UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the Quarterly Period Ended June 30, 2013

 

¨ 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: 000-54638

 

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.)
     
415 Madison Avenue, 17 th Floor    
New York, New York   10017
(Address of Principal Executive Offices)   (Zip Code)

 

(212) 445-6262
__________________________________________
(Registrant’s telephone number, including area code)
 
__________________________________________
(Former name and former address, if changed since last report)

 

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

 

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

 

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

 

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

 

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

 

As of July 23, 2013, there were 7,523,536 shares of the issuer’s common stock outstanding.

 

 
 

 

 

 

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Form 10-Q

June 30, 2013

TABLE OF CONTENTS

  

PART I – FINANCIAL INFORMATION  
   
  ITEM 1. Financial Statements.  
      Condensed Consolidated Balance Sheets as of June 30, 2013 (Unaudited) and December 31, 2012 1
      Condensed Consolidated Statements of Operations for the Three and Six Months ended  
        June 30, 2013 and 2012 (Unaudited) 2
      Condensed Consolidated Statement of Stockholders’ Equity for the Six Months Ended  
        June 30, 2013 (Unaudited) 3
      Condensed Consolidated Statements of Cash Flows for the Six Months Ended  
        June 30, 2013 and 2012 (Unaudited) 4
      Notes to Condensed  Consolidated Financial Statements (Unaudited) 5
     
  ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 15
     
  ITEM 3. Quantitative and Qualitative Disclosures About Market Risk. 21
     
  ITEM 4. Controls and Procedures. 21
     
PART II – OTHER INFORMATION  
   
  ITEM 1. Legal Proceedings. 22
     
  ITEM 1A. Risk Factors. 22
     
  ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds. 23
     
  ITEM 3. Defaults Upon Senior Securities. 23
     
  ITEM 4. Mine Safety Disclosures. 23
     
  ITEM 5. Other Information. 23
     
  ITEM 6. Exhibits. 23
   
SIGNATURES 24

 

 
 

 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share amounts)

 

ASSETS   June 30,     December 31,  
    2013     2012  
    (unaudited)        
Current assets:            
Cash and cash equivalents   $ 1,109     $ 3,155  
Short term investment     14,988       14,984  
Prepaid expenses and other current assets     95       51  
                 
Total assets   $ 16,192     $ 18,190  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
Accrued compensation and related benefits   $ 27     $ 65  
Other current liabilities     342       365  
Current liabilities of discontinued operations     13       798  
                 
Total liabilities     382       1,228  
                 
Commitments and contingencies                
                 
Stockholders'  equity:                
Preferred stock, $0.001 par value, 14,880,000 shares authorized, no shares issued or outstanding     -       -  
Series D convertible preferred stock, non-voting, $0.001 par value, 100,000 shares authorized,                
no shares issued or outstanding     -       -  
Series A junior participating preferred stock, $0.001 par value, 20,000 shares authorized,                
no shares issued or outstanding     -       -  
Common stock, $0.001 par value, 100,000,000 shares authorized;                
6,552,352 shares issued and 6,197,760 shares outstanding     7       7  
Additional paid-in capital     92,825       92,825  
Accumulated deficit     (76,309 )     (75,157 )
Treasury stock, at cost, 354,592 shares     (713 )     (713 )
Total stockholders' equity     15,810       16,962  
Total liabilities and stockholders' equity   $ 16,192     $ 18,190  

 

See notes to these condensed consolidated financial statements.

 

1
 

 

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations

(dollars in thousands, except share and per share amounts)

(Unaudited)

 

    For the Three Months Ended June 30,     For the Six Months Ended June 30,  
    2013     2012     2013     2012  
                         
Operating expenses:                                
                                 
General and administrative   $ 601     $ 840     $ 1,164     $ 1,672  
                                 
Total operating expenses     601       840       1,164       1,672  
                                 
Loss from operations     (601 )     (840 )     (1,164 )     (1,672 )
                                 
Other income:                                
                                 
Interest income     4       7       9       7  
Gain on sale of investment     3       -       3       -  
                                 
Loss from continuing operations     (594 )     (833 )     (1,152 )     (1,665 )
                                 
Discontinued Operations:                                
                              -  
Gain on disposal     -       289       -       9,964  
Income from discontinued operations     -       289       -       9,964  
                                 
Net (loss) income   $ (594 )   $ (544 )   $ (1,152 )   $ 8,299  
                                 
Basic and diluted net (loss) income per share:                                
Continuing operations   $ (0.10 )   $ (0.13 )   $ (0.19 )   $ (0.27 )
Discontinued operations     -       0.05       -       1.61  
                                 
Net (loss) income per share   $ (0.10 )   $ (0.08 )   $ (0.19 )   $ 1.34  
                                 
Weighted average number of common shares                                
outstanding - basic and diluted     6,197,760       6,197,760       6,197,760       6,195,622  

 

See notes to these condensed consolidated financial statements.

 

2
 

 

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Condensed Consolidated Statement of Stockholders' Equity

For the Six Months Ended June 30, 2013

(dollars in thousands)

(Unaudited)

  

                            Additional              
    Common Stock     Treasury Shares     Paid-in     Accumulated        
    Shares     Amount     Shares     Amount     Capital     Deficit     Total  
Balance, January 1, 2013     6,552,352     $ 7       354,592     $ (713 )   $ 92,825     $ (75,157 )   $ 16,962  
                                                         
Net loss     -       -       -       -       -       (1,152 )     (1,152 )
                                                         
Balance, June 30, 2013     6,552,352     $ 7       354,592     $ (713 )   $ 92,825     $ (76,309 )   $ 15,810  

 

See notes to these condensed consolidated financial statements.

 

3
 

 

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

 

    For the Six Months Ended June 30,  
    2013     2012  
Cash flows from operating activities:            
Net (loss) income   $ (1,152 )   $ 8,299  
Adjustments to reconcile net (loss) income to net cash used in operating activities:                
Stock-based compensation     -       189  
Accretion of discount on U.S. treasury bill     (9 )     -  
Gain on sale of investment     (3 )     -  
Gain on sale of business units     -       (9,964 )
Changes in operating assets and liabilities:                
Prepaid expenses and other current assets     (44 )     120  
Accounts payable     -       (105 )
Accrued compensation and related benefits     (38 )     (213 )
Other current liabilities     (808 )     (255 )
Total adjustments     (902 )     (10,228 )
Net cash used in operating activities     (2,054 )     (1,929 )
                 
Cash flows from investing activities:                
Proceeds from sale of short term investment     14,993       -  
Purchase of short term investment     (14,985 )     -  
Legal fees paid in connection with the sale of business units     -       (85 )
Proceeds from sale of business units     -       12,450  
Net cash provided by investing activities     8       12,365  
                 
Cash flows from financing activities:                
Recovery of stockholder short swing profit     -       15  
Proceeds from issuance of stock in connection with stock options exercised     -       8  
Repurchase of common stock     -       (5 )
Net cash provided by  financing activities     -       18  
                 
Net (decrease) increase  in cash and cash equivalents     (2,046 )     10,454  
Cash and cash equivalents - beginning of period     3,155       9,227  
Cash and cash equivalents - end of period   $ 1,109     $ 19,681  

 

See notes to these condensed consolidated financial statements.

 

4
 

 

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share amounts)

 

1.  Nature of Operations

 

GlobalOptions Group, Inc. and its subsidiary (collectively the “Company” or “GlobalOptions Group”) was a holding company operating to provide risk mitigation and management services. Following the sales of its business units, as described below, the Company has determined that it became a “shell company” as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (“Securities Exchange Act”).

 

On July 11, 2013, GlobalOptions Group entered into an Agreement and Plan of Merger with GO Merger Sub LLC (“Merger Sub”), its wholly-owned subsidiary, Walker Digital, LLC (“Walker Digital”) and Walker Digital Holdings, LLC, a wholly-owned subsidiary of Walker Digital (“Walker Digital Sub”) pursuant to which Merger Sub will merge with and into Walker Digital Sub (the “Merger”), with Walker Digital Sub surviving the Merger and becoming a wholly-owned subsidiary of GlobalOptions Group (the “Merger Agreement”). The Merger closing is subject to closing conditions. Walker Digital Sub’s principal business is acquiring, managing and monetizing its portfolio of intellectual property, with its corporate offices located in Stamford, CT (See Note 8 – Subsequent Events).

 

 The Company sold its SafirRosetti business unit (“SafirRosetti”) on April 30, 2010, its Preparedness Services business unit (“Preparedness Services”) on July 16, 2010, its Fraud and SIU Services business unit (“Fraud and SIU Services”) on July 20, 2010, and its Forensic DNA Solutions and Products business unit (“Bode”) on November 30, 2010 and closed its International Strategies business unit (“International Strategies”) on December 31, 2010.

 

As a result of the sales of SafirRosetti, Preparedness Services, Fraud and SIU Services and Bode and the closure of International Strategies, the results and accounts of these business units are shown as discontinued operations in the Company’s condensed consolidated financial statements. During the three and six months ended June 30, 2013, continuing operations consisted solely of executive and general corporate operations.  These executive and general corporate operations consisted principally of costs incurred in connection with the Company’s pursuit of its business strategy and the Company’s reporting obligations under the Securities Exchange Act.

