Item 1. Business
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 acquire, through a merger, share exchange, asset acquisition, plan of arrangement, recapitalization, reorganization or similar business combination, one or more operating businesses, or control of such operating businesses through contractual arrangements.
During 2011 and January and February of 2012, we negotiated and collected portions of the amounts payable to us from each of the purchasers of such operating units and returned a portion of such amounts to stockholders. During 2011 and through March 15, 2012 our primary objective was planning for additional distributions to our stockholders from our remaining net proceeds from the sales of our four business units. During 2011, we evaluated possible business combinations and other types of corporate transactions as an alternative to making further liquidating distributions to stockholders.
On March 16, 2012 our board of directors (the “Board”) determined that it was in the best interests of our stockholders to change the primary focus of our efforts from that of preparing and analyzing a plan to wind down the Company and distribute cash to stockholders to one of affirmatively pursuing an acquisition strategy for a period of six months, and if unable to effectively identify and conclude a transaction, then reevaluate the strategy to determine whether we should pursue an acquisition or distribution strategy. The Board has further reevaluated its strategy and concluded that it would continue to pursue transactions through the near term, which it believes may result in enhanced shareholder value. We are currently evaluating a variety of possible business combinations. We currently do not have any arrangement, agreement or understanding with respect to any such transaction and there can be no assurance that we will be successful in finally evaluating or in concluding one.
We currently intend to utilize our cash and short term investments of $18,139, capital stock, debt or a combination of the foregoing in effecting a business combination. A business combination may involve the acquisition of, or merger with, a company which desires to establish a public trading market for its shares, while avoiding what it may deem to be adverse consequences of undertaking a public offering itself. These include time delays, significant expense, loss of voting control and compliance with various federal and state securities laws. In the alternative, we may seek to consummate a business combination with a company that may be in need of capital or in its early stages of development or growth.
In connection with the pursuit of our business strategy, we have 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.
Beginning during the year 2005 and through 2009, in pursuit of our then existing strategy to build an integrated risk mitigation company, we acquired and integrated eight complementary risk mitigation businesses. We operated these businesses until they were sold during 2010.
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”).
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 shown as discontinued operations in our financial statements. As of December 31, 2012, continuing operations consist solely of executive and general corporate operations. These executive and general corporate operations include services provided by us in support of the business units sold, consisting principally of cash and treasury management and information technology. In addition, executive and general corporate operations consist principally of maintaining compliance as a public reporting company, as well as the reviewing of a number of business opportunities.
Selection of a target business and structuring of a business combination
We anticipate that target business candidates will be brought to our attention from various unaffiliated sources, who may present solicited or unsolicited proposals. Our officers and directors as well as their affiliates may also bring to our attention target business candidates. We do currently have one non-exclusive agreement with an advisor to assist us in our search for a target business.
Our management and the Board will work together in identifying and selecting a prospective target business. In evaluating a prospective target business, our management may consider, among other factors, any of the following:
• financial condition and results of operation;
• growth potential;
• experience and skill of management and availability of additional personnel;
• capital requirements;
• competitive position;
• barriers to entry;
• stage of development of the products, processes or services;
• degree of current or potential market acceptance of the products, processes or services;
• proprietary features and degree of intellectual property or other protection of the products, processes or services;
• regulatory environment of the industry; and
• costs associated with effecting the business combination.
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination will be based, to the extent relevant, on the above factors as well as other considerations deemed relevant by our management in effecting a business combination consistent with our business objective. In evaluating a prospective target business, we intend to conduct extensive due diligence reviews which will encompass, among other things, meetings with incumbent management and inspection of facilities, as well as review of financial and other information which will be made available to us.
On March 16, 2012, our Board determined that if after six months we are not able to identify and conclude an appropriate business combination, our Board would then analyze whether to continue this strategy or return to a strategy of returning capital to stockholders. The Board has further reevaluated its strategy and concluded that it would continue to pursue transactions through the near term which it believes may result in enhanced shareholder value.
Competition
In identifying, evaluating and selecting a target business, we expect to encounter intense competition from other entities having a business objective similar to ours. There are numerous blank check and other shell companies that are seeking to consummate business combinations. Additionally, we may be subject to competition from other companies looking to expand their operations through the acquisition of a target business. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Many of these competitors may possess greater technical, human and other resources than us and our financial resources may be deemed to be relatively limited when contrasted with these competitors. Further, while we believe there are numerous potential target businesses that we could acquire, our ability to compete in acquiring certain sizable target businesses will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of a target business.
Any of these factors may place us at a competitive disadvantage in successfully negotiating a business combination. Our management believes, however, that our status as a public entity, our current cash position and our access to the United States public equity markets may give us a competitive advantage over privately-held entities having a similar business objective as us in acquiring a target business on favorable terms.
If we succeed in effecting a business combination, there will be, in all likelihood, intense competition from competitors of the target business. Numerous companies, most of which have substantially greater financial resources available to them than we do, are already engaged in the industry segments we focus on. We cannot assure you that, subsequent to a business combination, we will have the resources or ability to compete effectively.
Proceeds that we have returned to stockholders
With the net proceeds we have received from the sales of SafirRosetti, Preparedness Services, Fraud and SIU Services and Bode we have made tender offer distributions to our stockholders in the aggregate amount of $22,188.
On December 1, 2010, we commenced a partial tender offer to purchase for cash up to 10,000,000 shares of our common stock at a price of $2.40 per share. The tender offer closed on December 29, 2010, after which we purchased a total of 1,119,978 shares at a cost of $2,688. In addition, during the year ended December 31, 2010, just prior to the aforementioned tender offer, we repurchased in the open market 16,627 shares of our common stock at a cost of $39. On February 7, 2011, our Board approved a new program to repurchase up to $3,000 of our common stock over a period of 18 months, at such times, amounts and prices as we deemed appropriate. This repurchase program ended on April 27, 2011, when we announced our 2011 partial tender offer. Through April 27, 2011, we made no stock repurchases under this program.
On April 27, 2011, we commenced a partial tender offer to purchase up to 7,500,000 shares of our common stock at a price of $2.60 per share, net to the seller in cash, without interest. This tender offer expired on May 25, 2011. In connection with this partial tender offer, we purchased and canceled 7,500,000 shares of common stock at an aggregate cost of $19,650, including $152 of expenses in connection with the tender, offset by $2 in proceeds from the sale of common stock, by a major stockholder, representing the disgorgement of a short swing profit on its sale of our common stock.
On July 21, 2011, our Board approved a new program to repurchase shares of our common stock. The repurchase program was established on August 4, 2011 and was amended on December 14, 2011. During the period October 18, 2011 through April 1, 2013, we repurchased 10,617 shares of our common stock at a cost of $26, under this program.
There remain a total of 6,197,760 shares of common stock outstanding on April 1, 2013.
Corporate History
GlobalOptions, Inc., our wholly-owned operating subsidiary, was initially formed as a limited liability company in the state of Delaware in November 1998 and converted into a Delaware corporation on January 24, 2002. On June 24, 2005, we became a public company by completing a reverse merger transaction, in which GlobalOptions Acquisition Corp., a Delaware corporation and our newly created, wholly owned subsidiary, merged with and into GlobalOptions, Inc. As a result of the reverse merger, GlobalOptions, Inc. became our wholly owned operating subsidiary, with GlobalOptions, Inc.’s former security holders acquiring a majority of the outstanding shares of our common stock. At the time of the reverse merger, our corporate name was Creative Solutions with Art, Inc., a Nevada corporation. Following the reverse merger, we changed our name to GlobalOptions Group, Inc. On December 8, 2006, we completed a reincorporation merger whereby we changed our state of incorporation from Nevada to Delaware.
Descriptions of and Sales or Closing of our Former Operating Businesses
Preparedness Services
The Preparedness Services unit developed and implemented crisis management and emergency response plans for disaster mitigation, continuity of operations and other emergency management issues for governments, corporations and individuals. The Preparedness Services unit was comprised of James Lee Witt Associates, LLC.
On July 16, 2010, we completed the sale of all assets used in Preparedness Services in accordance with an asset purchase agreement dated May 13, 2010 (the “Preparedness Services Purchase Agreement”), by and among us and Witt Group Holdings, LLC, (“Witt Holdings”), of which certain of our former officers are principals.
Pursuant to the terms of the Preparedness Services Purchase Agreement, we sold Preparedness Services to Witt Holdings for aggregate consideration of (i) $10,006 in cash, of which $1,000 was initially held in escrow and then released to us in full on July 26, 2011, (ii) an earnout payment equal to 40% of any revenues over $15,000 earned during the 12-month period following the closing, which payment may not exceed $12,000, (iii) the assumption of all of the Preparedness Services liabilities, including all termination and severance payments due to certain of our former officers, upon the sale of Preparedness Services, less $286, representing a payment in connection with Witt Holdings’ assumption of the lease for Preparedness Services’ Washington D.C. facility and (iv) a working capital adjustment of $1,652 paid on January 14, 2011.
On February 29, 2012, we received $10,000 from Witt Holdings representing the earnout payment due under the Preparedness Service Purchase Agreement.
Fraud and SIU Services
The Fraud and SIU Services unit provided investigative surveillance, anti-fraud solutions and business intelligence services to the insurance industry, law firms and multinational organizations. These services were provided to clients nationally and regionally through licensed investigators in all 50 states. Our investigators provided reports and intelligence on subjects such as workman’s compensation surveillance, unfair trade practices, political trends, economic forecasts, mortgage insurance fraud, profiles on competitors and satellite reconnaissance. The Fraud and SIU Services unit was comprised of the following acquired companies: Confidential Business Resources, Hyperion Risk, Inc., Secure Source, Inc., Facticon, Inc., and First Advantage Investigative Services.
On July 20, 2010, we completed the sale of all assets used in Fraud and SIU Services in accordance with an asset purchase agreement dated June 11, 2010 (the “Fraud and SIU Services Purchase Agreement”), by and among us, GlobalOptions and GlobalOptions Services, Inc., a non-related third party (“Global Services”), of which a number of our former officers are principals.
Pursuant to the terms of the Fraud and SIU Services Purchase Agreement, we sold Fraud and SIU Services to Global Services for aggregate consideration of (i) $8,340 in cash at closing, inclusive of $34 for an estimated adjustment for working capital and $56 for the purchase real estate lease deposits, of which $825 was initially held in escrow and then released to us in full on August 1, 2011, (ii) an additional final post-closing working capital adjustment of $275 which we received on December 30, 2010, and (iii) the assumption of substantially all of the liabilities of Fraud and SIU Services aggregating $2,978.
In connection with the Fraud and SIU Services Purchase Agreement, we entered into (i) certain license agreements with Global Services pursuant to which we granted Global Services worldwide, perpetual, irrevocable, exclusive, royalty-free, fully paid-up rights and licenses to certain of our intellectual property, including but not limited to the “GlobalOptions” corporate name, logo and websites (all of which Global Services has the right to purchase in the future for nominal consideration), and our Rapid Data Module and Rapid Video Module software and related source materials that are embedded within the GlobalTrak system for the Fraud and SIU Services business only, and (ii) a transition service agreement pursuant to which we and Global Services will provide each other with certain transition services following the closing. The term of such transition services agreement was extended until March 31, 2011 and then terminated.
Security Consulting and Investigations
The Security Consulting and Investigations unit delivered specialized security and investigative services to governments, corporations and individuals as well as forensic DNA analysis and casework, consisting of SafirRosetti and Bode. Our Security Consulting and Investigations unit was comprised of the following acquired companies: SafirRosetti, LLC, Bode and SPZ Oakland Corporation, dba On Line Consulting Services, Inc.
On April 30, 2010, we completed the sale of all of the assets of SafirRosetti in accordance with an asset purchase agreement dated April 23, 2010 (the “SafirRosetti Purchase Agreement”), by and among us, GlobalOptions and Guidepost Solutions LLC (“Guidepost”), a subsidiary of SolutionPoint International, Inc. (“SolutionPoint”), of which a former officer of SafirRosetti is a principal.
Pursuant to the terms of the SafirRosetti Purchase Agreement, we sold SafirRosetti to Guidepost for aggregate consideration of (i) $3,500 in cash, subject to certain adjustments, of which $525 was initially held in escrow and then released to the Company in full on October 23, 2011, (ii) a secured promissory note (the “SafirRosetti Note”) in the aggregate face amount of $1,750, with an interest rate of 0.79% per annum of which principal of $875 and interest of $8 was received on December 17, 2010 and principal of $875 and interest of $3 was paid to us on June 30, 2011, and (iii) contingent consideration based on 70% of the purchased accounts receivable in excess of $1,750 collected by Guidepost between the closing and June 30, 2011, and (iv) a cash payment of $2,286 received on July 28, 2011 for the full satisfaction of the working capital adjustment. On July 28, 2011 we received $88 as consideration for SafirRosetti retaining all rights associated with the sold accounts receivable that remained uncollected at June 30, 2011. Aggregate contingent consideration of $0, $579, and $705 was received and recognized during the years ended December 31, 2012, 2011, and 2010, respectively.
