaction was $2,164 in cash, a $350 broker’s fee, $34 in acquisition related legal expenses, and an earnout obligation.

Financing activities provided net funds of $5,263 and $4,406 for the nine months ended September 30, 2008 and 2007, respectively. The net cash provided for the nine months ended September 30, 2008 is primarily due to proceeds from the line of credit of $6,000, less repayment of notes payable for acquisitions of $700. The net cash provided for the nine months ended September 30, 2007 is primarily due to proceeds from the line of credit of $7,828, less repayment of notes payable for acquisitions of $3,403.

On April 16, 2008, effective as of March 31, 2008, GlobalOptions, Inc. and Bode entered into the Loan Agreement for which the Company provided an unconditional guarantee.

The Loan Agreement provides a Facility in an amount up to a maximum of $20,000, based upon eligible receivables.  The applicable interest rate with respect to the amount outstanding under the Facility consists of a base rate of the greater of 6.25% per annum or the Bank’s most recently announced “prime rate”, plus a range from 0.75% to 1.50% per annum, which is based upon our liquidity (as defined in the Loan Agreement).  The Loan Agreement also contains certain affirmative and negative covenants and grants to the financial institution a security interest in all of our property and security interest in all of our rights, titles and interests in, to and under our intellectual property.

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We have historically met our operating cash needs by using borrowings under our line of credit arrangement and through private placements of equity and debt securities and an underwritten public offering. At September 30, 2008, we had working capital of $15,270. We currently believe the cash on hand, operating improvements that we believe will result in additional cash flows from operations, and our current available borrowing level of $13,585 at September 30, 2008 under our line of credit facility will be sufficient to finance our operations through September 30, 2009.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

Our significant accounting policies, including the assumptions and judgments underlying them, are more fully described in our “Notes to Consolidated Financial Statements” included in the Annual Report on Form 10-K for the year ended December 31, 2007. Some of our accounting policies require the application of significant judgment by management in the preparation of the consolidated financial statements and, as a result, they are subject to a greater degree of uncertainty. In applying these policies, management uses its judgment to determine the appropriate assumptions to be used in calculating estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. We have identified certain of our accounting policies as the ones that are most important to the portrayal of our consolidated financial condition and results of operations and which require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Our critical accounting policies include the following:

Revenue Recognition and Related Costs

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

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

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

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

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

Intangible Assets, Goodwill and Impairment

In accordance with the requirements of Statement of Financial Accounting Standards (“SFAS”) No. 141 “Business Combinations” (“SFAS  141”), we recognize certain intangible assets acquired in acquisitions, primarily goodwill, trade names, covenants not to compete and client relationships. In accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”), on a regular basis, we perform impairment analysis of the carrying value of goodwill and certain other intangible assets by assessing the recoverability when there are indications of potential impairment based on estimates of undiscounted future cash flows.

Allowance for Doubtful Accounts

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

Stock-Based Compensation

The Company has adopted the fair value recognition provisions of SFAS No. 123R, “Share Based Payment” (“SFAS 123R”).  Stock-based compensation expense for all share-based payment awards granted after December 31, 2005 is based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. The Company recognizes these compensation costs over the requisite service period of the award, which is generally the vesting term of the options associated with the underlying employment agreement, where applicable.

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

We account for equity instruments issued to non-employees in accordance with the provisions of SFAS 123R and the Emerging Issues Task Force (“EITF”) Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or In Conjunction with Selling, Goods or Services” (“EITF 96-18”) which require that such equity instruments be recorded at their fair value on the measurement date, which is typically the date the services are performed. Stock-based compensation for non-employees is accounted for under EITF 96-18 and is reflected within general and administrative expenses.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4T. Controls and Procedures.

Disclosure Controls and Procedures

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

In connection with the preparation of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, 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 were effective as of September 30, 2008.

In their evaluation, our Chief Executive Officer and Chief Financial Officer identified the following changes and enhancements in our control environment, and in particular, our financial closing process, that we have implemented prior to September 30, 2008, that remedied our previously disclosed material weaknesses to the extent that they could conclude that our disclosure controls and procedures were effective as of September 30, 2008:

·  In connection with the filing of this Form 10-Q, we have been utilizing a more formal disclosure process for the Board and management resulting in a more detailed chronology and more detailed documentation of the discussions and analyses taking place, including a checklist of items we routinely consider, such as variances between financial results and forecasts, changes in relationships with key vendors, customers, lenders etc., company-wide initiatives, related party issues, new/emerging risks, credit agreement covenant adherence, tax, accounting, internal controls, governmental or other investigations, Management Discussion and Analysis discussions, and other matters. In addition, sub-certifications have been adopted to ensure accountability by the controllers and executives of each of our business units.

·  Management has continued to retain an independent third-party consulting firm to assist with our preparation, documentation and testing of our compliance efforts with Section 404 of the Sarbanes Oxley Act.  We performed testing to sustain compliance that both expanded the depth of our coverage in complex areas (e.g. intangibles, equity, revenue and financial reporting) and breadth by incorporating acquisitions such as Bode, which were exempted from the disclosure controls and procedures analysis in 2007.

Changes in Internal Control Over Financial Reporting

We implemented the enhancements in our internal control over financial reporting outlined above during the quarter ended September 30, 2008.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

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

From time to time, in the normal course of business, the Company may be involved in litigation.  Except for certain claims as described below, the Company’s management has determined any asserted or unasserted claims to be immaterial to the condensed consolidated financial statements. 

We are currently defendants in federal and state litigation matters related to Facticon, which were filed prior to the Company’s acquisition of the assets of Facticon (February 28, 2007).