 

2. Basis of Presentation

 

 The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. The Company has evaluated subsequent events through the issuance of this Form 10-Q. Operating results for the three and six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2013.

 

3.  Summary of Significant Accounting Policies

 

Short Term Investment

 

The Company’s short-term investments consist typically of investments in U.S. Treasury Bills with original maturities greater than three months and less than one year. These investments are classified as available-for-sale and are carried at fair value. On June 30, 2013, the Company’s short-term investment consisted of a U.S. Treasury Bill purchased on April 18, 2013 at a cost of $14,985, which matures on April 3, 2014. On December 31, 2012, the Company’s short-term investment consisted of a U.S. Treasury Bill purchased at a cost of $14,984. Accretion of discounts on the U.S. Treasury Bills, which was $4 and $9 for the three and six months ended June 30, 2013, respectively, is included in interest income.

 

 

5
 

 

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share amounts)

 

3.  Summary of Significant Accounting Policies, continued

 

Fair Value Measurements

 

Fair value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

 

· Level 1 . Quoted prices in active markets for identical assets or liabilities.
· Level 2 . Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly.
· Level 3 . Significant unobservable inputs that cannot be corroborated by market data.

 

The assets or liability’s fair value measurement within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. The following table provides a summary of the assets that are measured at fair value on a recurring basis.

 

    Condensed
Consolidated
Balance
Sheet
   

Quoted prices
in active markets
for identical assets
or liabilities
(Level 1)

   

Quoted prices
for similar assets
or liabilities in
active markets
(Level 2)

    Significant
unobservable
inputs
(Level 3)
 
Short Term Investment                        
(U.S. treasury bill) at:                        
June 30, 2013   $ 14,988     $ 14,988     $ -     $         -  
December 31, 2012   $ 14,984     $ 14,984     $      -     $ -  

 

Operating Expenses

 

General and administrative expenses consist primarily of salaries, bonuses and stock-based compensation, as well as corporate support expenses such as legal and professional fees, investor relations, human resources, facilities, telecommunication support services and information technology.

 

Discontinued Operations

 

Included in “Income from discontinued operations” for the six months ended June 30, 2012 in the accompanying condensed consolidated statements of operations, is the gain on the disposal of Preparedness Services less related expenses (See Note 4 – Discontinued Operations). Liabilities of the discontinued operations have been reclassified and are reflected in the accompanying condensed consolidated balance sheet as of June 30, 2013 and December 31, 2012 as “Current liabilities of discontinued operations.”

 

Net (Loss) Income per Common Share

 

Basic net (loss) income per common share is computed based on the weighted average number of shares of its Common Stock, par value $0.001 per share (“Common Stock”) outstanding, as adjusted, during the periods presented. Potentially dilutive securities, which consisted of stock options for the purchase of 200,000 and 260,000 shares of the Company’s Common Stock at June 30, 2013 and 2012, respectively, have been excluded from the computation of diluted net (loss) income per share, because the effect of their inclusion in loss per share for continuing operations would have been anti-dilutive for those periods.

 

6
 

 

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share amounts)

 

4. Discontinued Operations

 

Additional Gain on Sale of SafirRosetti

 

During the three and six months ended June 30, 2012, the Company recorded a positive adjustment of $150 to the gain on the sale of SafirRosetti, in connection with the release of reserves no longer required. This adjustment was reflected in the accompanying condensed consolidated statement of operations within discontinued operations as Gain on Disposal.

 

Additional Gain on Sale of Preparedness Services

 

On February 29, 2012, the Company received $10,000 from Witt Group Holdings, LLC (“Witt Holdings”), representing the earnout payment due in connection with the sale of Preparedness Services. During the year ended December 31, 2010, the Company recognized $301 of this earnout as contingent consideration not yet realized. During the three and six months ended June 30, 2012, the Company incurred legal expenses of $61 and $85, respectively, for its defense in connection with asserted litigation related to the former operations of its Preparedness Services business unit. This litigation was settled on June 13, 2012 for $23. No additional gains or losses were realized related to the sale of Preparedness Services during the three and six months ended June 30, 2013.

 

Accordingly, during the three and six months ended June 30, 2012, the Company recognized a (loss) gain of $(61) and $9,614, respectively, related to the sale of Preparedness Services. The loss recognized during the three months ended June 30, 2012 consisted solely of legal expenses incurred. The gain recognized during the six months ended June 30, 2012 consisted of the $10,000 received from Witt Holdings, less $301 recognized during the year ended December 31, 2010, and less $85 in legal expenses. The additional (loss) gain on the sale of Preparedness Services was reflected in the accompanying condensed consolidated statement of operations within discontinued operations as Gain on Disposal.

 

Additional Gain on Sale of Fraud and SIU Services

 

During the three and six months ended June 30, 2012, the Company recorded a positive adjustment of $200 to the gain on the sale of Fraud and SIU Services, related to the release of reserves no longer required. This adjustment was reflected in the accompanying condensed consolidated statement of operations within discontinued operations as Gain on Disposal.

 

Funds Held in Escrow Related to the Sale of Bode

 

On January 20, 2012, the Company received $2,450 from the purchasers of Bode, representing the full release of funds which had been held in escrow related to the sale of Bode.

 

7
 

 

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share amounts)

 

4. Discontinued Operations, continued

 

Results of Discontinued Operations

 

Income from discontinued operations is as follows, reflecting the gain, net of expenses, on the sales of SafirRosetti, Preparedness Services and Fraud and SIU Services.

 

    For the Three Months Ended
June 30,
    For the Six Months Ended
June 30,
 
    2013     2012     2013     2012  
Gain on disposal   $ -     $ 289     $ -     $ 9,964  
Income   $ -     $ 289     $ -     $ 9,964  

 

There were no assets included in discontinued operations as of June 30, 2013 and December 31, 2012. Liabilities included in discontinued operations as of June 30, 2013 and December 31, 2012 are as follows:

 

    As of  
    June 30, 2013     December 31, 2012  
Liabilities            
Accrued expenses and other current liabilities   $      13     $ 798  
Total liabilities of discontinued operations   $ 13     $ 798  

 

Accrued expenses and other current liabilities of discontinued operations at December 31, 2012 included $770 for amounts that were collected by the Company on behalf of the buyers of the respective sold business units through its lockbox prior to year end. These amounts were remitted to buyers promptly after the year end.

 

5. Accrued Compensation and Related Benefits

 

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

 

    As of  
    June 30, 2013     December 31, 2012  
Accrued payroll   $             10     $             64  
Accrued employee benefits     17       1  
Total   $ 27     $ 65  

 

8
 

 

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share amounts)

 

6. Commitments and Contingencies

 

Employment Agreements

 

Harvey W. Schiller, Ph.D.

 

On March 31, 2013, the Company entered into an amendment (the “2013 Schiller Amendment”) to Dr. Schiller’s employment agreement. Pursuant to the 2013 Schiller Amendment, the expiration date of Dr. Schiller’s employment with the Company was extended to June 30, 2013, with automatic month to month extensions thereafter until terminated by either the Company or Dr. Schiller with 30 days prior written notice. The 2013 Schiller Amendment further provided that Dr. Schiller’s base salary shall remain at $180 per annum, and that effective March 31, 2013, he shall no longer receive housing benefits which were previously provided pursuant to Dr. Schiller’s amended and restated employment agreement. As an inducement to Dr. Schiller to enter into the 2013 Schiller Amendment, upon the closing of an acquisition or merger, Dr. Schiller shall be paid a fee equal to $300, with the fee paid in shares of Common Stock equal to $300 based upon the deal price at the closing of such acquisition or merger (“2013 Schiller Success Fee”). Such shares shall be paid as compensation under the Amended and Restated 2006 Long-Term Incentive Plan. Notwithstanding the foregoing, in the event that Dr. Schiller’s employment is terminated without cause or good reason or as a result of his death or disability prior to the end of this extension, Dr. Schiller shall receive the base salary and benefits through the end of the term; provided further that in the event that Dr. Schiller’s employment is terminated without cause or for good reason or as a result of Dr. Schiller’s death or disability and an acquisition or merger is consummated within nine months of the date of termination, then Dr. Schiller shall be entitled to the 2013 Schiller Success Fee. Dr. Schiller’s employment agreement was further amended on July 11, 2013 (See Note 8 – Subsequent Events).