Bode
On November 30, 2010, we completed the sale of Bode in accordance with a stock purchase agreement dated August 11, 2010 (“the Bode Purchase Agreement”) by and among, us, GlobalOptions, Bode and LSR Acquisition Corp. (which following a corporate reorganization, became SolutionPoint).
Pursuant to the terms of the Bode Purchase Agreement, we sold all of the equity securities and stock of Bode to SolutionPoint for an aggregate consideration of (i) $24,500 in cash, of which $2,450 was initially held in escrow and then released to the Company in full on January 15, 2012, (ii) an earnout payment equal to 30% of any revenues over $27,000 earned by Bode during the 12-month period following the closing of the sale, which payment may not exceed $5,500, and (iii) a cash payment of $500 received on December 17, 2010 in connection with SolutionPoint’s tax election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The earnout payment was determined to be $0 based upon revenue information that Solution Point has provided to us.
In connection with the Bode Purchase Agreement, we entered into a transition service agreement pursuant to which we provided Bode with certain specified transition services following the closing, including but not limited to certain information technology services. In connection with this agreement, during the years ended December 31, 2012, 2011, and 2010, we recorded fees of $0, $76, and $19, which were recorded as an offset to general and administrative expenses. The transition services agreement terminated on March 31, 2011.
International Strategies
The International Strategies unit provided multidisciplinary, international risk management and business solutions to foreign and domestic governments, corporations and individuals. The International Strategies unit was our original core business. International Strategies was not a separate reporting segment and as such we attributed its revenues to the Fraud and SIU Services unit.
Effective on December 31, 2010, we closed International Strategies.
Employees
As of April 1, 2013 we had 2 full-time employees. We enjoy good employee relations. None of our employees are members of any labor union, and we are not a party to any collective bargaining agreement.
Item 1A.
Item 1A. Risk Factors
Any investment in our common stock involves a high degree of risk. You should consider carefully the specific risk factors described below in addition to the other information contained in this Annual Report on Form 10-K,, including our consolidated financial statements and related notes included elsewhere in this Annual report on Form 10-K, before making a decision to invest in our common stock. If any of these risks actually occurs, our business, financial condition, results of operations or prospects could be materially and adversely affected. This could cause the trading price of our common stock to decline and a loss of all or part of your investment.
Risks Related to Our Business and Industry
We currently have no business revenues or operations.
During 2010, we sold SafirRosetti, Preparedness Services, Fraud and SIU Services and Bode and the closed International Strategies and our continuing operations consist solely of our executive and general corporate operations. We currently have no sources of future revenues.
We will continue to incur operating expenses for SEC reporting, auditing and similar functions, as well as normal operating expenses associated with any ongoing business, such as rent, annual taxes, filing fees, and the like. Accordingly, in the absence of revenues, we will incur losses.
We may be unable to realize the benefits of our net operating loss (“NOL”) and capital loss carryforwards.
The amount of NOL and capital loss carryforwards that we have claimed have not been audited or otherwise validated by the U.S. Internal Revenue Service (the “IRS”). The IRS could challenge our calculation of the amount of our NOL and capital loss or our determinations as to when a prior change in ownership occurred and other provisions of the Internal Revenue Code may limit our ability to utilize our NOL and capital loss to offset taxable income and capital gains. If the IRS was successful with respect to any such challenge, the tax benefit of our NOL and capital loss carryforwards to us could be substantially reduced.
Our arrangements with members of our senior management team, or our failure to retain or recruit key personnel, could negatively impact our ability to sell our products and services and grow our business.
Our future success will depend to a significant extent upon the abilities, level of service, reputation and relationships of our Chairman and Chief Executive Officer and our Chief Financial Officer (“Executive Officers”), as well as our Board. One member of our senior management team works on a part-time basis. For the period January 1, 2013 through March 30, 2013, our Chairman and Chief Executive Officer and our Chief Financial Officer have worked for us without an employment agreement. Effective March 31, 2013, we entered into amended employment agreements with our Executive Officers, extending their employment with us through June 20, 2013, with automatic monthly extensions thereafter until terminated by either party with 30 days written notice. These arrangements, or any reduction or loss of these individuals’ services, could have a material adverse effect upon our business.
We are subject to the risk of possibly becoming an investment company.
Under Section 3(a)(1)(C) of the Investment Company Act of 1940 (the “1940 Act”), an issuer is deemed to be an investment company if it is engaged in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire “investment securities” having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. The 1940 Act defines “investment securities” broadly to include virtually all securities except U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves regulated or exempt investment companies. Rule 3a-1 under the 1940 Act exempts an issuer if no more than 45% of its total assets consist of, and not more than 45% of its net income (for the last four fiscal quarters combined) is derived from, securities other than U.S. government securities, securities issued by employees’ securities companies, securities of majority-owned subsidiaries and primarily controlled companies.
We currently have no plans to invest the proceeds of the sales of SafirRosetti, Preparedness Services, Fraud and SIU Services and Bode in investment securities. If we do invest the proceeds in investment securities, it is possible that we could inadvertently be deemed to be an investment company under the 1940 Act. If we were to inadvertently become an investment company, we would have one year to divest of a sufficient amount of investment securities and/or acquire other assets sufficient to cause us to no longer be an investment company. Registered investment companies are subject to extensive, restrictive and potentially adverse regulation relating to, among other things, operating methods, management, capital structure, dividends and transactions with affiliates. If it were established that we are an unregistered investment company, there would be a risk, among other material adverse consequences, that we could become subject to monetary penalties or injunctive relief, or both, in an action brought by the SEC, that we would be unable to enforce contracts with third parties or that third parties could seek to obtain rescission of transactions with us undertaken during the period it was established that we were an unregistered investment company.
We do not believe that our planned principal activities will subject us to the 1940 Act. If we are deemed to be subject to the 1940 Act, compliance with these additional regulatory burdens would increase our operating expenses.
Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on our business and operating results. In addition, current and potential stockholders could lose confidence in our financial reporting, which could cause our stock price to decline.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our business could be harmed.
As a public company, we are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal control over financial reporting.
Failure to maintain an effective internal control environment could cause us to face regulatory action, result in delays or inaccuracies in reporting financial information or cause investors to lose confidence in our reported financial information, any of which could cause our stock price to decline.
We may become subject to significant legal proceedings.
We are subject from time to time to litigation and other adverse claims related to our former businesses, some of which may be substantial. These claims have in the past been, and may in the future be, asserted by persons who are screened by us, regulatory agencies, former clients or other third parties. Matters such as these, in which we may become defendants, may negatively impact our cash flows
Our plans regarding a potential business combination may affect our remaining financial resources.
Our Board has determined that if we do not effectively identify and conclude a business combination within the near term, that our Board will then reevaluate the strategy to determine whether the Company should continue to pursue an acquisition strategy or a distribution strategy. If we make additional distributions or commence additional buybacks, there is no guaranty that the amount of such cash that we decide to maintain will be enough to cover our future expenses, including, (i) reporting obligations under the Exchange Act, and/or (ii) other general and administrative expenses in connection with the continued operation of our business.
Risk Associated with our Plan to Consummate a Business Combination
Because there are numerous companies with a business plan similar to ours seeking to effectuate a business combination, it may be more difficult for us to do so.
There are numerous blank check and other shell companies and we may be subject to competition from these and other companies seeking to consummate a business combination. Because of this competition, we cannot assure you that we will be able to effectuate a business combination within the time frame acceptable to the Board.
Investors are unable to currently ascertain the merits or risks of the target business’ operations.
There is no basis for investors to evaluate the possible merits or risks of the target business’ operations. To the extent we complete a business combination with a financially unstable company or an entity in its development stage, we may be affected by numerous risks inherent in the business operations of those entities. We will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors. We also cannot assure you that an investment in our securities will not ultimately prove to be less favorable than a direct investment, if an opportunity were available, in a target business.
We may issue shares of our common stock and preferred stock to complete a business combination, which would reduce the equity interest of our stockholders and possibly cause a change in control of our ownership.
Our certificate of incorporation authorizes the issuance of up to 100,000,000 shares of our common stock, par value $0.001 per share, and 15,000,000 shares of preferred stock, par value $0.001 per share. We currently have approximately 93,602,000 authorized but unissued shares of our common stock available for issuance (after appropriate reservation for the issuance of shares upon full exercise of our outstanding options). In addition, as of December 31, 2012, 1,407,342 shares of common stock remain eligible to be issued under the Incentive Plan and 1,877,612 shares of common stock remain unissued under the Stock Purchase Plan. Furthermore, except for 100,000 and 20,000 shares designated for our Series D and Series A Junior Participating Preferred Stock, all of the 15,000,000 shares of preferred stock are available for issuance. Although we currently have no commitments to issue our securities, we may issue shares of our common stock or preferred stock, or a combination of common and preferred stock, to complete a business combination. The issuance of additional shares of our common stock or any number of shares of our preferred stock:
• may significantly reduce the equity interest of stockholders;
• may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded to our common stock;
• may cause a change in control if a substantial number of our shares of common stock are issued, which may affect, among other things, our ability to use our NOL carryforwards, if any, and may also result in the resignation or removal of our present officers and directors; and
• may adversely affect prevailing market prices for our common stock.
Similarly, if we issue debt securities, it could result in:
• default and foreclosure on our assets if our operating revenues after a business combination were insufficient to pay our debt obligations;
• acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contains covenants that require the maintenance of certain financial ratios or reserves and any such covenant is breached without a waiver or renegotiation of that covenant;
• our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand; and
• our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding.
Our ability to successfully effect a business combination and to be successful thereafter will be largely dependent upon the efforts of our key personnel, one or both of whom may or may not remain following a business combination.
Our ability to successfully effect a business combination will be largely dependent upon the efforts of our key personnel. The future role of our key personnel in the target business, however, cannot presently be ascertained. Although it is possible that one or both of our key personnel will remain associated in various capacities with the target business following a business combination, it is likely that the management of the target business at the time of the business combination will remain in place. Moreover, our key personnel will be able to remain with the company after the consummation of a business combination only if they are able to negotiate employment or consulting agreements in connection with the business combination, the terms of which, including the compensation to be paid to such individuals, would be determined at such time between the respective parties. Such negotiations may take place simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to the company after the consummation of the business combination. While the personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business, it is not anticipated that the ability of such individuals to remain with us after the consummation of a business combination will be the determining factor in our decision as to whether or not we will proceed with any potential business combination. While we intend to closely scrutinize any individuals we engage after a business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a public company which could cause us to have to expend time and resources helping them become familiar with such requirements. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our operations.
Because of our limited resources and structure, we may not be able to consummate a business combination with growth potential.
We expect to encounter intense competition from other entities having a business objective similar to ours, including venture capital funds, leveraged buyout funds and operating businesses competing for acquisitions. Many of these entities are well established and have extensive experience in identifying and effecting business combinations directly or through affiliates. Many of these competitors possess greater technical, human and other resources than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe that there are numerous potential target businesses that we could acquire, our ability to compete in acquiring certain sizable target businesses will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses.
We may be unable to obtain additional financing, if required, to complete a business combination or to fund the operations and growth of the target business, which could compel us to restructure the transaction or abandon a particular business combination.
While our current assets may be sufficient to allow us to consummate a business combination, in as much as we have not yet identified any prospective target business, we cannot ascertain the capital requirements for any particular transaction. If we require further funds, we will be required to seek additional financing. We cannot assure you that such financing would be available on acceptable terms, if at all. To the extent that additional financing proves to be unavailable when needed to consummate a particular business combination, we would be compelled to restructure the transaction or abandon that particular business combination and seek an alternative target business candidate. In addition, if we consummate a business combination, we may require additional financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or stockholders is required to provide any financing to us in connection with or after a business combination.
If we effect a business combination with a company located outside of the United States, we would be subject to a variety of additional risks that may negatively impact our operations.
We may effect a business combination with a company located outside of the United States. If we did, we would be subject to considerations or risks associated with companies operating in the target business’ home jurisdiction, including any of the following:
• rules and regulations or currency conversion or corporate withholding taxes on individuals;
• tariffs and trade barriers;
• regulations related to customs and import/export matters;
• longer payment cycles;
• tax issues, such as tax law changes and variations in tax laws as compared to the United States;
• currency fluctuations;
• challenges in collecting accounts receivable;
• cultural and language differences; and
• employment regulations.