In the federal matter, Anchondo vs. Facticon Inc. and GlobalOptions Group, Inc. in the U.S. District Court for the Central District of California, Peter Anchondo (the“Federal Plaintiff”), in a class action, is alleging that Facticon failed to pay overtime wages. Subsequent to the acquisition of the assets of Facticon by the Company, the Company was added as a defendant in said case, under the successor liability theory. A Motion for Summary Judgment was filed for the Court to contest the Company’s liability as a successor liable company. On March 7, 2008, the Court issued a ruling denying the Company’s Motion for Summary Judgment and issued a ruling granting a Motion for Summary Judgment in favor of the Federal Plaintiff ruling that the Company was in fact a successor party to the Plaintiffs actions. This ruling by the Court is in opposition to the Court’s original ruling dated March 3, 2008, wherein it granted the Company’s Motion for Summary Judgment. The Company filed a Motion for Reconsideration and the Judge reversed his opinion but ruled that the issue of successor liability must be litigated. In July 2008, the Company reached a tentative agreement with the Federal Plaintiff to settle this matter with a cash payment of $635, which the Court approved on November 10, 2008. 

The State Court case Wonsch, et al. vs. Facticon Inc. and GlobalOptions Group, Inc.was filed in the State Court for the Central District of California, wherein Wonsch, the plaintiffs in the class action (the “State Plaintiffs”), have alleged that Facticon failed to pay overtime wages under the California Civil Code. This action is similar to the Anchondo case, but is limited to the state laws of California. Subsequent to the acquisition, the Company was added as a defendant in said case, under the successor liability theory; however, the Company has not filed a response under the successor liability claim, since the Company filed a motion with the California State Court to remove such case from the California State Court and for such case to be merged with the Anchondo case, and the California State Court has granted such motion. Although the cases have been merged, the Company must settle with each of the two plaintiff groups separately. Based upon preliminary discussions with the State Plaintiffs, the Company believes that it will be able to reasonably settle the Wonsch matter.

Under the terms of an escrow agreement, as amended, entered into by and between GlobalOptions and Facticon, the escrow agreement provides that 85,700 shares of the Company’s common stock and $100 in cash funds shall be held to satisfy this and other pre-acquisition obligations of Facticon. The Company and the stockholders of Facticon have agreed that the Company will not distribute any funds or stock as provided under the asset purchase agreement until the Anchondo case and the Wonsch cases are resolved, and if necessary, the Company shall use such stock and cash to resolve such matters. The Company has established a reserve in the amount of $776 to cover the Company for any additional costs in connection with the Anchondo and Wonsch cases that are not recoverable through the escrow amounts. 

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Item 1A. Risk Factors.

None.

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

In the third quarter of 2008, the Company withheld shares to pay taxes due upon the vesting of certain employees’ restricted stock. The following table provides information about such withholding during the quarter ended September 30, 2008:

Period	(a) Total Number of Shares  (or Units) Withheld			(b) Average Price Paid per  Share (or Unit)			(c) Maximum Number (or  Approximate Dollar Value) of  Shares (or Units) that May Yet Be  Withheld Under the Plans or  Programs
7/1/08-7/31/08		-			-			-
8/1/08-8/31/08		15,704	(1)	$	2.09	(2)		-	(3)
9/1/08-9/30/08		-			-			-
Total		15,704	(1)	$	2.09	(2)		-	(3)

(1) The Compensation Committee of the Company’s Board of Directors determined that, as of August 19, 2008, 25,000 shares of common stock held by Harvey W. Schiller, the Company’s Chairman and Chief Executive Officer, and 18,500 shares of common stock held by Jeffrey O. Nyweide, the Company’s Chief Financial Officer, were no longer subject to forfeiture and that 9,451 and 6,253 of such shares of common stock, should be withheld by the Company for the payment of taxes by Messrs. Schiller and Nyweide, respectively.

(2) The closing price of the Company’s common stock on the last business day prior to their vesting, August 18, 2008.

(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. Submission of Matters to a Vote of Security Holders.

The Company held its Annual Meeting on July 24, 2008. A quorum was present at the Annual Meeting, with 7,038,203 outstanding shares of the Company’s common stock entitled to vote represented in person or by proxy.

At the Annual Meeting, the Company’s stockholders reelected each of our incumbent directors, to serve until our 2009 annual meeting of stockholders and until their successors are duly elected and qualify, by the following votes:

	Shares For	Shares Withheld
Harvey W. Schiller, Ph.D.	4,602,922	2,435,281
Per-Olof Lööf	4,603,881	2,434,322
John P. Oswald	4,764,079	2,274,124
Ronald M. Starr	4,605,331	2,432,872
John P. Bujouves	5,309,721	1,728,482

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The Company’s stockholders voted to adopt and approve the Incentive Plan by the following votes:

	Shares
For:	3,601,080
Against:	2,018,881
Abstain:	269,275

The Company’s stockholders voted to adopt and approve the Stock Purchase Plan by the following votes:

	Shares
For:	3,937,946
Against:	1,697,615
Abstain:	253,675

The Company’s stockholders voted to ratify the appointment of Marcum & Kliegman LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2008 by the following votes:

	Shares
For:	7,023,445
Against:	412
Abstain:	14,346

Item 5. Other Information.

There are no items required to be disclosed on Current Report on Form 8-K during the three months ended September 30, 2008 that were not so reported.

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Item 6. Exhibits.

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

EXHIBIT INDEX

Exhibit No.	Description
31.1	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

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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 12, 2008	By:	/s/ Harvey W. Schiller
		Harvey W. Schiller Chairman, Chief Executive Officer and Director (Principal Executive Officer)
Dated:  November 12, 2008	By:	/s/ Jeffrey O. Nyweide
		Jeffrey O. Nyweide Executive Vice President-Corporate Development, Chief Financial Officer, Secretary (Principal Financial Officer and Principal Accounting Officer)

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