 

Jeffrey O. Nyweide

 

On March 31, 2013, the Company entered into an amendment (the “2013 Nyweide Amendment”) to Mr. Nyweide’s employment agreement. Pursuant to the 2013 Nyweide Amendment, the expiration date of Mr. Nyweide’s employment with the Company was extended to June 30, 2013, with automatic month to month extensions thereafter until terminated by either the Company or Mr. Nyweide with 30 days prior written notice. The 2013 Nyweide Amendment further provided that effective April 1, 2013, Mr. Nyweide’s base salary shall be decreased to $180 annum, payable in advance on the first day of each month and as of such date he shall no longer receive housing benefits, which were previously provided pursuant to Mr. Nyweide’s amended and restated employment agreement.  As an inducement to Mr. Nyweide to enter into the 2013 Nyweide Amendment, upon the closing of an acquisition or merger, Mr. Nyweide shall be paid a fee equal to $250, with the fee paid in shares of Common Stock equal to $250 based upon the deal price at the closing of such acquisition or merger (“2013 Nyweide Success Fee”).  Such shares shall be paid as compensation under the Amended and Restated 2006 Long-Term Incentive Plan, and Mr. Nyweide may elect to accept such shares on a tax free basis wherein the Company would withhold that number of shares necessary to satisfy Mr. Nyweide’s income tax withholding requirements in connection with this 2013 Nyweide Success Fee. Notwithstanding the foregoing, in the event that Mr. Nyweide’s employment is terminated without cause or good reason or as a result of his death or disability prior to the end of this extension, Mr. Nyweide shall receive the base salary and benefits through the end of the term; provided further that in the event that Mr. Nyweide’s employment is terminated without cause or for good reason or as a result of Mr. Nyweide’s death or disability and an acquisition or merger is consummated within nine months of the date of termination, then Mr. Nyweide shall be entitled to the 2013 Nyweide Success Fee. Mr. Nyweide’s employment agreement was further amended on July 11, 2013 (See Note 8 – Subsequent Events).

 

9
 

 

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share amounts)

 

6. Commitments and Contingencies, continued

 

Operating Lease

 

Effective October 31, 2011, the Company entered into a lease agreement for office space in New York, New York, at a rent of $12 per month. The lease agreement was modified effective January 1, 2013, reducing the rent amount from $12 to $5 per month. Under this agreement, which expires on June 30, 2015, the Company may terminate the agreement at any time, with 90 days advance notice. Future non-cancellable obligations under this agreement are $15.

 

Rent expense charged to continuing operations was $15 and $20 for the three months ended June 30, 2013 and 2012 and $30 and $56 for the six months ended June 30, 2013 and 2012, respectively.

 

7. Stock Based Compensation

 

Amended and Restated 2006 Long-Term Incentive Plan (“ Incentive Plan ”)

 

Under the Incentive Plan, the Company may issue up to 3,000,000 shares of the Company’s Common Stock. The Compensation Committee has the authority to determine the amount, type and terms of each award, but may not grant awards under the Incentive Plan, in any combination, for more than 625,000 shares of the Company’s Common Stock to any individual during any calendar year.

 

As of June 30, 2013, a total of 1,407,342 shares of Common Stock remained eligible to be issued under the Incentive Plan.

 

Stock Based Compensation

 

Equity instruments issued to employees are recorded at their fair value on the date of grant and are amortized over the vesting period of the award. Stock based compensation for employees was approximately $0 and $165 for the three months ended June 30, 2013 and 2012 and $0 and $189 for the six months ended June 30, 2013 and 2012, respectively, and was reflected in general and administrative expenses.

 

Stock Options

 

On March 16, 2012, the Company granted, in the aggregate, options for the purchase of 200,000 shares of its Common Stock at an exercise price of $3.05 per share, under the Incentive Plan, to two executives of the Company. The options have a term of five years and were vested on September 16, 2012. These options have an aggregate grant date fair value of approximately $322 utilizing the Black-Scholes option pricing model with the following assumptions used: expected life of three years; volatility of 87.9%, dividends of 0%; and a risk free interest rate of 1.13%. The expected life of the options was calculated using the simplified method, using the average of the contractual term and the vesting period.

 

At June 30, 2013, the fair value of stock options granted by the Company has been fully amortized. A summary of the status of the Company’s stock option plans and the changes during the six months ended June 30, 2013, is presented in the table below:

 

    Number of
Options
    Weighted Average
Exercise
Price
(per share)
    Weighted
Average Remaining Contractual
Life
  Intrinsic
Value
 
Options outstanding at January 1, 2013     200,000     $ 3.05     4.2 years   $ -  
Granted     -     $ -              
Exercised     -     $ -              
Forfeited     -     $ -              
Options outstanding at June 30, 2013     200,000     $ 3.05     3.7 years   $ -  
Exercisable,  June 30, 2013     200,000     $ 3.05     3.7 years   $ -  

 

10
 

 

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share amounts)

 

8. Subsequent Events

 

Merger Agreement

 

On July 8, 2013, Global Options Group formed Merger Sub as a limited liability company in the state of Delaware. On July 11, 2013, GlobalOptions Group entered into the Merger Agreement with Merger Sub, Walker Digital and Walker Digital Sub pursuant to which Merger Sub will merge with and into Walker Digital Sub, with Walker Digital Sub surviving the Merger and becoming a wholly-owned subsidiary of GlobalOptions Group.

 

At the closing of the Merger, in exchange for all of the membership interests in Walker Digital Sub, GlobalOptions Group will issue to Walker Digital 22,666,667 shares of its capital stock, which will be comprised of shares of the Common Stock and shares of a to be created Series B Preferred Stock, par value $0.001 per share (“Series B Preferred Stock” and together with the Common Stock, the “Merger Consideration”), resulting in Walker Digital receiving approximately 70.79% of the economic interest (calculated (i) on a fully diluted basis, (ii) prior to the issuance of the Contingent Shares (as defined below), (iii) assuming the issuance of 1,445,000 shares of Common Stock to a vendor of Walker Digital, and (iv) prior to seeking stockholder approval to increase GlobalOptions Group’s option pool by 2,000,000 shares of Common Stock) and at least 80% of the voting interest in the Company following the closing of the Merger. The exact proportion of Common Stock and Series B Preferred Stock shall be determined at the closing of the Merger.

 

Immediately prior to the closing of the Merger, GlobalOptions Group will file with the Secretary of State of the State of Delaware a Certificate of Designations of the Series B Preferred Stock setting forth the powers, preferences and rights of the Series B Preferred Stock. The Series B Preferred Stock will be convertible on a one-for-one basis into shares of Common Stock, will receive the equivalent amount of liquidation proceeds as the holders of Common Stock, on an as converted basis, will be entitled to cast an aggregate of 80% of the vote on all matters presented to the holders of Common Stock.

 

On July 11, 2013, Walker Digital entered into a lock-up agreement with GlobalOptions Group, whereby Walker Digital agreed that for a period of 12 months following the closing of the Merger, it will not sell or transfer any of such shares of Common Stock or Series B Preferred Stock received in the Merger to any person, other than to affiliates and to current and former officers or members of Walker Digital and its affiliates (and on the condition such transferees enter into a similar lock-up agreement), upon a pledge of such securities (and on condition such pledgee will enter into a similar lock-up agreement) or in the Secondary Sale described below. The lock-up agreement will become effective upon the closing of the Merger.

 

The Merger Agreement contains customary representations and warranties by the Company, Merger Sub, Walker Digital Sub and Walker Digital. The Merger Agreement also contains customary covenants and agreements, including with respect to the operation of the business of the Company, Merger Sub, Walker Digital Sub and Walker Digital between signing of the Merger Agreement and closing of the Merger. Also, in connection with and only upon the closing of the Merger, the Company has agreed to reimburse Walker Digital for certain reasonable legal, accounting and other fees incurred by Walker Digital in connection with the Merger Agreement and the Merger.

 

The closing of the Merger is subject to a number of closing conditions, including (i) all current directors of GlobalOptions Group, other than Dr. Harvey Schiller, resign from director positions, (ii) Walker Digital provides audited financial statements of Walker Digital Sub, substantially similar to the unaudited financial statements of Walker Digital Sub which were presented to the Company prior to signing the Merger Agreement, (iii) the Company has not less than a pre-determined amount of cash at the closing of the Merger, (iv) the Company has terminated its support agreement with Genesis Capital Advisors LLC, Genesis Opportunity Fund LP (“Genesis Opportunity Fund”) and Genesis Asset Opportunity Fund L.P. (“Genesis Asset Opportunity Fund”), (v) the Company has terminated its stockholder rights plan, as amended, with Continental Transfer and Trust Company (“Continental”) and, (vi) the Company has terminated its Amended and Restated 2006 Employee Stock Purchase Plan. On July 11, 2013 the Company entered into standard indemnification agreements, to be effective at the closing of the Merger, with the directors and executive officers who will assume those positions following the closing of the Merger.

 

The closing of the Merger is also subject to Walker Digital completing simultaneously with the closing of the Merger a secondary sale (the “Secondary Sale”) to unaffiliated third parties of certain shares of Common Stock to be received by Walker Digital in the Merger. The aggregate number of shares of Common Stock to be sold in the Secondary Sale and the price per share of Common Stock to be sold in the Secondary Sale are subject to mutual agreement by the Company and Walker Digital. The Company has agreed in the Merger Agreement to register for resale the shares of Common Stock sold in the Secondary Sale. The Company and Walker Digital have agreed to work in good faith to have the Company hire a number of current executive officers of Walker Digital, including Jay Walker as Executive Chairman of the Board, Jonathan Ellenthal as Vice-Chairman of the Board and Chief Executive Officer, Gary Greene as Chief Administrative Officer, General Counsel and Secretary and Karen Romaine as Chief Financial Officer, and to enter into Employment Agreements with each such executive.