We cannot assure you that we would be able to adequately address these additional risks. If we were unable to do so, our operations might suffer.
If we effect a business combination with a company located outside of the United States, the laws applicable to such company will likely govern all of our material agreements and we may not be able to enforce our legal rights.
If we effect a business combination with a company located outside of the United States, the laws of the country in which such company operates will govern almost all of the material agreements relating to its operations. We cannot assure you that the target business will be able to enforce any of its material agreements or that remedies will be available in this new jurisdiction. The system of laws and the enforcement of existing laws in such jurisdiction may not be as certain in implementation and interpretation as in the United States. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital. Additionally, if we acquire a company located outside of the United States, it is likely that substantially all of our assets would be located outside of the United States and some of our officers and directors might reside outside of the United States. As a result, it may not be possible for investors in the United States to enforce their legal rights, to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors and officers under Federal securities laws.
Risks Related To Our Stock
Our common stock price has fluctuated considerably and stockholders may not be able to resell their shares at or above the price at which their shares were purchased.
Since our reverse merger in June 2005, the high and low bid price for our common stock has been $32.00 and $1.14 per share, respectively. The market price of our common stock may still fluctuate significantly in response to a number of factors.
The stock market in general has experienced extreme price fluctuations. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock. Price volatility might be worse if the trading volume of our common stock continues to be low, as we expect it to be.
We expect the volume of trading of our stock will remain low and the market for selling our shares will remain limited.
Our common stock has historically been sporadically or thinly traded. As a result of the sales of SafirRosetti, Preparedness Services, Fraud and SIU Services and Bode, our delisting from the NASDAQ Stock Market, LLC (“NASDAQ”) and the unavailability of Rule 144 promulgated under the Securities Act (“Rule 144”) our trading volume is expected to remain low. As a result, the number of persons interested in purchasing our common stock at or near ask prices at any given time may be relatively small or non-existent. There may be periods of several days or more when trading activity in our shares is low and a stockholder may be unable to sell his shares of common stock at an acceptable price, or at all. We cannot give stockholders any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.
Our stockholders are no longer able to rely upon Rule 144 to sell their shares not registered for resale under the Securities Act.
Our stockholders are no longer able to rely upon Rule 144 to sell their shares not registered for resale under the Securities Act because we are now a “shell company” with no operations and assets consisting solely of cash and cash equivalents. The unavailability of Rule 144 may make it more difficult for investors holding restricted shares to sell their shares.
We may be deemed a “penny stock.”
We may be considered a “penny stock” as defined in the Exchange Act and the rules thereunder, unless the price of our shares of common stock is at least $5.00. We expect that our share price will remain less than $5.00. Unless our common stock is otherwise excluded from the definition of “penny stock”, the penny stock rules apply. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its sales person in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that the broker-dealer, not otherwise exempt from such rules, must make a special written determination that the penny stock is suitable for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure rules have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. So long as our common stock is subject to the penny stock rules, the level of trading activity could be limited and it may be difficult for investors to sell our common stock.
We may never pay any dividends to stockholders.
To date, we have never declared or paid any cash dividends or distributions on our capital stock. While our management and the Board are currently reviewing and evaluating potential acquisition targets, in the future we may change our strategy and that strategy may involve a dividend or distribution on our capital stock.
The declaration, payment and amount of any future dividends will be made at the discretion of the Board, and will depend upon, among other things, cash flows and financial condition, operating and capital requirements, and other factors as the Board considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.
Our executive officers, directors and 10% stockholders have significant voting power and may vote their shares in a manner that is not in the best interest of other stockholders.
Our executive officers, directors and 10% stockholders control approximately 37.6% of the voting power represented by our outstanding common stock. If these stockholders act together, they may be able to exert significant control over our management and affairs requiring stockholder approval, such as the election of directors or the dissolution of the company. This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of our common stock. This concentration of ownership may not be in the best interests of all our stockholders.
Provisions in our certificate of incorporation and by-laws may deter third parties from acquiring us and could lead to the entrenchment of our Board.
Our certificate of incorporation and by-laws contain provisions that may make the acquisition of our company more difficult without the approval of our Board, including the following:
·we have authorized undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;
·stockholders may only remove directors for cause;
·vacancies on the Board may be filled only by the directors;
·we have a stockholder rights plan in place; and
·we require advance notice for stockholder proposals.
These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take other corporate actions that you desire. The anti-takeover defenses in our certificate of incorporation and by-laws could discourage, delay or prevent a transaction involving a change in control of our company. These deterrents could adversely affect the price of our common stock and make it difficult to remove or replace members of the Board or management of the Company. See “Description of Capital Stock” below for a discussion of some of these provisions that make the acquisition of the company more difficult.
Item 1B.
Item 1B. Unresolved Staff Comments
Not applicable
Item 2.
Item 2. Properties
Our administrative headquarters is located in New York, New York. This office is leased under an agreement expiring on June 30, 2015. We may terminate this agreement at any time, with 90 days advance notice. We believe that equally suited facilities are otherwise available to us, if needed.
Item 3.
Item 3. Legal Proceedings
None
Item 4.
Item 4. Mine Safety Disclosures.
Not applicable
PART II
(Dollar amounts in thousands, except per share amounts)
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market for Common Equity
Our common stock was delisted from the NASDAQ on March 2, 2011, as a result of the findings of the NASDAQ Hearings Panel, which determined we no longer met NASDAQ’s listing standards on the grounds that we were not in compliance with Listing Rule 5101 and that we may be a “public shell” with no operating business.
Our common stock is quoted on the OTC Bulletin Board under the symbol “GLOI.OB”. Based upon information furnished by our transfer agent, as of March 28, 2013, we had 179 holders of record of our common stock.
The table below sets forth the high and low bid prices for our common stock as reported on the OTC Bulletin Board from March 22, 2011 to March 28, 2013, and as reported on the pink sheets from March 2, 2011 to March 21, 2011, as well as the high and low sales prices of our common stock as reported on NASDAQ from January 1, 2011 to March 1, 2011. The price quotations reported on the OTC Bulletin Board and the pink sheets reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
We have not paid any cash dividends on our common stock during the periods presented above. Pursuant to our current strategy, we do not have a plan to pay cash dividends. However, in the future, the Board may change our strategy to one that includes a dividend or distribution on our capital stock.
During the year ended December 31, 2012, we repurchased 1,943 shares of our common stock at an aggregate cost of $5.
Securities Authorized for Issuance under Equity Compensation Plans
The following table contains information about our common stock that may be issued under our equity compensation plans as of December 31, 2012. See “Executive Compensation-Benefit Plans” for a description of our stock option and incentive plans.
(1) Our Amended and Restated 2006 Long-Term Incentive Plan and Amended and Restated 2006 Employee Stock Purchase Plan were adopted by our stockholders on July 24, 2008.
(2) The number of securities remaining available for future issuances includes 1,407,342 shares available under the Amended and Restated 2006 Long-Term Incentive Plan and 1,877,612 shares available under the Amended and Restated 2006 Employee Stock Purchase Plan.
Item 6.
Item 6. Selected Financial Data
	Not applicable.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of results of operations and financial condition is based upon, and should be read in conjunction with, our consolidated financial statements and accompanying notes thereto included elsewhere in this Form 10-K. This discussion contains forward-looking statements. Actual results could differ materially from the results discussed in the forward-looking statements. Please see “Forward-Looking Statements” and “Risk Factors” for a discussion of some of the uncertainties, risks and assumptions associated with these statements.
Overview
We are currently a “shell company” as defined in Rule 12b-2 promulgated under the Exchange Act. We became a shell company following the sale of our four operating units in 2010. Our current intention is to acquire, through a merger, share exchange, asset acquisition, plan of arrangement, recapitalization, reorganization or similar business combination, one or more operating businesses, or control of such operating businesses through contractual arrangements. During the year ended December 31, 2010, we sold or closed all of our operating businesses. We completed the sale of SafirRosetti on April 30, 2010, Preparedness Services on July 16, 2010 Fraud and SIU Services on July 20, 2010, Bode on November 30, 2010 and on December 31, 2010, we closed International Strategies.
Prior to our sales of SafirRosetti, Preparedness Services, Fraud and SIU Services and Bode and the closure of International Strategies, we reported operating results in three financial reporting segments: Preparedness Services, Fraud and SIU Services, and Security Consulting and Investigations (which was re-named Forensic DNA Solutions and Products following the sale of SafirRosetti). The Preparedness Services segment consisted of the operations of Preparedness Services, which implemented crisis management and emergency response plans and other emergency management issued for governments, corporations and individuals. The Fraud and SIU Services segment consisted of the operations of Fraud and SIU Services and our International Strategies business unit, which provided multidisciplinary, international risk management and business solutions. The Security Consulting and Investigations segment consisted of the operations of SafirRosetti, which provided security and investigative services, and Bode, which provided forensic DNA analysis services. As a result of the sales of these business units, we no longer report operating results in separate segments.
On March 16, 2012, our board of directors (the “Board”) determined that it was in the best interests of our stockholders to change the primary focus of our efforts from that of preparing and analyzing a plan to wind down the Company and distribute cash to stockholders to one of affirmatively pursuing an acquisition strategy for a period of six months, and if unable to effectively identify and conclude a transaction, then reevaluate the acquisition strategy to determine whether we should continue to pursue such acquisition or distribution strategy. Our Board has further reevaluated its strategy and concluded that it would continue to pursue transactions through the near term, which it believes may result in enhanced shareholder value. We are currently evaluating a variety of possible business combinations. We currently do not have any arrangement, agreement or understanding with respect to any such transaction and there can be no assurance that we will be successful in finally evaluating or in concluding one.
We currently intend to utilize our cash, capital stock, debt or a combination of the foregoing in effecting a business combination. A business combination may involve the acquisition of, or merger with, a company which desires to establish a public trading market for its shares, while avoiding what it may deem to be adverse consequences of undertaking a public offering itself. These include time delays, significant expense, loss of voting control and compliance with various Federal and state securities laws. In the alternative, we may seek to consummate a business combination with a company that may be financially unstable or in its early stages of development or growth.
In connection with our pursuit of our business strategy, we have 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.
Selection of a target business and structuring of a business combination
We are currently working with our advisors and third parties to develop profiles of desirable business combination targets. We anticipate that target business candidates will be brought to our attention from various unaffiliated sources who may present solicited or unsolicited proposals. Our officers and directors as well as their affiliates may also bring to our attention target business candidates. We do currently have one non-exclusive agreement with an advisor to assist us in our search for a target business.
Our management has unrestricted flexibility in identifying and selecting a prospective target business. In evaluating a prospective target business, our management may consider, among other factors, any of the following:
• financial condition and results of operation;
• growth potential;
• experience and skill of management and availability of additional personnel;
• capital requirements;
• competitive position;
• barriers to entry;
• stage of development of the products, processes or services;
• degree of current or potential market acceptance of the products, processes or services;
• proprietary features and degree of intellectual property or other protection of the products, processes or services;
• regulatory environment of the industry; and
• costs associated with effecting the business combination.
These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination will be based, to the extent relevant, on the above factors as well as other considerations deemed relevant by our management in effecting a business combination consistent with our business objective. In evaluating a prospective target business, we intend to conduct extensive due diligence reviews which will encompass, among other things, meetings with incumbent management and inspection of facilities, as well as review of financial and other information which will be made available to us.
Results of Operations
Continuing Operations
Our continuing operations consist of executive and general corporate functions, consisting principally of salaries and professional fees. These executive and general corporate operations have included services in support of the business units sold including services provided for cash and treasury management, information technology, marketing and business development, employee benefits, general insurance and general transition services. In addition, significant executive and general corporate attention has been focused upon monitoring and managing the collection of the post business unit cash receipts, including notes receivable, working capital adjustments, escrowed purchase price amounts and earnouts, as well as the reviewing of a number of business opportunities.
Operating Expenses
Our selling and marketing expenses primarily include salaries, stock based compensation, as well as travel and other expenses. Our general and administrative expenses consist primarily of salaries, bonuses and stock-based compensation, as well as corporate support expenses such as legal and professional fees, investor relations, human resources, facilities, telecommunication support services and information technology.
Discontinued Operations
As a result of our sales of SafirRosetti, Preparedness Services, Fraud and SIU Services, Bode, and our closing of International Strategies, the results and accounts of these business units are now presented in our financial statements as discontinued operations for the year ended December 31, 2012 and all prior periods, including the gains and losses recognized on the sales of these units. As of December 31, 2012, continuing operations consist solely of our executive and general corporate operations.