 

11
 

 

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share amounts)

 

8. Subsequent Events, continued

 

Merger Agreement, continued

 

In addition to the Merger Consideration, GlobalOptions Group has agreed to issue 2,166,667 shares of its Common Stock (the “Contingent Shares”) to Walker Digital if one of the following conditions is satisfied following the closing of the Merger: (i) the closing price of the Company’s Common Stock equals or exceeds $4.25 per share for any 20 trading days within any 30 trading-day period during the first 15 months following the earlier of the date on which (a) a registration statement with respect to the shares of Common Stock sold in the Secondary Sale is filed with the SEC on Form S-1 (the “Secondary Registration”) is first effective, or (b) the purchasers of the shares of Common Stock sold in the Secondary Sale become eligible to resell the shares of Common Stock sold in the Secondary Sale under Rule 144; or (ii) the closing price of Registrant’s Common Stock equals or exceeds $5.50 per share for any 20 trading days within any 30 trading-day period during the first 24 months following the earlier of the date on which (a) the Secondary Registration is first effective or (b) the purchasers of the shares of Common Stock sold in the Secondary Sale become eligible to resell the Secondary Sale Shares under Rule 144.

 

Following the closing of the Merger, GlobalOptions Group will seek stockholder approval to change its name to Patent Properties, Inc.

 

The Merger Agreement may be terminated at any time prior to closing by mutual written agreement of Walker Digital Sub and the GlobalOptions Group and according to the terms set forth in the Merger Agreement. The Company may also terminate the Merger Agreement if it enters into an alternative transaction that it concludes in good faith, after consultation with outside legal counsel and its financial advisors, that such alternative transaction is reasonably likely to be financially more favorable to the Company’s stockholders than the Merger and that if it does not enter into such alternative transaction the Board would be in breach of its fiduciary duties. If the Company terminates the Merger Agreement under these circumstances, it would have to pay to Walker Digital a break-up fee in the amount of $3,200.

 

In connection with the Merger, GlobalOptions Group and Walker Digital entered into a Shared Services Agreement, to be effective at the closing of the Merger, whereby an affiliate of Walker Digital will provide certain services to GlobalOptions Group. The affiliate of Walker Digital will provide such services at cost.

 

Employment Agreements

 

Harvey W. Schiller, PhD.

 

In connection with the Merger and as a condition to signing the Merger Agreement, on July 11, 2013, the Company entered into an amendment (the “July 2013 Schiller Extension”) to Dr. Schiller’s employment agreement. Pursuant to the July 2013 Schiller Extension, the term of Dr. Schiller’s employment is to be extended for a period of 12 months following the closing of the Merger. The compensation and benefits of Dr. Schiller shall remain substantially the same in the aggregate following the closing of the Merger as they were prior to the Merger. Dr. Schiller’s term is being extended to provide for a seamless transition for the Company following the Merger. Dr. Schiller has agreed to work in good faith with the Company to enter into a detailed transition agreement with the Company defining the terms of such employment. The parties also agreed to work in good faith to alter the form of compensation from cash to stock-based compensation or some combination thereof if the necessity arises.

 

Further, on July 11, 2013, the Company entered into another amendment with Dr. Schiller (the “July 2013 Schiller Amendment”) which provides that Dr. Schiller will receive 100,000 shares of Common Stock upon the closing of the Merger. This amends a previous amendment to Dr. Schiller’s employment agreement whereby the Company agreed to issue to Dr. Schiller $300 worth of Common Stock at the closing of a transaction with an operating company. The Company has agreed to register in a registration statement filed with the SEC, the 100,000 shares of Common Stock to be issued to Dr. Schiller.

 

12
 

 

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share amounts)

 

8. Subsequent Events, continued

 

Employment Agreements, continued

 

Jeffrey O. Nyweide

 

In connection with the Merger and as a condition to signing the Merger Agreement, on July 11, 2013, the Company entered into an amendment (the “July 2013 Nyweide Extension”) to Mr. Nyweide’s employment agreement. Pursuant to the July 2013 Nyweide Extension, the term of Mr. Nyweide’s employment is to be extended for a period of 12 months following the closing of the Merger. The compensation and benefits of Mr. Nyweide shall remain substantially the same in the aggregate following the closing of the Merger as they were prior to the Merger. Mr. Nyweide’s term is being extended to provide for a seamless transition for the Company following the Merger. Mr. Nyweide has agreed to work in good faith with the Company to enter into a detailed transition agreement with the Company defining the terms of such employment. The parties also agreed to work in good faith to alter the form of compensation from cash to stock-based compensation or some combination thereof if the necessity arises.

 

Further, on July 11, 2013, the Company entered into another amendment with Mr. Nyweide (the “July 2013 Nyweide Amendment”) which provides that Mr. Nyweide will receive 83,334 shares of Common Stock upon the closing of the Merger. This amends a previous amendment to Mr. Nyweide’s employment agreement whereby the Company agreed to issue to Mr. Nyweide $250 worth of Common Stock at the closing of a transaction with an operating company. The Company has agreed to register in a registration statement filed with the SEC, the 83,334 shares of Common Stock to be issued to Mr. Nyweide.

 

Broadband Agreements

 

On March 26, 2012, the Company entered into a non-exclusive agreement with Broadband Capital Management, LLC (the “Financial Advisor”), for services related to identifying and evaluating potential acquisition candidates, and to the raising of additional private investments on public entity (“PIPE”) financing. In connection with the Financial Advisor’s services provided to the Company in connection with the Merger, on July 10, 2013 the Company entered into a Restricted Stock Agreement (the Restricted Stock Agreement”) with the Financial Advisor. The Restricted Stock Agreement amends the terms of the March 26, 2012 agreement with the Financial Advisor, whereby the fees to be received from the Company in connection with the Merger was determined to be 1,325,776 shares of Common Stock (“Financial Advisor Shares”), the vesting of which is subject to the closing of the Merger. In the Restricted Stock Agreement, the Company also agreed pay to the Financial Advisor a success fee of $100 payable in cash, upon the closing of the Merger and a cash fee for certain proceeds raised in a private placement financing. On July 10, 2013, the Company issued the Financial Advisor Shares. Pursuant to the Restricted Stock Agreement the Company has agreed to register the Financial Advisor Shares in a registration statement filed with the SEC following the closing of the Merger. On July 11, 2013, the Company also entered into a lock-up agreement, to be effective at the closing of the Merger, with the Financial Advisor, whereby the Financial Advisor has agreed not to sell or transfer the Financial Advisor Shares for a period of six (6) months following the closing of the Merger.

 

Elimination of Series D Convertible Preferred Stock

 

On July 11, 2013, GlobalOptions Group filed with the Secretary of State of the State of Delaware, a certificate eliminating from the Company's Certificate of Incorporation, as amended, all matters relating to the Registrant's Series D Convertible Preferred Stock. At the time of filing this certificate, there were no issued or outstanding shares of Series D Preferred Stock.

 

13
 

 

GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except per share amounts)

 

8. Subsequent Events, continued

 

Amendment to Registration Rights Amendment

 

On July 22, 2013, GlobalOptions Group entered into an amendment (“the Amendment”) to its Registration Rights Amendment (the “RRA”), entered into as of March 27, 2013, by and among GlobalOptions Group, Genesis Opportunity Fund and Genesis Asset Opportunity Fund (together, the “Genesis Funds”).  The Amendment provides, in part that, (i) GlobalOptions Group will within nine (9) business days following the closing of the Merger, use commercially reasonable efforts to file a post-effective amendment (the “Post-Effective Amendment”) to the Company’s registration statement which includes the shares held by the Genesis Funds, (ii) GlobalOptions Group will use commercially reasonable efforts to have the Post-Effective Amendment declared effective within 45 business days following the closing of the Merger, (iii) GlobalOptions Group will agree to further amend the terms of the RRA to provide that the Genesis Funds will be entitled to liquidated damages under certain circumstances, if GlobalOptions Group enters into any registration rights agreements with any other parties which entitle the other party to liquidated damages under certain circumstances, (iv) if GlobalOptions Group is required to exclude certain shares from its registration statements because of SEC rules, GlobalOptions Group will first exclude all shares other than the Genesis Funds’ share, prior to excluding any of the Genesis Funds’ shares from registration, and (v) Genesis Funds will immediately suspend use of the registration statement which includes the shares held by the Genesis Funds until a post-effective amendment to such registration statement that reflects the transactions contemplated by the Merger Agreement is declared effective by the SEC.  Directors Ethan Benovitz and Daniel Saks are managing principals of the Genesis Funds and were appointed to GlobalOptions Group’s Board pursuant to rights granted to the Genesis Funds in connection with the RRA.

 

14
 

 

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

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

 

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

 

Forward-Looking Statements

 

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

 

Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2013. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

 

Overview

 

GlobalOptions Group, Inc. and its wholly-owned subsidiary, GlobalOptions, Inc. (collectively we, us, the “Company” or “GlobalOptions Group”) is a “shell company” as defined in Rule 12b-2 promulgated under the Exchange Act, as amended. References herein to “GlobalOptions” refer to GlobalOptions, Inc., our wholly-owned subsidiary. We became a shell company following the sale of our four operating units in 2010, as described below. Our current intention is to consummate a merger with an operating company (see below).