GlobalOptions’ Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011
Operating Expenses
There were no selling and marketing expenses for the years ended December 31, 2012 and 2011. General and administrative expenses were $3,650, principally consisting of $1,572 in employee and board compensation and $1,267 in professional fees, for the year ended December 31, 2012, as compared to $2,973 for the year ended December 31, 2011. The increase of $677 was primarily related to an increase in legal and professional fees incurred in connection with identifying and evaluating prospective target businesses, as well as an increase in stock based compensation related to options for the purchase of the Company’s common stock awarded to our two executives on March 16, 2012.
Results of Discontinued Operations
Income from discontinued operations, net of tax, was $9,950 and $2,612 for the years ended December 31, 2012 and 2011, respectively. Income from discontinued operations for the year ended December 31, 2012 consisted principally of the earnout of $10,000 received on the sale of Preparedness Services ($9,699 recognized, net of $301 gain recognized at closing), and $350 of reserves released, net of $99 of legal expenses incurred. Income from discontinued operations for the year ended December 31, 2011 consisted primarily of the receipt of $752 of contingent proceeds related to the sales of the business units, $932 due to the recovery of the income tax provision related the sale of Bode, $478 related to the reversal of escrow reserves no longer required, $333 related to the reversal of working capital and other reserves no longer required, as well as a $94 working capital adjustment related to the sale of Bode.
Net Income (Loss)
Net income (loss) for the year ended December 31, 2012 and 2011 was $6,320 and $(346), respectively. Net income for the year ended December 31, 2012 was comprised of a loss from continuing operations of $3,630 offset by income from discontinued operations of $9,950. Net loss for the year ended December 31, 2011 was comprised of a loss from continuing operations of $2,958 offset by income from discontinued operations, net of tax, of $2,612. The increase in net income is principally the result of the recognition 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.
GlobalOptions’ Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010
Operating Expenses
There were no selling and marketing expenses for the year ended December 31, 2011, as compared to $1,755 for the year ended December 31, 2010, representing a $1,755 decrease, resulting from decreased selling activities due to the sale of business units and discontinuation of operations. General and administrative expenses were $2,973 for the year ended December 31, 2011, as compared to $14,138 for the year ended December 31, 2010. The decrease of $11,165 is attributable decreases in the costs of evaluating strategic alternatives with regard to the sales of the business units, and decreases in professional fees relating to the consummation of the sales of the business units, as well as decreases in payroll and stock based compensation costs, professional fees and depreciation expense on account of scaling back the corporate functions after the sales of the business units.
Results of Discontinued Operations
Income from discontinued operations, net of tax, was $2,612 and $840 for the years ended December 31, 2011 and 2010, respectively. Income from discontinued operations for the year ended December 31, 2011 consists primarily of the receipt of $752 of contingent proceeds related to the sales of the business units, $932 due to the recovery of the income tax provision related the sale of Bode, $478 related to the reversal of escrow reserves no longer required, $333 related to the reversal of working capital and other reserves no longer required, as well as a $94 working capital adjustment related to the sale of Bode. Income from discontinued operations for the year ended December 31, 2010 consisted primarily of operating income of $277, as well as the recovery of an income tax provision of $511.
Net Loss
Net loss for the years ended December 31, 2011 and 2010 was $346 and $15,274, respectively. Net loss for the year ended December 31, 2011 was comprised of a loss from continuing operations of $2,958 and income from discontinued operations, net of tax, of $2,612. Net loss for the year ended December 31, 2010 was comprised of a loss from continuing operations of $16,114 and income from discontinued operations, net of tax, of $840. The decrease in net loss is principally the result of a $2,589 gain on the sale of the business units, and the elimination of operating costs associated with the sale of the business units.
Liquidity and Capital Resources
Our cash and cash equivalents, and short term investments were $18,139 at December 31, 2012. 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 $(4,286) and $(7,412) for the years ended December 31, 2012 and 2011, respectively. Cash used in operating activities for the year ended December 31, 2012 resulted primarily from our loss from continuing operations of $3,630 and our use in operating activities related to changes in operating assets and liabilities of $972, offset by non-cash charges for stock based compensation of $323.
Cash (used in) provided by investing activities was $(1,804) and $9,600 for the years ended December 31, 2012 and 2011, respectively. The cash used in investing activities during the year ended December 31, 2012 consisted principally of our net purchases of short term investments of $14,977, offset by (i) the receipt of $10,000 from Witt Group Holdings, LLC (“Witt Holdings”), representing the earnout payment received in connection with the sale of Preparedness Services, (ii) the receipt of $2,450 representing the full release of funds which had been held in escrow related to the sale of Bode, and (iii) $822 of proceeds from restricted cash equivalents.
Cash provided by (used in) financing activities was $18 and $(19,087) for the years ended December 31, 2012 and 2011, respectively. The net cash used in financing activities for the year ended December 31, 2012 consisted of the receipt of $15 representing the recovery of a stockholder short swing profit, $8 in proceeds related to the exercise of stock options, offset by $5 used for the repurchase of our common stock.
For the year ended December 31, 2012, we have met our cash needs through cash generated by the sales of Preparedness Services and Bode. On January 15, 2012, we received $2,450 as the full release of the escrow that was initially held in connection with the sale of Bode. On February 29, 2012, we received $10,000 from Witt Holdings, representing the earnout payment due us under the Prepared Services Purchase Agreement. At December 31, 2012, we had working capital of $16,962.
As of March 27, 2013, we had a balance of cash and cash equivalents, and short term investments of approximately 16,951. We expect that after retaining a portion of our cash for future operating expenses and working capital, we intend to utilize this cash for due diligence, advisory, transaction and acquisition costs in connection with our plans to consummate a business combination. We also anticipate that we will need to keep a certain amount of funds in reserve to fund the initial operations of the acquired business.
If our cash on hand is not sufficient to consummate a particular business combination, we may need to raise additional capital through the issuance of debt or equity securities to third parties.
Proceeds that we have returned to stockholders
With the net proceeds we have received from the sales of SafirRosetti, Preparedness Services, Fraud and SIU Services and Bode we have made tender offer distributions to our stockholders in the aggregate amount of $22,188.
On December 1, 2010, we commenced a partial tender offer to purchase for cash up to 10,000,000 shares of our common stock at a price of $2.40 per share. The tender offer closed on December 29, 2010, after which we purchased a total of 1,119,978 shares at a cost of $2,688. In addition, during the year ended December 31, 2010, just prior to the aforementioned tender offer, we repurchased in the open market 16,627 shares of our common stock at a cost of $39. On February 7, 2011, our Board approved a new program to repurchase up to $3,000 of our common stock over a period of 18 months, at such times, amounts and prices as we deemed appropriate. This repurchase program ended on April 27, 2011, when we announced our 2011 partial tender offer. Through April 27, 2011, we made no stock repurchases under this program.
On April 27, 2011 we commenced a partial tender offer to purchase up to 7,500,000 shares of our common stock at a price of $2.60 per share, net to the seller in cash, without interest. This tender offer expired on May 25, 2011. In connection with this partial tender offer, we purchased and canceled 7,500,000 shares of common stock at an aggregate cost of $19,650, including $152 of expenses in connection with the tender, offset by $2 in proceeds from the sale of common stock, by a major stockholder, representing the disgorgement of a short swing profit on its sale of our common stock.
On July 21, 2011, our Board approved a new program to repurchase shares of our common stock. The repurchase program was established on August 4, 2011 and was amended on December 14, 2011. During the period October 18, 2011 through March 28, 2013, we repurchased 10,617 shares of our common stock at a cost of $26, under this program.
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 elsewhere within this Annual Report on Form 10-K. Some of our accounting policies require the application of significant judgment by management in the preparation of the consolidated financial statements and, as a result, they are subject to a greater degree of uncertainty. In applying these policies, management uses its judgment to determine the appropriate assumptions to be used in calculating estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. We have identified certain of our accounting policies as the ones that are most important to the portrayal of our consolidated financial condition and results of operations and which require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Our critical accounting policies include the following:
Stock-Based Compensation
We have adopted the fair value recognition provisions Accounting Standards Codification 718 “Compensation-Stock Compensation” (“ASC 718”). Stock-based compensation expense for all share-based payment awards granted after December 31, 2005 is based on the grant-date fair value estimated in accordance with the provisions ASC 718. We recognize these compensation costs over the requisite service period of the award, which is generally the vesting term of the options associated with the underlying employment agreement, where applicable.
ASC 718 also requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience. Prior to the adoption of ASC 718, we accounted for forfeitures as they occurred.
We account for equity instruments issued to non-employees in accordance with the provisions of ASC 718 which requires that such equity instruments be recorded at their fair value on the measurement date, which is typically the date the services are performed. Stock-based compensation for non-employees is accounted for under ASC 718 and is reflected within general and administrative expenses.
Discontinued Operations
We account for our discontinued operations under the provisions of ASC 205-20 “Presentation of Financial Statements - Discontinued Operations”. Accordingly, the results of operations and related charges for discontinued operations with respect to the sales of SafirRosetti, Preparedness Services, Fraud and SIU Services and Bode and the closure of International Strategies, are reflected in net loss discontinued operations. Assets and liabilities of the discontinued operations have been reclassified and are reflected on our Consolidated Balance Sheet as “Current assets of discontinued operations”, “Assets of discontinued operations”, “Current liabilities of discontinued operations” and “Liabilities of discontinued operations”. Additionally, certain corporate overhead costs that were clearly identifiable as costs of the disposed business units were attributed to discontinued operations under the provisions of ASC 205-20.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8.
Item 8. Financial Statements and Supplementary Data.
Our consolidated financial statements and the related notes to the financial statements called for by this item appear under the caption “Index to Consolidated Financial Statements” beginning on Page attached hereto of this Annual Report on Form 10-K.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Table of Contents to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Audit Committee of the Board of Directors and Stockholders
Of GlobalOptions Group, Inc.
We have audited the accompanying consolidated balance sheets of GlobalOptions Group, Inc. and Subsidiaries (the “Company”) as of December 31, 2012 and 2011 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2012, 2011 and 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of GlobalOptions Group, Inc. and Subsidiaries as of December 31, 2012 and 2011 and the consolidated results of its operations and its cash flows for the years ended December 31, 2012, 2011 and 2010 in conformity accounting principles generally accepted in the United States of America.
/s/ Marcum LLP
New York, New York
April 1, 2013
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(dollars in thousands, except per share amounts)
See notes to these consolidated financial statements.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(dollars in thousands, except share and per share amounts)
See notes to these consolidated financial statements.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
For the Year Ended December 31, 2012
(dollars in thousands)
See notes to these consolidated financial statements.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
For the Year Ended December 31, 2011
(dollars in thousands)
See notes to these consolidated financial statements.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For the Year Ended December 31, 2010
(dollars in thousands)
See notes to these consolidated financial statements.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(dollars in thousands)
See notes to these consolidated financial statements.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(dollars in thousands)
See notes to these consolidated financial statements.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
1. Business Organization and Nature of Operations
GlobalOptions, LLC was formed in November 1998 as a limited liability company (“LLC”) in the state of Delaware. On January 24, 2002, the LLC was recapitalized as a Delaware corporation with the name GlobalOptions, Inc. (“GlobalOptions”). On June 24, 2005, GlobalOptions consummated a “reverse merger” transaction with a non-operating public company accounted for as a recapitalization, with the result that on June 24, 2005, GlobalOptions became the subsidiary of a public company. Following the merger, the public company changed its name to GlobalOptions Group, Inc. (“GlobalOptions Group” or the “Company”).
Beginning during the year 2005 and through 2009, in pursuit of the Company’s then existing strategy to build an integrated risk mitigation company, the Company acquired and integrated eight complementary risk mitigation businesses. The Company operated these businesses until they were sold during 2010.
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 (See Note 2 - Basis of Presentation). The Company stated throughout the year ended December 31, 2011 that it intended to return the remaining net proceeds from the sales of the SafirRosetti, Preparedness Services, Fraud and SIU Services and Bode to its stockholders after satisfying existing contractual obligations and establishing appropriate reserves for contingencies and ongoing operating costs. During 2011 and 2012, the Company also stated that it was evaluating possible business combinations and other types of corporate transactions as an alternative to making further liquidating distributions to stockholders. With the net proceeds that the Company has received from the sales of SafirRosetti, Preparedness Services, Fraud and SIU Services and Bode through December 31, 2012, the Company has made two tender offer distributions to stockholders in the aggregate amount of $22,188 and has purchased 27,244 shares of its common stock under stock repurchase programs (See Note 10 - Stockholders’ Equity - Repurchase of Common Stock).
On March 16, 2012 the Company’s board of directors (the “Board”) determined that it was in the best interests of the Company’s stockholders to change the primary focus of its efforts from that of preparing and analyzing a plan to wind down the Company and distribute cash to stockholders, to one of affirmatively pursuing an acquisition strategy for a period of six months. If the Board was unable to effectively identify and conclude a transaction within that time period, the Board would then reevaluate the acquisition strategy to determine whether it should continue to pursue such acquisition or distribution strategy. The Board has reevaluated its strategy and concluded that it would continue to pursue transactions during the near term, which it believes may result in enhanced shareholder value. As of December 31, 2012, the Company was evaluating possible business combinations, but does not currently have any arrangement, agreement or understanding with respect to any such transaction and there can be no assurance that it will be successful in finally evaluating or in concluding one.
2. Basis of Presentation
As a result of the sales of SafirRosetti, Preparedness Services, Fraud and SIU Services, Bode and the closing of International Strategies, the consolidated balance sheets as of December 31, 2012 and 2011, the consolidated statements of operations for the years ended December 31, 2012, 2011 and 2010 and the consolidated statements of cash flows for the years ended December 31, 2012, 2011 and 2010, present the results and accounts of these business units as discontinued operations. All prior periods presented in the consolidated statements of operations and the consolidated statements of cash flows discussed herein have been restated to conform to such presentation.
Prior to the Company’s sales of SafirRosetti and entry into agreements to sell Preparedness Services, Fraud and SIU Services and Bode, the Company reported its operating results in three financial reporting segments: Preparedness Services; Fraud and SIU Services; and Security Consulting and Investigations (which was re-named Forensic DNA Solutions and Products following the sale of SafirRosetti). The Preparedness Services segment consisted of the operations of Preparedness Services, which provided emergency response plans for disaster mitigation, continuity of operations and other emergency management issues for governments, corporations and individuals. The Fraud and SIU Services segment consisted of the operations of Fraud and SIU Services and the International Strategies business unit, which provided multidisciplinary, international risk management and business solutions. The Security Consulting and Investigations segment consisted of the operations of SafirRosetti and Bode, which provided forensic DNA analysis services. As a result of the sale of SafirRosetti and the entry into agreements to sell Preparedness Services and Fraud and SIU Services as of June 30, 2010, the Company determined to cease reporting its operating results in separate segments.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
3. Principles of Consolidation
The consolidated financial statements of the Company include the consolidated financial statements of GlobalOptions, Inc. and up until its sale on November 30, 2010, its former wholly-owned subsidiary, The Bode Technology Group, Inc., or Bode. All material intercompany accounts and transactions are eliminated in consolidation.
4. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses. Actual results could differ from estimated amounts. Significant estimates and assumptions with regard to continuing operations include the carrying value of escrow amounts due related to the sales of the business units, the carrying value of short-term investments, contingent consideration recognized, accruals related to performance based compensation plans, deferred taxes and related valuation allowances, and valuation of equity instruments. The significant estimate and assumption related to discontinued operations related principally to the accruals for discontinued operations. The Company’s management monitors its risks and assesses its business and financial risks on a quarterly basis.
Concentrations of Credit Risk
Cash: The Company maintains its cash with high credit quality financial institutions. At times, cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit. As of December 31, 2012, substantially all of the Company’s funds are held at one financial institution.
Cash Equivalents: The Company considers all short-term investments with a maturity of three months or less when purchased to be cash equivalents.
Restricted Cash Equivalents - Deferred Compensation
Restricted cash equivalents - deferred compensation - included cash and money market funds held in a rabbi trust under a nonqualified deferred compensation arrangement (the “Deferred Compensation Arrangement”) established in connection with compensation earned by the Company’s Chief Financial Officer upon the sale of Preparedness Services. The plan participant’s account was comprised of the Company’s contribution to the trust on behalf of the participant. The restricted cash held in the rabbi trust was considered an asset available for sale and was reported at fair value with an offsetting liability included in deferred compensation in the accompanying Consolidated Balance Sheet. The earnings on the investments were recorded in interest income in the accompanying Consolidated Statements of Operations. During the years ended December 31, 2012, 2011 and 2010, earnings on these investments were immaterial. The fair value of the investment of the Deferred Compensation Arrangement was $822 at December 31, 2011. On July 31, 2012, the remaining funds held in the rabbi trust under the Deferred Compensation Arrangement were disbursed to the Company’s Chief Financial Officer (See Note 7 - Deferred Compensation).
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, which approximates amortized cost at December 31, 2012. On December 31, 2012, the Company’s short-term investment consisted of a U.S. Treasury Bill, purchased at a cost of $14,984, and which matures on October 17, 2013. Accretion of discounts on the U.S. Treasury Bills, which was $5 for the year ended December 31, 2012, is included in interest income.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
4. 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 asset’s 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 a fair value on a recurring basis.
Operating Expenses
Selling and marketing expenses primarily include salaries, stock based compensation, as well as travel and other 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.
Income Taxes
The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of such assets and liabilities. The Company establishes a valuation allowance for certain deferred tax assets.
Deferred tax assets pertaining to windfall tax benefits on exercise of non-qualified stock options and the corresponding credit to additional paid-in capital are recorded if the related tax amount either reduces income taxes payable or results in an income tax refund. The Company has elected the “with and without approach” regarding ordering of windfall tax benefits to determine whether the windfall tax benefit did reduce income taxes payable or resulted in an income tax refund in the current year. Under this approach, the windfall tax benefits would be recognized in additional paid-in capital only if an incremental income tax benefit is realized after considering all other income tax benefits presently available to the Company.
The Company accounts for uncertain tax positions based upon authoritative guidance that prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also provides direction on derecognition, classification, interest and penalties, accounting in interim periods and related disclosure.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
4. Summary of Significant Accounting Policies, continued
Income Taxes, continued
Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements for the years ended December 31, 2012, December 31, 2011 and December 31, 2010. The tax years ended December 31, 2003 through 2011 remain subject to examination for federal, state, and local income tax purposes by various taxing authorities as of December 31, 2012.
The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses.
Stock-Based Compensation
The Company accounts for equity instruments issued to non-employees in accordance with accounting guidance which requires that such equity instruments are recorded at their fair value on the measurement date, which is typically the date the services are performed. Stock based compensation for non-employees is reflected within general and administrative expenses.
The Company accounts for equity instruments issued to employees in accordance with accounting guidance which requires that awards are recorded at their fair value on the date of grant and are amortized over the vesting period of the award. The Company recognizes compensation costs over the requisite service period of the award, which is generally the vesting term of the options associated with the underlying employment agreement, where applicable.
Discontinued Operations
Included in “Income from discontinued operations net of tax” in the accompanying consolidated statements of operations, are the results, as applicable, for SafirRosetti, Preparedness Services, Fraud and SIU Services, International Strategies and Bode and the respective gains on their disposals (See Note 5- Discontinued Operations). Liabilities of the discontinued operations have been reclassified and are reflected in the accompanying consolidated balance sheets as of December 31, 2012 and 2011 as “Current liabilities of discontinued operations”.
Net Income (Loss) per Common Share
Basic net income (loss) per common share is computed based on the weighted average number of shares of common stock outstanding, as adjusted, during the years presented. Common stock equivalents, consisting of stock options and restricted stock units (“RSUs”) were not included in the calculation of the diluted loss per share because their inclusion would have been anti-dilutive.
Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share, because the effect of their inclusion would have been anti-dilutive.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
4. Summary of Significant Accounting Policies, continued
Subsequent Events
The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
5. Discontinued Operations
Introduction
On April 30, 2010, July 16, 2010, July 20, 2010 and November 30, 2010, the Company completed the sales of SafirRosetti, Preparedness Services, Fraud and SIU Services and Bode, respectively. On December 31, 2010, the Company closed International Strategies. Prior to approving the Company’s entry into the purchase agreements with respect to each such transaction, the Company’s Board of Directors, acting with the advice and assistance of its legal advisors, evaluated the respective purchase agreements and, acting with the advice and assistance of its legal and financial advisors, evaluated the consideration negotiated with the buyers and their representatives. In such evaluations, the Board of Directors considered a number of substantive factors, both positive and negative, and potential benefits and detriments of the specific transaction, including but not limited to the consideration offered, likelihood of consummation, prospects for the business unit going forward, opinion of financial advisors (when provided), and effect on the Company’s cash flows. After careful consideration, the Board of Directors determined that each of the transactions was advisable and in the best interests of the Company and its stockholders and that the form, terms and provisions of the respective transaction documents were expedient and in the best interests of the Company and its stockholders.
As a result of the Company’s sales of SafirRosetti, Preparedness Services, Fraud and SIU Services and Bode, and the Company’s closing of International Strategies, the results and accounts of each of these business operating units are shown as discontinued operations in the Company’s financial statements.
Sale of SafirRosetti
On April 30, 2010, pursuant to the Board of Directors’ approval on April 21, 2010, the Company and GlobalOptions (the “Sellers”) completed the sale of all of the assets used in SafirRosetti in accordance with an asset purchase agreement dated April 23, 2010 (the “SafirRosetti Purchase Agreement”), by and among the Sellers and Guidepost Solutions LLC (“Guidepost”), a subsidiary of SolutionPoint International, Inc. (“SolutionPoint ”), of which Joseph Rosetti, a former officer of SafirRosetti, is a principal.
SafirRosetti delivered specialized security and investigative services to governments, corporations and individuals, and reported the results of its operations as part of the Company’s Security Consulting and Investigations reporting segment, which was re-named Forensic DNA Solutions and Products following the sale of SafirRosetti.
Pursuant to the terms of the SafirRosetti Purchase Agreement, the Sellers sold SafirRosetti to Guidepost for aggregate consideration of (i) $3,500 in cash, subject to certain adjustments, of which $525 was initially held in escrow and then released to the Company in full on October 23, 2011, (ii) a secured promissory note (the “SafirRosetti Note”) in the aggregate face amount of $1,750, with an interest rate of 0.79% per annum of which principal of $875 and interest of $8 was received on December 17, 2010 and principal of $875 and interest of $3 was paid to us on June 30, 2011 and (iii) contingent consideration based on 70% of the purchased accounts receivable in excess of $1,750 collected by Guidepost between the closing and June 30, 2011. Aggregate contingent consideration of $0, $579 and $705 was received and recognized during the years ended December 31, 2012, 2011 and 2010, respectively. On July 28, 2011 the Company received $88 as consideration for SafirRosetti retaining all rights associated with the sold accounts receivable that remained uncollected at June 30, 2011. During the year ended December 31, 2012, the Company recorded $150 of additional gain on the sale of SafirRosetti, in connection with the release of reserves no longer required related to certain working capital items.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
5. Discontinued Operations, continued
Sale of SafirRosetti, continued
In connection with the SafirRosetti Purchase Agreement, the Company entered into a transition service agreement pursuant to which the Company provided Guidepost with certain specified transition services following the closing, including but not limited to certain information technology services. In connection with this agreement, during the year ended December 31, 2010, the Company recorded fees of $58, which were recorded as an offset to general and administrative expenses. The transition services agreement terminated on July 31, 2010. Through December 31, 2012, the Company has recorded a cumulative loss of $387 on the sale of SafirRosetti, pursuant to the following:
During the years ended December 31, 2012, 2011 and 2010, the Company recognized gain (loss) of $150, $732 and ($1,269), respectively, on the sale of SafirRosetti.
Sale of Preparedness Services
On July 16, 2010, pursuant to the Board of Directors’ approval on May 6, 2010, and the Company’s stockholders’ approval on July 15, 2010, the Sellers completed the sale of all assets used in Preparedness Services in accordance with an asset purchase agreement dated May 13, 2010 (the “Preparedness Services Purchase Agreement”), by and among the Sellers and Witt Group Holdings, LLC, (“Witt Holdings”), of which certain of our former officers are principals.
Preparedness Services developed and implemented crisis management and emergency response plans for disaster mitigation, continuity of operations and other emergency management issues for governments, corporations and individuals, and reported the results of its operations in the Company’s Preparedness Services reporting segment.
Pursuant to the terms of the Preparedness Services Purchase Agreement, the Sellers sold Preparedness Services to Witt Holdings for aggregate consideration of (i) $10,006 in cash, of which $1,000 was initially held in escrow and then released to the Company in full on July 26, 2011, (ii) an earnout payment equal to 40% of any revenues over $15,000 earned during the 12-month period following the closing, which payment may not exceed $12,000, (iii) the assumption of all of the Preparedness Services liabilities, including all termination and severance payments due to James Lee Witt, Mark Merritt, Barry Scanlon and Pate Felts under their respective employment agreements, upon the sale of Preparedness Services, less $286, representing a payment in connection with Witt Holdings’ assumption of the lease for Preparedness Services’ Washington D.C. facility and (iv) a working capital adjustment of $1,652 paid on January 14, 2011.