 

On July 11, 2013, we entered into an Agreement and Plan of Merger with GO Merger Sub LLC (“Merger Sub”), our wholly-owned subsidiary, Walker Digital, LLC (“Walker Digital”) and Walker Digital Holdings, LLC, a wholly-owned subsidiary of Walker Digital (“Walker Digital Sub”) pursuant to which Merger Sub will merge with and into Walker Digital Sub (the “Merger”), with Walker Digital Sub surviving the Merger and becoming a wholly-owned subsidiary of GlobalOptions Group (the “Merger Agreement”). The Merger closing is subject to closing conditions. Walker Digital Sub’s principal business is acquiring, managing and monetizing its portfolio of intellectual property, with its corporate offices located in Stamford, CT (See below, Corporate Developments – Merger Agreement).

 

On March 31, 2013, in connection with the pursuit of our business strategy, we amended the employment agreements of our Chief Executive Officer and Chief Financial Officer to extend their employment through June 30, 2013, with automatic monthly extensions thereafter until terminated by either party with 30 days written notice. Further, in connection with the Merger Agreement, on July 11, 2013, we made multiple further amendments to the employment agreements of our Chief Executive Officer and Chief Financial Officer, and such amendments provided that upon the consummation of the Merger, their employment would be extended for an additional 12 months from the closing of the Merger to provide transition and other services to us post closing (See below, Corporate Developments – Employment Agreements).

 

During the year ended December 31, 2010, we sold or closed all of our operating businesses. We completed the sale of our SafirRosetti business unit (“SafirRosetti”) on April 30, 2010, our Preparedness Services business unit (“Preparedness Services”) on July 16, 2010, our Fraud and SIU Services business unit (“Fraud and SIU Services”) on July 20, 2010, our subsidiary, The Bode Technology Group, Inc. which represented our Forensic DNA Solutions and Products Services business unit (“Bode”) on November 30, 2010 and on December 31, 2010, we closed our International Strategies business unit (“International Strategies”).

 

Corporate Developments

 

Merger Agreement

 

On July 8, 2013, Global Options Group formed Merger Sub as a limited liability company in the state of Delaware. On July 11, 2013, GlobalOptions Group entered into the Merger Agreement with Merger Sub, Walker Digital and Walker Digital Sub pursuant to which Merger Sub will merge with and into Walker Digital Sub, with Walker Digital Sub surviving the Merger and becoming a wholly-owned subsidiary of GlobalOptions Group.

 

15
 

 

At the closing of the Merger, in exchange for all of the membership interests in Walker Digital Sub, GlobalOptions Group will issue to Walker Digital 22,666,667 shares of its capital stock, which will be comprised of shares of the common stock, par value $0.001 (“Common Stock”) and shares of a to be created Series B Preferred Stock, par value $0.001 per share (“Series B Preferred Stock” and together with the Common Stock, the “Merger Consideration”), resulting in Walker Digital receiving approximately 70.79% of the economic interest (calculated (i) on a fully diluted basis, (ii) prior to the issuance of the Contingent Shares (as defined below), (iii) assuming the issuance of 1,445,000 shares of Common Stock to a vendor of Walker Digital, and (iv) prior to seeking stockholder approval to increase our option pool by 2,000,000 shares of Common Stock) and at least 80% of the voting interest in the Company following the closing of the Merger. The exact proportion of Common Stock and Series B Preferred Stock shall be determined at the closing of the Merger.

 

Immediately prior to the closing of the Merger, GlobalOptions Group will file with the Secretary of State of the State of Delaware a Certificate of Designations of the Series B Preferred Stock setting forth the powers, preferences and rights of the Series B Preferred Stock. The Series B Preferred Stock will be convertible on a one-for-one basis into shares of Common Stock, will receive the equivalent amount of liquidation proceeds as the holders of Common Stock, on an as converted basis, will be entitled to cast an aggregate of 80% of the vote on all matters presented to the holders of Common Stock.

 

On July 11, 2013, Walker Digital entered into a lock-up agreement with GlobalOptions Group, whereby Walker Digital agreed that for a period of 12 months following the closing of the Merger, it will not sell or transfer any of such shares of Common Stock or Series B Preferred Stock received in the Merger to any person, other than to affiliates and to current and former officers or members of Walker Digital and its affiliates (and on the condition such transferees enter into a similar lock-up agreement), upon a pledge of such securities (and on condition such pledgee will enter into a similar lock-up agreement) or in the Secondary Sale described below. The lock-up agreement will become effective upon the closing of the Merger.

 

The Merger Agreement contains customary representations and warranties by us, Merger Sub, Walker Digital Sub and Walker Digital. The Merger Agreement also contains customary covenants and agreements, including with respect to the operation of the business of the Company, Merger Sub, Walker Digital Sub and Walker Digital between signing of the Merger Agreement and closing of the Merger. Also, in connection with and only upon the closing of the Merger, we have agreed to reimburse Walker Digital for certain reasonable legal, accounting and other fees incurred by Walker Digital in connection with the Merger Agreement and the Merger.

 

The closing of the Merger is subject to a number of closing conditions, including (i) all current directors of GlobalOptions Group, other than Dr. Harvey Schiller, resign from director positions, (ii) Walker Digital provides audited financial statements of Walker Digital Sub, substantially similar to the unaudited financial statements of Walker Digital Sub which were presented to the Company prior to signing the Merger Agreement, (iii) we have not less than a pre-determined amount of cash at the closing of the Merger, (iv) we have terminated our support agreement with Genesis Capital Advisors LLC, Genesis Opportunity Fund LP and Genesis Asset Opportunity Fund L.P., (v) we have terminated our stockholder rights plan, as amended, with Continental Transfer and Trust Company (“Continental”) and, (vi) we have terminated our Amended and Restated 2006 Employee Stock Purchase Plan. On July 11, 2013 we entered into standard indemnification agreements, to be effective at the closing of the Merger, with the directors and executive officers who will assume those positions following the closing of the Merger.

 

The closing of the Merger is also subject to Walker Digital completing simultaneously with the closing of the Merger a secondary sale (the “Secondary Sale”) to unaffiliated third parties of certain shares of Common Stock to be received by Walker Digital in the Merger. The aggregate number of shares of Common Stock to be sold in the Secondary Sale and the price per share of Common Stock to be sold in the Secondary Sale are subject to mutual agreement by the Company and Walker Digital. Pursuant to the Merger Agreement, we have agreed to register for resale the shares of Common Stock sold in the Secondary Sale. We have agreed to work in good faith with Walker Digital for us to hire a number of current executive officers of Walker Digital, including Jay Walker as Executive Chairman of the Board, Jonathan Ellenthal as Vice-Chairman of the Board and Chief Executive Officer, Gary Greene as Chief Administrative Officer, General Counsel and Secretary and Karen Romaine as Chief Financial Officer, and to enter into Employment Agreements with each such executive.

 

In addition to the Merger Consideration, we have agreed to issue 2,166,667 shares of our Common Stock (the “Contingent Shares”) to Walker Digital if one of the following conditions is satisfied following the closing of the Merger: (i) the closing price of our Common Stock equals or exceeds $4.25 per share for any 20 trading days within any 30 trading-day period during the first 15 months following the earlier of the date on which (a) a registration statement with respect to the shares of Common Stock sold in the Secondary Sale is filed with the SEC on Form S-1 (the “Secondary Registration”) is first effective, or (b) the purchasers of the shares of Common Stock sold in the Secondary Sale become eligible to resell the shares of Common Stock sold in the Secondary Sale under Rule 144; or (ii) the closing price of Registrant’s Common Stock equals or exceeds $5.50 per share for any 20 trading days within any 30 trading-day period during the first 24 months following the earlier of the date on which (a) the Secondary Registration is first effective or (b) the purchasers of the shares of Common Stock sold in the Secondary Sale become eligible to resell the Secondary Sale Shares under Rule 144.

 

16
 

 

Following the closing of the Merger, we will seek stockholder approval to change our name to Patent Properties, Inc.

 

The Merger Agreement may be terminated at any time prior to closing by mutual written agreement of Walker Digital and GlobalOptions Group and according to the terms set forth in the Merger Agreement. GlobalOptions Group may also terminate the Merger Agreement if it enters into an alternative transaction that it concludes in good faith, after consultation with outside legal counsel and its financial advisors, that such alternative transaction is reasonably likely to be financially more favorable to our stockholders than the Merger and that if it does not enter into such alternative transaction the Board would be in breach of its fiduciary duties. If we terminate the Merger Agreement under these circumstances, we would have to pay to Walker Digital a break-up fee in the amount of $3,200.

 

In connection with the Merger, GlobalOptions Group and Walker Digital entered into a Shared Services Agreement, to be effective at the closing of the Merger, whereby an affiliate of Walker Digital will provide certain services to us. The affiliate of Walker Digital will provide such services at cost.

 

Employment Agreements

 

Harvey W. Schiller, PhD.

 

In connection with the Merger and as a condition to signing the Merger Agreement, on July 11, 2013, we entered into an amendment (the “July 2013 Schiller Extension”) to Dr. Schiller’s employment agreement. Pursuant to the July 2013 Schiller Extension, the term of Dr. Schiller’s employment is to be extended for a period of 12 months following the closing of the Merger. The compensation and benefits of Dr. Schiller shall remain substantially the same in the aggregate following the closing of the Merger as they were prior to the Merger. Dr. Schiller’s term is being extended to provide for our seamless transition following the Merger. Dr. Schiller has agreed to work in good faith with us to enter into a detailed transition agreement defining the terms of such employment. The parties also agreed to work in good faith to alter the form of compensation from cash to stock-based compensation or some combination thereof if the necessity arises.