On February 29, 2012, the Company received $10,000 from Witt Holdings, representing the earnout payment due under the Preparedness Services Purchase Agreement. During the year ended December 31, 2010, the Company recognized $301 of this earnout contingent consideration not yet realized, representing the amount which brought the initial gain recognized to $0.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
5. Discontinued Operations, continued
Sale of Preparedness Services, continued
The Sellers had also agreed to pay Witt Holdings (i) a “true-up” of up to $1,000 based on accounts receivable (other than accounts receivable originating from the State of Louisiana or its agencies) that remain uncollected as of six months following the closing, and (ii) the face amount of any uncollected receivables arising from the bankruptcy or dissolution of any non-governmental entity. Witt Holdings had agreed upon such “true-up” payment to transfer to the Sellers all rights with respect to such uncollected receivables. On January 28, 2011, Witt Holdings notified the Company that it would not make a claim for either a “true-up” or bankrupt amount as described in (i) or (ii), herein.
Additionally, in connection with the Preparedness Services Purchase Agreement, the Company entered into (i) a license agreement pursuant to which it granted Witt Holdings a world-wide, perpetual, irrevocable, exclusive, royalty free, fully paid-up right and license to use the Company’s software in the field of emergency preparedness and disaster relief recovery, and the Company agreed not to license the Preparedness Services application of software to any other business in such field, and (ii) a transition service agreement pursuant to which the Company provided Witt Holdings with certain specified transition services following the closing, including but not limited to certain information technology services. In connection with this agreement, during the year ended December 31, 2010, the Company recorded fees of $72, which were recorded as an offset to general and administrative expenses. The transition services agreement terminated on September 30, 2010.
During the year ended December 31, 2011, the Company recognized additional contingent consideration of $167 in connection with certain working capital items.
During the year ended December 31, 2012, the Company incurred legal expenses, which were recorded as an offset to the gain on sale, for its defense and settlement costs in the aggregate amount of $99, in connection with asserted litigation related to the former operations of Preparedness Services. This litigation was settled on June 13, 2012.
Through December 31, 2012, the Company has recorded a cumulative gain of $9,767 on the sale of Preparedness Services, pursuant to the following:
During the years ended December 31, 2012, 2011 and 2010, the Company recognized gain of $9,600, $167 and $0, respectively, on the sale of Preparedness Services.
Sale of Fraud and SIU Services
On July 20, 2010, pursuant to the Board of Directors’ approval on June 10, 2010, the Sellers completed the sale of all assets used in Fraud and SIU Services in accordance with an asset purchase agreement dated June 11, 2010 (the “Fraud and SIU Services Purchase Agreement”), by and among the Sellers and GlobalOptions Services, Inc., a non-related third party (“Global Services”), of which a number of the Company’s former officers are principals.
Fraud and SIU Services provided investigative surveillance, anti-fraud solutions and business intelligence services to the insurance industry, law firms and multinational organizations, and reported the results of its operations in the Company’s Fraud and SIU Services reporting segment.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
5. Discontinued Operations, continued
Sale of Fraud and SIU Services, continued
Pursuant to the terms of the Fraud and SIU Services Purchase Agreement, the Sellers sold Fraud and SIU Services to Global Services for aggregate consideration of (i) $8,340 in cash at closing, inclusive of $34 for an estimated adjustment for working capital and $56 for the purchase real estate lease deposits, of which $825 was initially held in escrow and then released to the Company in full on August 1, 2011, (ii) an additional final post-closing working capital adjustment of $275 which the Sellers received on December 30, 2010, and (iii) the assumption of substantially all of the liabilities of Fraud and SIU Services aggregating $2,978.	
In connection with Fraud and SIU Services being classified as held for sale, during the three months ended June 30, 2010, the Company recorded a charge to discontinued operations of $4,475 to write down the carrying value of the assets of Fraud and SIU Services to fair value.
In connection with the Fraud and SIU Services Purchase Agreement, the Sellers and Global Services entered into (i) certain license agreements pursuant to which the Sellers granted Global Services worldwide, perpetual, irrevocable, exclusive, royalty-free, fully paid-up rights and licenses to certain of the Seller’s intellectual property, including but not limited to the “GlobalOptions” corporate name, logo and websites (all of which Global Services has the right to purchase in the future for nominal consideration), and the Company’s Rapid Data Module and Rapid Video Module software and related source materials that are embedded within the GlobalTrak system for the Fraud and SIU Services business only, and (ii) transition service agreement pursuant to which the Sellers and Global Services will provide each other with certain transition services following the closing. The Company recorded fees of $0 and $0 in connection with this agreement during the years ended December 31, 2011 and 2010, respectively. The term of such transition services agreement was extended until March 31, 2011 and was then terminated.
During the year ended December 31, 2012, the Company recorded $200 of additional gain on the sale of Fraud and SIU Services related to the release of reserves no longer required for a working capital item.
Through December 31, 2012 the Company has recorded a cumulative loss of $20 on the sale of Fraud and SIU Services, pursuant to the following:
During the years ended December 31, 2012, 2011 and 2010, the Company recognized gain (loss) of $200, $189 and ($409), respectively from the sale of Fraud and SIU Services.
Sale of Bode
On November 30, 2010, pursuant to the Board of Directors’ approval on August 10, 2010, and the Company’s stockholders’ approval on November 11, 2010, the Sellers completed the sale of the stock of Bode in accordance with a stock purchase agreement dated August 11, 2010 (“Bode Purchase Agreement”) by and among the Sellers, Bode and LSR Acquisition Corp. (which following a corporate reorganization, became SolutionPoint).
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
5. Discontinued Operations, continued
Sale of Bode, continued
Pursuant to the terms of the Bode Purchase Agreement, the Sellers sold the equity securities and stock of Bode, which constitutes the Company’s Forensic DNA Solutions and Products business unit, to SolutionPoint for aggregate consideration of (i) $24,500 in cash, of which $2,450 was initially held in escrow and then released to the Company in full on January 15, 2012, (ii) an earnout payment equal to 30% of any revenues over $27,000 earned by Bode during the 12-month period following the closing of the sale, which payment may not exceed $5,500, (iii) a cash payment of $500 received on December 17, 2010 in connection with SolutionPoint’s tax election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) and (iv) $2,286 received on July 28, 2011 for the full satisfaction of the working capital adjustment requirements.
The earnout payment was determined to be $0 based upon revenue information that Solution Point has provided to the Company.
In connection with the Bode Purchase Agreement, the Company entered into a transition service agreement pursuant to which the Company provided Bode with certain specified transition services following the closing, including but not limited to certain information technology services. In connection with this agreement, during the years ended December 31, 2012, 2011 and 2010, the Company recorded fees of $0, $76 and $19, which were recorded as an offset to general and administrative expenses. The transition services agreement terminated on March 31, 2011. During the year ended December 31, 2011 the Company recorded (i) a reduction to the provision for income taxes on the sale of Bode on account of the release of $932 of reserves no longer required, (ii) a working capital adjustment of $94 and (iii) $230 for the release of reserves no longer required.
Through December 31, 2012, the Company has recorded a cumulative gain, net of tax, of $3,060 on the sale of Bode, pursuant to the following:
During the years ended December 31, 2012, 2011 and 2010, the Company recognized gain of $0, $1,501 and $1,559, respectively from the sale of Bode.
Funds held in escrow related to the sales of business units
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.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
5. Discontinued Operations, continued
Results of Discontinued Operations
Results and net income from discontinued operations are as follows, reflecting the results of SafirRosetti, Preparedness Services, Fraud and SIU Services, Bode and International Strategies:
There were no assets included in discontinued operations as of December 31, 2012 and 2011. Liabilities included in discontinued operations are as follows:
Accrued expenses and other current liabilities of discontinued operations at December 31, 2012 and 2011 includes $770 and $592, respectively, 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 year end.
6. Accrued Compensation and Related Benefits
A summary of accrued compensation and related benefits is comprised of the following:
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
7. Deferred Compensation
The Company had established a Deferred Compensation Arrangement for the benefit of its Chief Executive Officer and its Chief Financial Officer (See Note 9 - Commitments and Contingencies - Employment Agreements). The deferred compensation was held in a separate trust account, established by the Company to administer the Deferred Compensation Arrangement. The assets of the trust were subject to the claims of the Company’s creditors in the event that the Company became insolvent. The trust qualified as a grantor trust for income tax purposes (known as a “rabbi trust”). The assets of the trust were valued at $822 as of December 31, 2011, and were included in Restricted Cash Equivalents on the accompanying consolidated balance sheet. The liabilities of the Deferred Compensation Arrangement were valued $821 as of December 31, 2011. On July 31, 2012, the remaining funds held in the rabbi trust under the Deferred Compensation Arrangement were disbursed to the Company’s Chief Financial Officer.
8. Income Taxes
Significant components of the Company’s net deferred tax assets at December 31, 2012 and 2011 are as follows:
As of December 31, 2012 and 2011, the Company had approximately $47,160 and $40,617 of federal and state net operating losses (“NOL”), respectively, available for income tax purposes that may be carried forward to offset future taxable income, if any. The federal carryforwards expire in years 2022 through 2032. The Company conducted a change in ownership study in accordance with Section 382 of the Internal Revenue Code (“IRC”) and determined that its ability to use approximately $37,517 of its federal and state NOL carryforwards generated prior to March, 2011 is subject to an annual limitation. Accordingly, the Company has recorded an accounting impairment of its NOL carryforwards with a reduction of approximately $37,517 for the NOL carryovers it would not be able to utilize prior to their expiration, due to the effect of the annual limitation. This impairment resulted in a reduction of $145 and $14,486 in the NOL deferred tax asset for the years ended December 31, 2012, and 2011, respectively.
The valuation allowances related to the Company’s deferred tax assets decreased by approximately $2,267 (of which the valuation allowance related to continuing operations increased by $1,614 and the valuation allowance related to discontinued operations decreased by $3,881) and $15,265 (of which the valuation allowance related to continuing operations decreased by $15,549 and the valuation allowance related to discontinued operations increased by $284) for the years ended December 31, 2012 and 2011, respectively.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
8. Income Taxes, continued
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the loss from continuing operations is as follows:
During the year ended December 31, 2010, as result of the vesting of restricted stock units and certain other share based payment awards, the ultimate tax deduction realized by the Company at the vesting date was substantially lower than the cumulative compensation expense recorded for financial reporting purposes, which is commonly referred to as a “shortfall”. Accordingly, the effective tax rate reconciliation for the year ended December 31, 2010 includes the effect of derecognizing the gross deferred tax asset and the related valuation allowance associated with the book compensation expense of these vested awards and correspondingly, the set-up of the gross deferred tax asset and the corresponding valuation allowance associated with the final tax deduction.
The Company files a consolidated federal income tax return as well as consolidated or separate company income tax returns in 29 state and 2 local jurisdictions in the United States. Currently no income tax returns are under examination.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
9. Commitments and Contingencies
Employment Agreements
Harvey W. Schiller, Ph.D.
The Company entered into a three-year employment agreement with Dr. Schiller, its Chairman and Chief Executive Officer, in January 2004. The agreement was initially amended on December 19, 2006 to extend the term through January 31, 2010; subsequently on August 13, 2009 the term was extended through January 31, 2011 and on January 31, 2010 pursuant to its terms was extended to January 31, 2012. Effective May 11, 2010, the Company modified its employment agreement with Dr. Schiller to induce him to remain with the Company to ensure continuity of corporate operations in the event that he became entitled to terminate his employment agreement as a result of the occurrence of a “change of control,” as defined under his employment agreement, which the Compensation Committee of the Board determined would result from the completion of the sale of Preparedness Services. On December 14, 2010 and again on December 12, 2011 and March 31, 2012, the Company further modified its agreement with Dr. Schiller, principally, to extend the term of Dr. Schiller’s employment with the Company through April 30, 2012, then to July 31, 2012, and then to December 31, 2012 (See Schiller amendment below). Pursuant to the terms of the modified employment agreement which expired on December 31, 2012, Dr. Schiller had the right to terminate his employment agreement if a “change of control” event occurred prior to the end of the term of his employment agreement. A change of control event could have occurred if more than fifty percent of the combined voting power of the outstanding securities of the Company had changed.