 

Further, on July 11, 2013, we entered into another amendment with Dr. Schiller (the “July 2013 Schiller Amendment”) which provides that Dr. Schiller will receive 100,000 shares of Common Stock upon the closing of the Merger. This amends a previous amendment to Dr. Schiller’s employment agreement whereby we agreed to issue to Dr. Schiller $300 worth of Common Stock at the closing of a transaction with an operating company (see below). We have agreed to register in a registration statement filed with the SEC, the 100,000 shares of Common Stock to be issued to Dr. Schiller.

 

On March 31, 2013, we entered into an amendment (the “2013 Schiller Amendment”) to Dr. Schiller’s employment agreement. Pursuant to the 2013 Schiller Amendment, the expiration date of Dr. Schiller’s employment with us was extended to June 30, 2013, with automatic month to month extensions thereafter until terminated by either us or Dr. Schiller with 30 days prior written notice. The 2013 Schiller Amendment further provided that Dr. Schiller’s base salary shall remain at $180 per annum, and that effective March 31, 2013, he shall no longer receive housing benefits which were previously provided pursuant to Dr. Schiller’s amended and restated employment agreement. As an inducement to Dr. Schiller to enter into the 2013 Schiller Amendment, upon the closing of an acquisition or merger, Dr. Schiller shall be paid a fee equal to $300, with the fee paid in shares of common stock equal to $300 based upon the deal price at the closing of such acquisition or merger (“2013 Schiller Success Fee”). Such shares shall be paid as compensation under the Amended and Restated 2006 Long-Term Incentive Plan. Notwithstanding the foregoing, in the event that Dr. Schiller’s employment is terminated without cause or for good reason or as a result of his death or disability prior to the end of this extension, Dr. Schiller shall receive the base salary and benefits through the end of the term; provided further that in the event that Dr. Schiller’s employment is terminated without cause or good reason or as a result of Dr. Schiller’s death or disability and an acquisition or merger is consummated within nine months of the date of termination, then Dr. Schiller shall be entitled to the 2013 Schiller Success Fee.

 

Jeffrey O. Nyweide

 

In connection with the Merger and as a condition to signing the Merger Agreement, on July 11, 2013, we entered into an amendment (the “July 2013 Nyweide Extension”) to Mr. Nyweide’s employment agreement. Pursuant to the July 2013 Nyweide Extension, the term of Mr. Nyweide’s employment is to be extended for a period of 12 months following the closing of the Merger. The compensation and benefits of Mr. Nyweide shall remain substantially the same in the aggregate following the closing of the Merger as they were prior to the Merger. Mr. Nyweide’s term is being extended to provide for our seamless transition following the Merger. Mr. Nyweide has agreed to work in good faith with us to enter into a detailed transition agreement defining the terms of such employment. The parties also agreed to work in good faith to alter the form of compensation from cash to stock-based compensation or some combination thereof if the necessity arises.

 

17
 

 

Further, on July 11, 2013, we entered into another amendment with Mr. Nyweide (the “July 2013 Nyweide Amendment”) which provides that Mr. Nyweide will receive 83,334 shares of Common Stock upon the closing of the Merger. This amends a previous amendment to Mr. Nyweide’s employment agreement whereby we agreed to issue to Mr. Nyweide $250 worth of Common Stock at the closing of a transaction with an operating company (see below). We have agreed to register in a registration statement filed with the SEC, the 83,334 shares of Common Stock to be issued to Mr. Nyweide.

 

On March 31, 2013, we entered into an amendment (the “2013 Nyweide Amendment”) to Mr. Nyweide’s employment agreement. Pursuant to the 2013 Nyweide Amendment, the expiration date of Mr. Nyweide’s employment with us was extended to June 30, 2013, with automatic month to month extensions thereafter until terminated by either us or Mr. Nyweide with 30 days prior written notice. The 2013 Nyweide Amendment further provided that effective April 1, 2013, Mr. Nyweide’s base salary shall be decreased to $180 annum, payable in advance on the first day of each month and as of such date he shall no longer receive housing benefits, which were previously provided pursuant to Mr. Nyweide’s amended and restated employment agreement.  As an inducement to Mr. Nyweide to enter into the 2013 Nyweide Amendment, upon the closing of an acquisition or merger, Mr. Nyweide shall be paid a fee equal to $250, with the fee paid in shares of common stock equal to $250 based upon the deal price at the closing of such acquisition or merger (“2013 Nyweide Success Fee”).  Such shares shall be paid as compensation under the Amended and Restated 2006 Long-Term Incentive Plan, and Mr. Nyweide may elect to accept such shares on a tax free basis wherein we would withhold that number of shares necessary to satisfy Mr. Nyweide’s income tax withholding requirements in connection with this 2013 Nyweide Success Fee.  Notwithstanding the foregoing, in the event that Mr. Nyweide’s employment is terminated without cause or good reason or as a result of his death or disability prior to the end of this extension, Mr. Nyweide shall receive the base salary and benefits through the end of the term; provided further that in the event that Mr. Nyweide’s employment is terminated without cause or for good reason or as a result of Mr. Nyweide’s death or disability and an acquisition or merger is consummated within nine months of the date of termination, then Mr. Nyweide shall be entitled to the 2013 Nyweide Success Fee.

 

Broadband Agreements

 

On March 26, 2012, we entered into a non-exclusive agreement with Broadband Capital Management, LLC (the “Financial Advisor”), for services related to identifying and evaluating potential acquisition candidates, and to the raising of additional private investments on public entity (“PIPE”) financing. In connection with the Financial Advisor’s services to us in connection with the Merger, on July 10, 2013 we entered into a Restricted Stock Agreement (the Restricted Stock Agreement”) with the Financial Advisor. The Restricted Stock Agreement amends the terms of the March 26, 2012 agreement with the Financial Advisor, whereby the fees to be paid by us to the Financial Advisor in connection with the Merger were determined to be 1,325,776 shares of Common Stock (“Financial Advisor Shares”), the vesting of which is subject to the closing of the Merger. In the Restricted Stock Agreement, the Company also agreed pay to the Financial Advisor a success fee of $100 payable in cash, upon the closing of the Merger and a cash fee for certain proceeds raised in a private placement financing. On July 10, 2013, we issued the Financial Advisor Shares to the Financial Advisor. Pursuant to the Restricted Stock Agreement we have agreed to register the Financial Advisor Shares in a registration statement filed with the SEC following the closing of the Merger. On July 11, 2013, we also entered into a lock-up agreement, to be effective at the closing of the Merger, with the Financial Advisor, whereby the Financial Advisor has agreed not to sell or transfer the Financial Advisor Shares for a period of six (6) months following the closing of the Merger.

 

Elimination of Series D Convertible Preferred Stock

 

On July 11, 2013, we filed with the Secretary of State of the State of Delaware, a certificate eliminating from our Certificate of Incorporation, as amended, all matters relating to the Registrant's Series D Convertible Preferred Stock. At the time of filing this certificate, there were no issued or outstanding shares of Series D Preferred Stock.

 

Results of Operations

 

Continuing Operations

 

During the three and six months ended June 30, 2013, continuing operations consisted of executive and general corporate operations. These executive and general corporate operations principally include services in support of the pursuit of the Company’s reporting obligations to the Securities and Exchange Commission, as well as the Company’s strategy.

 

Operating Expenses

 

Our general and administrative expenses consist primarily of salaries and stock-based compensation, legal and professional fees, as well as corporate support expenses such as for facilities, telecommunication and information technology.

 

18
 

 

Discontinued Operations

 

As a result of our sales of SafirRosetti, Preparedness Services, Fraud and SIU Services and Bode and the closure of International Strategies, the results and accounts of these business units are presented in our financial statements as discontinued operations for the three and six months ended June 30, 2013 and all prior periods. As of June 30, 2013, continuing operations consist solely of our executive and general corporate operations.

 

GlobalOptions Group Three months ended June 30, 2013 Compared to the Three months ended June 30, 2012

 

Operating Expenses

 

General and administrative expenses were $601 for the three months ended June 30, 2013, as compared to $840 for the three months ended June 30, 2012. The decrease of $239 was principally attributable to a decrease in compensation costs of approximately $125 (principally due to a decrease in an officers’ compensation which was effective on March 31, 2013) and a decrease in stock-based compensation costs of $165 (as all remaining outstanding stock options were fully amortized during 2012), offset principally by an increase in due diligence and merger related costs.

 

Results of Discontinued Operations

 

Income from discontinued operations was $0 and $289 for the three months ended June 30, 2013 and 2012, respectively. Income from discontinued operations for the three months ended June 30, 2012 consisted of $350 for the reversal of reserves no longer required related to the sale of the business units, offset by $61 in legal expenses incurred in connection with the sale of Preparedness Services.

 

Net loss

 

Net loss for the three months ended June 30, 2013 and 2012 was $594 and $544, respectively. The increase in net loss of approximately $50 was principally the result of a decrease in gains recognized and reported on the sale of the businesses units and reported within discontinued operations, as described above, offset by a decrease in loss from continuing operations of $239, primarily as a result of decreases in operating expenses, as described above.

 

GlobalOptions Group Six Months Ended June 30, 2013 Compared to the Six Months Ended June 30, 2012

 

Operating Expenses

 

General and administrative expenses were $1,164 for the six months ended June 30, 2013, as compared to $1,672 for the six months ended June 30, 2012. The decrease of $508 was principally attributable to a decrease in compensation costs of $78 (principally due to a decrease in an officers’ compensation which was effective on March 31, 2013), a decrease in stock-based compensation of $189 (as all outstanding options were fully amortized during 2012), with the remainder of the decrease on account of reduced diligence costs in connection with the pursuit and evaluation of a suitable merger candidate.

 

Results of Discontinued Operations

 

Income from discontinued operations was $0 and $9,964 for the six months ended June 30, 2013 and 2012, respectively. Income from discontinued operations recognized during the six months ended June 30, 2012 was principally the recognition in 2012 of the earnout payment received by us on February 29, 2012 in connection with the sale of Preparedness Services.

 

Net (Loss) Income

 

Net (loss) income for the six months ended June 30, 2013 and 2012 was $(1,152) and $8,299, respectively. Net loss for the six months ended June 30, 2013 was solely related to our continuing operations. Net income for the six months ended June 30, 2012 was comprised of a loss from continuing operations of $1,665, offset by income from discontinued operations of $9,964. The decrease in net income is principally the result of the recognition during the six months ended June 30, 2012 of the earnout payment received by us on February 29, 2012 in connection with the sale of Preparedness Services and reported within discontinued operations, as described above.

 

19
 

 

Liquidity and Capital Resources

 

For the six months ended June 30, 2013

 

Our cash and cash equivalents, and short term investments were $16,097 at June 30, 2013. Short term investment objectives are to minimize risk, maintain liquidity and maximize yield. To attain these objectives, investment limits are placed on the amount, type and issuer.

 

Cash used in operating activities was approximately $2,054 and $1,929 for the six months ended June 30, 2013 and 2012, respectively.  Cash used in operating activities for the six months ended June 30, 2013 resulted primarily from our loss from continuing operations of $1,152, in which are reflected the costs that we have incurred for due diligence and the preparation of the merger agreement and related agreements, and our use in operating activities related to changes in operating assets and liabilities of $890.

 

Cash provided by investing activities was $8 and $12,365 for the six months ended June 30, 2013 and 2012, respectively.  

 

Cash provided by financing activities was $0 and $18 for the six months ended June 30, 2013 and 2012, respectively.

 

As of July 22, 2013, we had a balance of cash and cash equivalents, and short term investments of approximately $15,900. Included as a closing condition for the Merger is that we have not less than a predetermined amount of cash and cash equivalents at the closing date of the Merger. Also, in connection with and only upon the closing of the Merger, we have agreed to reimburse Walker Digital for certain reasonable legal, accounting and other fees incurred by Walker Digital in connection with the Merger Agreement and the Merger. We currently expect that on the closing date, we will be able to meet the cash and cash equivalents closing condition under the Merger Agreement.

 

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, 2012. Some of our accounting policies require the application of significant judgment by management in the preparation of the consolidated financial statements and, as a result, they are subject to a greater degree of uncertainty. In applying these policies, management uses its judgment to determine the appropriate assumptions to be used in calculating estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. We have identified certain accounting policies as the ones that are most important to the portrayal of our consolidated financial condition and results of operations and which require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Our critical accounting policies include the following:

 

Discontinued Operations

 

We account for our discontinued operations under the provisions of ASC 205-20 “Presentation of Financial Statements – Discontinued Operations”. Accordingly, the results of operations and related charges for discontinued operations with respect to the sale of SafirRosetti, Preparedness Services, Fraud and SIU Services and Bode are reflected in net income of discontinued operations. Liabilities of the discontinued operations have been reclassified and are reflected in our condensed consolidated balance sheet as “current liabilities of discontinued operations.”

 

20
 

 

Item 3 . Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

  

Item 4. Controls and Procedures.

  

Disclosure Controls and Procedures

 

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

 

In connection with the preparation of this Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, management, consisting principally 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 has determined that such controls and procedures were effective as of June 30, 2013.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting or in any other factors that could significantly affect these controls during the quarter ended June 30, 2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

21
 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 1A. Risk Factors.

 

We may not be able to consummate our Merger Agreement with Walker Digital.

 

On July 11, 2013, we entered into a Merger Agreement with Merger Sub, Walker Digital and Walker Digital Sub pursuant to which Merger Sub will merge with and into Walker Digital Sub, with Walker Digital Sub surviving the Merger and becoming a wholly-owned subsidiary of GlobalOptions Group.

 

The closing of the Merger is subject to a number of closing conditions, including (i) all current directors of GlobalOptions Group, other than Dr. Harvey Schiller, resign from director positions, (ii) Walker Digital provides audited financial statements of Walker Digital Sub, substantially similar to the unaudited financial statements of Walker Digital Sub which were presented to the Company prior to signing the Merger Agreement, (iii) the Company has not less than a pre-determined amount of cash at the closing of the Merger, (iv) the Company has terminated its support agreement with Genesis Capital Advisors LLC, Genesis Opportunity Fund LP and Genesis Asset Opportunity Fund L.P., (v) the Company has terminated its stockholder rights plan, as amended, with Continental Transfer and Trust Company (“Continental”) and, (vi) the Company has terminated its Amended and Restated 2006 Employee Stock Purchase Plan. The closing of the Merger is also subject the Secondary Sale.

 

The Merger Agreement may be terminated at any time prior to closing by mutual written agreement of Walker Digital and GlobalOptions Group and according to the terms set forth in the Merger Agreement. The Company may also terminate the Merger Agreement if it enters into an alternative transaction that it concludes in good faith, after consultation with outside legal counsel and its financial advisors, that such alternative transaction is reasonably likely to be financially more favorable to the Company’s stockholders than the Merger and that if it does not enter into such alternative transaction the Board would be in breach of its fiduciary duties. If the Company terminates the Merger Agreement under these circumstances, it would have to pay to Walker Digital a break-up fee in the amount of $3,200.

 

There can be no assurance that all of the conditions to closing will be satisfied, or where possible, waived, or that the Merger will become effective. If the Merger does not become effective because all conditions to closing are not satisfied, or because one of the parties, or all of the parties mutually, terminate the Merger Agreement, then, among other possible adverse effects: (i) the Company’s stockholders will not be able to realize the benefits of our becoming an operating company; (ii) the Company’s stock price may decline; (iii) the Company will have incurred significant transaction costs; and (iv) under certain circumstances, the Company may have to pay Walker Digital a break-up fee of $3,200.

 

In addition, if the Merger Agreement is terminated and our board of directors determines to seek another business combination, there can be no assurance that we will be able to find another partner, and even if we do, that the new arrangement will provide the same expected value to us. If the Merger Agreement is terminated, our Board may evaluate other alternatives, which may include the return of capital to our stockholders.

 

We may be adversely affected upon the closing of the Merger if Walker Digital does not perform as expected.

 

Even if we successfully complete our Merger, we may be adversely affected if Walker Digital does not perform as expected. Walker Digital may perform below expectations after the merger for various reasons, including the occurrence of legislative or regulatory changes that might adversely affect revenue generating capability, the loss of key employees, vendors, advisors and/or clients, increased competition and a decline in general overall economic factors. The failure of Walker Digital to perform as expected at the time of the Merger may have an adverse effect on our business, earnings, financial condition, and could result in our reporting losses for an extended period.

 

The Merger Agreement contains provisions that could discourage or make it difficult for a third party to present a superior offer prior to the completion of the Merger.

 

The Merger Agreement contains provisions that restrict our ability to entertain a third party proposal to acquire us. These provisions include the general prohibition of our soliciting or engaging in discussions or negotiations regarding any alternative merger proposal, subject to certain exceptions, and the requirement that we pay a termination fee of $3,200. These provisions might discourage an otherwise-interested third party from considering or proposing to merge with us, even one that may be deemed of greater value than the proposed Merger to our stockholders. Furthermore, even if a third party elects to propose an acquisition, the concept of a termination fee may result in that third party offering a lower value to our stockholders than such third party might otherwise have offered.

 

22
 

 

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

 

None.

 

Item 3. Default Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information.