The sale of Preparedness Services was completed on July 16, 2010. As a result of this sale, the Company’s employment agreement with Dr. Schiller, as modified (the “Schiller Employment Agreement”), provided that Dr. Schiller will continue to serve as the Company’s Chairman and Chief Executive Officer, and devote the necessary working time and efforts, but less than substantially all of his working time and efforts to the business of GlobalOptions Group. The Schiller Employment Agreement provided for a base salary of $180 per annum, plus certain living expenses through December 31, 2010 and then reduced to $150 per annum through July 31, 2012. In addition to his base salary, in December 2010, Dr. Schiller was awarded a cash bonus of $150 and Dr. Schiller became eligible for a discretionary cash bonus on or before the end of the term.
Additionally, pursuant to the terms of the Schiller Employment Agreement, upon the sale of Preparedness Services, 268,750 shares of restricted stock granted under the 2006 Executive Compensation Performance Bonus Plan (the “Performance Bonus Plan”) and 31,912 restricted stock units (“RSUs”) held by Dr. Schiller became fully vested and non-forfeitable, and the target cash bonus award for the year 2010 was deemed to be earned. Out of the amount of the 2010 award that was deemed earned through the date of the sale of Preparedness Services, $270 was paid on August 13, 2010 and $230 was paid on March 16, 2011. In addition, $1,685 was paid into a “rabbi trust” on August 20, 2010 and was disbursed to Dr. Schiller on July 6, 2011, a date which was six months after his separation of service for any reason (for purposes of Section 409A of the Internal Revenue Code, the deferred compensation rules, which includes a point in time when Dr. Schiller works part-time) representing: (i) salary that would have been earned for the period August 1, 2010 through January 31, 2012; (ii) the target cash bonus for the period January 1, 2011 through January 31, 2012; and (iii) cash in lieu of additional shares of stock, for the number of shares of stock deemed earned upon the vesting of the target stock bonus awards that were in excess of the number of shares of restricted stock previously granted to Dr. Schiller. The Compensation Committee determined that December 31, 2010 was the date of such separation of service for purposes of Section 409A of the Internal Revenue Code.
Dr. Schiller elected to have 113,650 shares, valued at $225, withheld in satisfaction of his tax obligation in connection with the vesting of the restricted stock and RSUs during the year ended December 31, 2010.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
9. Commitments and Contingencies, continued
Employment Agreements, continued
Harvey W. Schiller, Ph., continued
On March 26, 2012, the Company entered into an amendment (the “Schiller Amendment”) to Dr. Schiller’s employment agreement. Pursuant to the Schiller Amendment, the expiration date of Dr. Schiller’s employment with the Company was extended from July 31, 2012 to December 31, 2012. The Schiller Amendment further provided that Dr. Schiller’s base salary shall be increased from $150 per annum to $180 per annum, and provided that, as an inducement to Dr. Schiller to enter into the Schiller Amendment, the Company granted Dr. Schiller an option for the purchase of 125,000 shares of the company’s common stock at an exercise price of $3.05 per share, which vested six months after the grant date with a five year term. The Schiller Amendment further provided that, should the Company have merged or acquired an operating company before December 31, 2012, the Company would have been required to pay to Dr. Schiller as severance a sum equal to 12 months of his part-time base salary ($15 per month) plus all benefits and cash payments accruing throughout those 12 months in a lump sum within 30 days of the date on which Dr. Schiller’s employment with the Company was terminated. The Schiller Amendment further provided that the Company shall reimburse Dr. Schiller for certain professional fees for accounting and legal services relating to the preparation and execution of the Schiller Amendment. The Schiller Employment Agreement, as amended, expired on December 31, 2012. Dr. Schiller continues to be employed as the Company’s Chairman and Chief Executive Officer and receives compensation consistent with that which he had been receiving at the termination of the Schiller Amendment.
Jeffrey O. Nyweide
Effective as of August 1, 2007, Mr. Nyweide and the Company terminated his consulting agreement and entered into an employment agreement providing for Mr. Nyweide’s service as the Company’s Chief Financial Officer, Executive Vice President-Corporate Development, Treasurer and Secretary, reporting to the Chairman of the Board. The employment agreement, which had an initial term through January 31, 2010, was amended on August 13, 2009 to extend its term through January 31, 2011, and pursuant to its terms, on January 31, 2010, was further extended to January 31, 2012. Effective May 11, 2010, the Company modified its employment agreement with Mr. Nyweide to induce him to remain with the Company to ensure the continuity of corporate operations in the event that he became entitled to terminate his employment agreement as a result of the occurrence of a “change of control,” as defined under his employment agreement, which the Compensation Committee determined would result from the sale of Preparedness Services. On December 14, 2010, the Company further modified its agreement with Mr. Nyweide to extend the term of his employment agreement to July 31, 2012 and then on March 31, 2012 to December 31, 2012 (see Nyweide Amendment, below) Pursuant to the terms of the modified employment agreement, which expired on December 31, 2012, Mr. Nyweide had the right to terminate his employment agreement if a “change of control” event had occurred prior to the end of the term of his employment agreement. A change of control event could have occurred if more than fifty percent of the combined voting power of the outstanding securities of the Company changed.
The sale of Preparedness Services was completed on July 16, 2010. As a result of this sale, the Company’s employment agreement with Mr. Nyweide, as modified (the “Nyweide Employment Agreement”), provided that Mr. Nyweide will continue to serve as its Chief Financial Officer and Executive Vice President. Mr. Nyweide received a base salary of $375 per annum for the first eighteen month period of such term and a reduced base salary of $180 per annum for the remaining six months, during which period Mr. Nyweide’s responsibilities were intended to be reduced. In addition to his base salary, Mr. Nyweide earned a performance bonus of $150 in connection with the sale of Preparedness Services ($75 paid on August 11, 2010 and the remainder paid on October 15, 2010), on November 30, 2010, Mr. Nyweide earned a performance bonus of $250 in connection with the sale of Bode ($125 paid on December 10, 2010 and the remainder paid on January 5, 2012.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
9. Commitments and Contingencies, continued
Employment Agreements, continued
Jeffrey O. Nyweide, continued
Additionally, pursuant to the terms of the Nyweide Employment Agreement, upon the sale of Preparedness Services, 201,813 shares of restricted stock granted under the Performance Bonus Plan and 14,093 RSUs held by Mr. Nyweide became fully vested and non-forfeitable, and the target cash bonus award for the year 2010 was deemed to be earned. Out of the amount of the 2010 award that was deemed earned through the sale of Preparedness Services, $202 was paid on August 13, 2010, and the remaining $173 was paid in March 2011. In addition, $821 was paid into a “rabbi trust” on August 23, 2010 to be disbursed to Mr. Nyweide six months after his separation of service for any reason (for purposes of Section 409A of the Internal Revenue Code, the deferred compensation rules, which may include a point in time when Mr. Nyweide works part-time), representing: (i) 50% of the salary and 100% of benefits, including a housing allowance, that would have been earned for the period August 1, 2010 through January 31, 2012; (ii) 50% of the target cash bonus for the period January 1, 2011 through January 31, 2012 ; and (iii) cash in lieu of additional shares of stock for 50% of the number of shares of stock deemed earned upon the vesting of the target stock bonus awards that were in excess of the number of shares of restricted stock previously granted to Mr. Nyweide. The Compensation Committee determined that January 31, 2012 was the date of such separation of service for purposes of Section 409A of the Internal Revenue Code, and the amount held in the rabbi trust was disbursed to Mr. Nyweide on July 31, 2012.
Mr. Nyweide elected to have 72,977 shares, valued at $144, withheld in satisfaction of his tax obligations in connection with the vesting of the restricted stock and RSUs during the year ended December 31, 2010.
On March 26, 2012, the Company entered into an amendment (the “Nyweide Amendment”) to Mr. Nyweide’s employment agreement. Pursuant to the Nyweide Amendment, the expiration date of Mr. Nyweide’s employment with the Company was extended from July 31, 2012 to December 31, 2012. The Nyweide Amendment further provided that, for the period March 1, 2012 through December 31, 2012, the Company paid to Mr. Nyweide a base salary of approximately $31 per month as a full time employee. The Nyweide Amendment provided that, as an inducement to Mr. Nyweide to enter into the Nyweide Amendment, the Company granted Mr. Nyweide an option for the purchase of 75,000 shares of the company’s common stock at an exercise price of $3.05 per share, which vested six months after the grant date with a five year term. The Nyweide Amendment further provided that, should the Company have merged or acquired an operating company before December 31, 2012, the Company would have been required to pay to Mr. Nyweide as severance a sum equal to 12 months compensation at $15 per month, plus all benefits and cash payments accruing throughout those 12 months in a lump sum within 30 days of the date on which Mr. Nyweide’s employment with the Company is terminated (the “Nyweide Severance Payment”). The Nyweide Amendment further provides that the Severance Payment would have been reduced by an amount equal to $15 times the number of completed months worked by Mr. Nyweide from March 1, 2012 to the date of termination due to acquisition or merger. The Nyweide Amendment further provided that the Company reimburse Mr. Nyweide for certain professional fees for accounting and legal services relating to the preparation and execution of the Nyweide Amendment. The Nyweide Employment Agreement as amended, expired on December 31, 2012. Mr. Nyweide continues to be employed as the Company’s Chief Financial Officer, Executive Vice President-Corporate Development, Treasurer and Secretary and receives compensation consistent with that which he had been receiving at the termination of the Nyweide Amendment.
Consulting Agreement
On March 26, 2012, the Company entered into a non-exclusive agreement with a 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. The agreement may be terminated by either party upon thirty (30) days prior written notice. The Company will not be obligated to pay a fee to the financial advisor with respect to an acquisition or financing transaction, unless such a transaction is introduced by the financial advisor and is completed. Fees payable under the agreement apply to qualified transactions consummated within one year following the termination of the agreement.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
9. Commitments and Contingencies, continued
Operating Leases
Effective October 31, 2011, the Company entered into a new lease agreement for office space in New York, New York. Under this agreement, which expires on June 30, 2015, the Company may terminate the agreement at any time, with 90 days advance notice. Effective January 1, 2013, the Company entered into a modification of the lease agreement, reducing the monthly rent to $5 from $12. Future non-cancellable obligations under this agreement are $15.
Rent expense charged to continuing operations amounted to approximately $144, $178 and $198 for the years ended December 31, 2012, 2011 and 2010, respectively.
Litigation, Claims and Assessments
On April 22, 2010 a case was filed against the Company stating that the Company conspired to divert work from the plaintiff. The claims were for $2,400 in this case. This litigation was settled on June 13, 2012 for a cash payment of $23.
On October 2, 2010, the Company, along with others, was notified that it was a defendant in a lawsuit filed by a third party for alleged conversion of assets, tortuous interference and defamation, among other claims. The suit asked for actual and punitive damages totaling $4,200,000. On November 2, 2011, the plaintiffs in this case moved to dismiss the Company from this lawsuit, and the lawsuit was dismissed.
10. Stockholders’ Equity
Description of Authorized Capital
The Company is authorized to issue up to 100,000,000 shares of common stock. The holders of the Company’s common stock are entitled to one vote per share. The holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of legally available funds. Upon liquidation, dissolution or winding-up of the Company, the holders of common stock are entitled to share ratably in all assets of the Company that are legally available for distribution. The holders of common stock have no preemptive, subscription, redemption or conversion rights.
The Company is authorized to issue 15,000,000 of preferred stock, of which 100,000 shares have been designated as Series D convertible preferred stock, and 20,000 shares have been designated as Series A junior participating preferred stock. Shares previously issued for other classes of preferred stock, for which shares are no longer outstanding, have been canceled and returned to undesignated preferred stock that is available for future issuance.
Common Stock Issued
During the years ended December 31, 2011 and 2010, the Company issued 5,557 and 155,561 shares of its common stock, respectively, pursuant to the vesting of RSUs under the Incentive Plan. Of the 155,561 shares issued during the year ended December 31, 2010, 63,825 and 28,187 shares were issued to the Chief Executive Officer and Chief Financial Officer, respectively. The Chief Executive Office and Chief Financial Officer elected to have the Company withhold 24,126 and 9,528 shares, respectively, in satisfaction of their tax obligations in connection with the vesting of these RSUs. Such withheld shares valued at $49 and $20, respectively are reflected as treasury shares in the Company’s books and records.
During the year ended December 31, 2010, the Company issued 26,309 shares of its common stock valued at $45 to Lippert/Heilshorn and Associates for services rendered during 2010.