 

On July 22, 2013, GlobalOptions Group entered into an amendment (“the Amendment”) to its Registration Rights Amendment (the “RRA”), entered into as of March 27, 2013, by and among GlobalOptions Group, Genesis Opportunity Fund and Genesis Asset Opportunity Fund (together, the “Genesis Funds”).  The Amendment provides, in part that, (i) GlobalOptions Group will within nine (9) business days following the closing of the Merger, use commercially reasonable efforts to file a post-effective amendment (the “Post-Effective Amendment”) to the Company’s registration statement which includes the shares held by the Genesis Funds, (ii) GlobalOptions Group will use commercially reasonable efforts to have the Post-Effective Amendment declared effective within 45 business days following the closing of the Merger, (iii) GlobalOptions Group will agree to further amend the terms of the RRA to provide that the Genesis Funds will be entitled to liquidated damages under certain circumstances, if GlobalOptions Group enters into any registration rights agreements with any other parties which entitle the other party to liquidated damages under certain circumstances, (iv) if GlobalOptions Group is required to exclude certain shares from its registration statements because of SEC rules, GlobalOptions Group will first exclude all shares other than the Genesis Funds’ share, prior to excluding any of the Genesis Funds’ shares from registration, and (v) Genesis Funds will immediately suspend use of the registration statement which includes the shares held by the Genesis Funds until a post-effective amendment to such registration statement that reflects the transactions contemplated by the Merger Agreement is declared effective by the SEC.  Directors Ethan Benovitz and Daniel Saks are managing principals of the Genesis Funds and were appointed to GlobalOptions Group’s Board pursuant to rights granted to the Genesis Funds in connection with the RRA.

 

Item 6. Exhibits.

 

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

 

Exhibit No.   Description
     
10.1   Amendment to Registration Rights Agreement, dated July 22, 2013, by and between Genesis Capital Advisors LLC, Genesis Opportunity Fund, L.P., Genesis Asset Opportunity Fund, L.P. and GlobalOptions Group, Inc.
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.
101.INS   XBRL Instance Document.
101.SCH   XBRL Taxonomy Schema.
101.CAL   XBRL Taxonomy Extension Calculation Linkbase.
101.DEF   XBRL Taxonomy Extension Definition Linkbase.
101.LAB   XBRL Taxonomy Extension Label Linkbase.

  

23
 

 

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:  July 23, 2013 By:   /s/ Harvey W. Schiller
     
    Harvey W. Schiller
    Chairman, Chief Executive Officer and Director
    (Principal Executive Officer)
     
Dated:  July 23, 2013 By:   /s/ Jeffrey O. Nyweide
     
    Jeffrey O. Nyweide
    Executive Vice President-Corporate Development,
    Chief Financial Officer and Secretary
    (Principal Financial Officer and Principal Accounting Officer)

 

24
 

 

EXHIBIT INDEX

 

Exhibit No.   Description 
     
10.1   Amendment to Registration Rights Agreement, dated July 22, 2013, by and between Genesis Capital Advisors LLC, Genesis Opportunity Fund, L.P., Genesis Asset Opportunity Fund, L.P. and GlobalOptions Group, Inc.
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.
101.INS   XBRL Instance Document.
101.SCH   XBRL Taxonomy Schema.
101.CAL   XBRL Taxonomy Extension Calculation Linkbase.
101.DEF   XBRL Taxonomy Extension Definition Linkbase.
101.LAB   XBRL Taxonomy Extension Label Linkbase.

 

25

 

 

Exhibit 10.1

 

GlobalOptions Group, Inc.
415 Madison Avenue, 17 th Floor
New York, New York 10017

 

As of July 22, 2013

 

Genesis Opportunity Fund, L.P.
c/o Genesis Capital Advisors LLC
1212 Avenue of the Americas, 19 th Floor
New York, New York 10036

 

Genesis Asset Opportunity Fund, L.P.
c/o Genesis Capital Advisors LLC
1212 Avenue of the Americas, 19 th Floor
New York, New York 10036

 

Re: Amendment to Registration Rights Agreement

 

Ladies and Gentlemen:

 

Reference is made to that certain Registration Rights Agreement (the “ RRA ”), entered into as of March 27, 2012, by and among GlobalOptions Group, Inc., a Delaware corporation (the “ Company ”), Genesis Opportunity Fund, L.P. (“ GOF ”) and Genesis Asset Opportunity Fund, L.P. (“ GAOF ” and together with GOF, the “ Stockholders ”). Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to them in the RRA.

 

Notwithstanding anything to the contrary set forth in the RRA, the Company and the Stockholders hereby agree that upon the Company’s execution of that certain Agreement and Plan of Merger, of even date herewith, by and among the Company, GO Merger Sub LLC, Walker Digital, LLC and Walker Digital Holdings, LLC (the “ Merger Agreement ”), and for the consideration set forth below, the Stockholders shall immediately suspend use of any Registration Statement or Prospectus until a post-effective amendment to such Registration Statement that reflects the terms of the transactions contemplated by the Merger Agreement (the “ Post-Effective Amendment ”) is declared effective by the Commission (the “ Suspension ”).

 

In consideration for the Stockholders agreeing to the Suspension:

 

(i)         The Company shall use commercially reasonable efforts to cause the Post-Effective Amendment to be filed with the Commission within 9 Business Days following the Closing Date (as defined in the Merger Agreement).  

 

(ii)        The Company shall use commercially reasonable efforts to cause the Post-Effective Amendment to be declared effective by the Commission within 45 Business Days following the Closing Date (as defined in the Merger Agreement).

 

 
 

 

(iii)        To the extent that the Company grants any Person registration rights following the date hereof, or amends any Person’s registration rights existing on or following the date hereof, pursuant to which such Person is entitled to any liquidated damages in the event the Company either fails to file a registration statement (or an amendment thereto) or a prospectus by a certain date and/or cause a registration statement (or an amendment thereto) to be declared effective by the Commission by a certain date, then, in addition to any other rights the Stockholders may have under the RRA or under applicable law, the Company shall amend the terms of the RRA so as to give the Stockholders the benefit of any such liquidated damages.

 

(iv)        In addition to the rights of the Stockholders set forth in Section 2(a) of the RRA, in the event the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering in the Post-Effective Amendment due to the Company’s efforts to separately register any shares of Common Stock following the date hereof (the “ Other Shares ”), the Company shall not exclude any Registrable Securities from the Post-Effective Amendment unless the Company has first excluded all Other Shares from their respective registration statements and the Commission again informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering in the Post-Effective Amendment.

 

In the event that the Closing Date (as defined in the Merger Agreement) fails to occur on or before September 30, 2013 this Letter Agreement shall become void and of no further effect and the Company shall not be entitled to prohibit the usage of any Registration Statement or Prospectus beyond the deadlines set forth in Section 3(h) of the RRA.

 

Except as modified by the provisions hereof, the RRA will remain in full force and effect in accordance with its terms.

 

The Company shall reimburse the Stockholders for its reasonable legal expenses incurred in connection with the preparation and execution of this Letter Agreement and any and all documents executed in connection therewith.

 

This Letter Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature.

 

This Letter Agreement may not be amended or otherwise modified in any respect without the written consent of each of the Company and the Stockholders. This Letter Agreement shall be construed and enforced in accordance with the laws of the State of New York, without regard to the principles of conflicts of laws.

 

- 2 -
 

 

If this consent accurately reflects the understanding and agreement of the Company, please sign below and return an executed copy of this consent to the undersigned.

 

  Very truly yours,
   
  GLOBALOPTIONS GROUP, INC.
   
  By: /s/ Harvey W. Schiller
    Name: Harvey W. Schiller
    Title: Chairman and Chief Executive Officer

 

Acknowledged and Agreed  
as of this 22 day of July, 2013  
   
GENESIS OPPORTUNITY FUND, L.P.  
   
By: Genesis Capital Advisors LLC,  
its General Partner  
     
By: /s/ Ethan Benovitz  
  Name:   Ethan Benovitz  
  Title: Managing Member of GP  
   
GENESIS ASSET OPPORTUNITY FUND, L.P.  
   
By: Genesis Capital Advisors LLC,  
its General Partner  
     
By: /s/ Ethan Benovitz  
  Name:   Ethan Benovitz  
  Title: Managing Member of GP  

 

- 3 -

 

Exhibit 31.1

 

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Harvey W. Schiller, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of GlobalOptions Group, Inc. for the quarter ended June 30, 2013;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

July 23, 2013   /s/ Harvey W. Schiller
    Name: Harvey W. Schiller
    Title: Chairman of the Board and
      Chief Executive Officer
      (Principal Executive Officer)

 

 

 

 

Exhibit 31.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Jeffrey O. Nyweide, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of GlobalOptions Group, Inc. for the quarter ended June 30, 2013;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

July 23, 2013   /s/ Jeffrey O. Nyweide
    Name: Jeffrey O. Nyweide
    Title: Chief Financial Officer, Executive Vice
      President – Corporate Development, and
      Secretary (Principal Financial Officer and
      Principal Accounting Officer )

 

 

 

 

Exhibit 32.1

 

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report of GlobalOptions Group, Inc., (the “Company”) on Form 10-Q for the quarter ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Harvey W. Schiller, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

July 23, 2013   /s/ Harvey W. Schiller
    Name: Harvey W. Schiller
    Title: Chairman of the Board and
      Chief Executive Officer
      (Principal Executive Officer)

 

 

 

 

Exhibit 32.2

 

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report of GlobalOptions Group, Inc., (the “Company”) on Form 10-Q for the quarter ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeffrey O. Nyweide, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

July 23, 2013   /s/ Jeffrey O. Nyweide
    Name: Jeffrey O. Nyweide
    Title: Chief Financial Officer, Executive Vice
      President – Corporate Development, and
      Secretary (Principal Financial Officer and
      Principal Accounting Officer)