During the years ended December 2012, 2011 and 2010, the Company issued 4,998, 325,003 and 151,250 shares of its common stock and realized proceeds of $8, $584 and $273, respectively, in connection with the exercise of stock options. During the year ended December 31, 2010, the Company issued 31,289 shares of its common stock under the Amended and Restated 2006 Employee Stock Purchase Plan (the “Stock Purchase Plan”). The Company realized proceeds of $45 and recognized stock based compensation of $16 in connection with the issuance of these shares. No shares were issued under the Stock Purchase Plan during 2011 or 2012.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
10. Stockholders’ Equity, continued
Recovery of Stockholder Short Swing Profit
In February, 2012, the Company was notified by a stockholder that the stockholder had generated short swing profits under the provisions of Section 16(b) of the Exchange Act on its purchases and sales of shares of the Company’s common stock. During the years ended December 31, 2012 and 2011, stockholders made payments to the Company of $15 and $2, respectively, representing the disgorgement of short swing profits. These amounts were recorded as additional paid-in capital.
Restricted Stock Issued Under Performance Based Executive Bonus Plan
On December 19, 2006, the Company awarded 100,000 and 75,000 shares of unvested restricted stock to its Chief Executive Officer and Chief Financial Officer, respectively, in connection with the extension of their respective employment and consulting agreements. On July 24, 2008, the Company awarded an additional 250,000 and 187,500 shares of unvested restricted stock to its Chief Executive Officer and Chief Financial Officer, respectively, in connection with the Performance Bonus Plan.
As a result of the sale of Preparedness, the remaining 268,750 and 201,813 unvested shares held by Dr. Schiller and Mr. Nyweide, respectively, were no longer subject to forfeiture, and 31,912 and 14,094 RSUs became vested, respectively. Dr. Schiller and Mr. Nyweide elected to have the Company withhold 101,588 and 68,212 shares, respectively, in satisfaction of their tax obligations in connection with the vesting of their restricted stock and 12,063 and 4,764 Shares, respectively, in satisfaction of their tax obligations in connection with the vesting of their RSUs. Such withheld shares, valued at $225 and $145, respectively, are reflected as treasury shares in the Company’s books and records. As of September 30, 2010, Dr. Schiller and Mr. Nyweide had no more non-vested shares of restricted stock. (See Note 9 - Commitments and Contingencies - Employment Agreements, for additional discussion regarding these shares.)
Repurchase of Common Stock
On October 28, 2010, the Company’s board of directors authorized the repurchase of up to $3,000 of the Company’s common stock over a period of 18 months, at such times, amounts and prices as the Company deemed appropriate. This program terminated when the Company announced a partial tender offer (the “2010 Tender Offer’ - see below.) During the year ended December 31, 2010, the Company purchased 16,627 shares of its common stock through this common stock buyback program, to be held in treasury, at an aggregate cost of $39.
On February 7, 2011, the Company’s board of directors authorized the repurchase of up to $3,000 of the Company’s common stock over a period of 18 months, at such times, amounts and prices as the Company deemed appropriate. This program terminated when the Company announced its 2011 tender offer (see below). No shares were repurchased under this program.
On July 21, 2011, the Company’s board of directors approved a new program (the “Stock Repurchase Program”) to repurchase shares of the Company’s common stock. The Stock Repurchase Program was established on August 4, 2011 with the authorization to repurchase up to $1,000 of the Company’s common stock over a period of 18 months, at such times, amounts and prices as the Company shall deem appropriate. On December 14, 2011, the Company’s board of directors increased the authorization under this program to repurchase a total of $2,000 of the Company’s common stock. During the years ended December 31, 2012 and 2011, 1,943 and 8,674 shares were repurchased under this program and held in treasury, at an aggregate cost of $5 and $21, respectively.
Tender Offers
On December 1, 2010, the Company commenced the 2010 Tender Offer for the purchase of up to 10,000,000 shares of its common stock at a price of $2.40 per share, net to the seller in cash, without interest. The tender offer expired on December 29, 2010. During the year ended December 31, 2010, the Company purchased and canceled 1,119,978 shares of common stock at an aggregate cost of $2,688.
On April 27, 2011 the Company commenced a partial tender offer to purchase up to 7,500,000 shares of its common stock at a price of $2.60 per share, net to the seller in cash, without interest (the “2011 Tender Offer”.) The 2011 Tender Offer expired on May 25, 2011. In connection with the 2011 Tender Offer, the Company purchased and canceled 7,500,000 shares of common stock at an aggregate cost of $19,650, including expenses of $152 related to the 2011 Tender Offer, offset by $2 of proceeds received from a major stockholder representing the disgorgement of a short swing profit on its sale of the Company’s stock.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
10. Stockholders’ Equity, continued
Stockholder Rights Plan
On September 7, 2010, the Company entered into a stockholder rights plan, dated as of September 7, 2010 (the “Rights Agreement”), with Continental Transfer & Trust Company (“Continental”), as rights agent.
On September 7, 2010, in connection with the Company’s entry into the Rights Agreement, the Board of Directors authorized the issuance of one right (a “Right”) to purchase one one-thousandth of a share of the Company’s Series A Junior Participating Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”), at a purchase price of $4.10 (as may be adjusted from time to time as provided in the Rights Agreement) for each share of the Company’s outstanding common stock to stockholders of record as of the close of business on September 17, 2010. The Rights will expire on September 7, 2013.
On March 26, 2012, the Company entered into a First Amendment to Rights Agreement (the “First Amendment”) with Continental Stock Transfer and Trust Company (“Continental”), as rights agent, to amend the definition of “Acquiring Person” contained in Section 1 of the Rights Agreement to lower the threshold for qualifying as an Acquiring Person to Beneficial Ownership, alone or together with all Affiliates and Associates of such Person, of more than 10% of the Common Shares then outstanding, and to make other conforming changes (each of Person, Affiliates, Associates, Beneficial Ownership and Common Shares as defined in the Rights Agreement).
Limited Waiver of Rights Agreement and Stockholder Support Agreement
On October 27, 2010, the Company waived the provisions of the Rights Agreement for a certain large stockholder (the “Stockholder”) of the Company (the “Stockholder Exemption”). On the close of business as of that day, the Stockholder owned an aggregate of 5,766,324 shares of the Company’s stock, or approximately 40% of the common stock outstanding. In connection with this purchase, the Company entered into a support agreement with the Stockholder, the principal term of which required the Stockholder to vote in favor of the sale of Bode.
On January 19, 2012, the Company’s board of directors adopted a resolution to: (i) withdraw the Stockholder Exemption granted to the Stockholder on October 27, 2010 pursuant to the terms of Rights Agreement, dated September 7, 2010 and (ii) supersede the Stockholder Exemption with a new exemption (the “New Stockholder Exemption”) for a new stockholder (the “New Stockholder”), as described below.
The New Stockholder Exemption provided that the New Stockholder shall not be deemed an “Acquiring Person” for the purposes of the Rights Agreement unless and until either of the following occurs at any time after January 19, 2012: (i) the New Stockholder acquires beneficial ownership of an additional one percent (1%) or more of the then outstanding shares of common stock of the Company, other than as a result of a stock dividend, stock split or similar transaction effected by the Company in which all holders of common stock are treated equally, or (ii) any other Person (as defined under the Rights Agreement) who is the beneficial owner of shares of common stock of the Company representing one percent (1%) or more of the then outstanding shares of common stock of the Company becomes an Affiliate or Associate of the New Stockholder.
On March 27, 2012, the Company entered into a support agreement (the “Genesis Support Agreement”) with Genesis Capital Advisors LLC, a Delaware limited liability company, Genesis Opportunity Fund, L.P., a Delaware limited partnership, and Genesis Asset Opportunity Fund, L.P., a Delaware limited partnership (collectively, the “2012 Stockholder”). Pursuant to the Genesis Support Agreement, the 2012 Stockholder agreed to vote all of the shares of the Company’s common voting stock owned by the 2012 Stockholder in favor of the election of all director nominees recommended by the Board at the Company’s 2012 Annual Meeting (the “Annual Meeting”).
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
10. Stockholders’ Equity, continued
Limited Waiver of Rights Agreement and Stockholder Support Agreement, continued
The Genesis Support Agreement also provided that, as a condition to the 2012 Stockholder’s obligations thereunder, the Board would adopt certain resolutions providing that (i) the Stockholder, together with its affiliates, will not be deemed to be an “Acquiring Person” for the purposes of that certain Rights Agreement, dated as of September 7, 2010, as amended (such amendment is described below) (the “Rights Agreement”), by and between the Company and Continental, as rights agent, unless and until the 2012 Stockholder becomes the “Beneficial Owner” (as defined under the Rights Agreement) of more than 35% of the Company’s outstanding common stock, and (ii) that the Board approve, solely for the purposes of Section 203 of the Delaware General Corporation Law, the acquisition of additional shares of the Company’s common stock by the 2012 Stockholder. The Genesis Support Agreement also provides that if at any time the 2012 Stockholder beneficially owns less than 25% of the Company’s common stock and then at any time it increases its beneficial ownership over 25% it would be deemed an “Acquiring Person” and if at any time the 2012 Stockholder beneficially owns less than 10% of the Company’s common stock then at any time it increases its beneficial ownership over 10% it would be deemed an “Acquiring Person”.
Pursuant to its obligations under the Genesis Support Agreement and as a further inducement for the 2012 Stockholder to enter into the Genesis Support Agreement, the Company, concurrently with the execution of the Genesis Support Agreement, entered into a Registration Rights Agreement with the 2012 Stockholder pursuant to which the Company agreed to register the resale of the shares of the Company’s common stock owned by the 2012 Stockholder (See Note 10 - Stockholder’s Equity - Registration Rights Agreement, below).
Pursuant to the Genesis Support Agreement, the Board expanded its size to a total of six (6) members and appointed two designees of the 2012 Stockholder (the “Stockholder Designees”) to serve as directors on the Board. The Board is further obligated to nominate and recommend the election of the Stockholder Designees, and to solicit proxies to such effect. The Genesis Support Agreement further provides that, should the 2012 Stockholder beneficially own less than 22% of the common stock of the Company, the 2012 Stockholder shall only retain authority to appoint one Stockholder Designee to the Board. In such case, the Board shall no longer be obligated to nominate and recommend the election of more than one Stockholder Designee and shall not be obligated to solicit proxies or otherwise promote the election to the Board of such Stockholder Designee. The Genesis Support Agreement further provides that, should the 2012 Stockholder beneficially own less than 10% of the common stock of the Company, the 2012 Stockholder shall retain no authority to appoint any Stockholder Designees to the Board. In such case, the Board shall no longer be obligated to nominate and recommend the election of any of the Stockholder Designees and shall not be obligated to solicit proxies or otherwise promote the election to the Board of any Stockholder Designee. Additionally, the 2012 Stockholder agreed to certain standstill restrictions, effective as of the date of the Genesis Support Agreement and expiring on the earlier of 18 months following the execution of the Genesis Support Agreement or the consummation of a change of control of the Company and certain restrictions on transfer of certain of the shares owned by them.
Series A Junior Participating Preferred Stock
On September 7, 2010, the Company filed a certificate of designation with the State of Delaware authorizing the designation of a total of 20,000 shares of Series A Preferred Stock.
Voting Rights
No voting rights shall attach to the Series A Preferred Stock.
Liquidation Rights
In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company, no distribution shall be made to the holders of any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
10. Stockholders’ Equity, continued
Dividends
Subject to the superior rights of the holders of shares of any other series of preferred stock or other class of capital stock of the Company ranking superior to the shares of Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of the assets of the Company legally available therefor, dividends payable in cash on the payment date for each cash dividend declared on the shares of common stock of the Company in an amount per whole share (rounded to the nearest cent) equal to the formula then in effect (as described in the Series A preferred stock certificate designations) times the cash dividends then to be paid on each share of common stock.
Registration Rights Agreement
Pursuant to its obligation under the Genesis Support Agreement, on March 27, 2012, the Company entered into a Registration Rights Agreement with the 2012 Stockholder (the “Registration Rights Agreement”), pursuant to which the Company agreed to register for resale the shares of common stock held by the 2012 Stockholder by no later than April 30, 2012. The Registration Rights Agreement further obligates the Company to use commercially reasonable efforts to cause any registration statement filed pursuant to the Registration Rights Agreement to be declared effective within 150 days following the date of the Registration Rights Agreement, and to remain effective under the Securities Act until the earlier of (i) such time as all of the 2012 Stockholders’ shares of the Company’s common stock registered by any such registration statement have been sold, or (ii) three years from the effective date of the Agreement. Pursuant to such Registration Rights Agreement, on April 17, 2012, the Company filed a registration statement with the Securities and Exchange Commission on Form S-1 to register 3,311,086 shares for resale, including the shares required to be registered pursuant to the Registration Right Agreement. The Securities and Exchange Commission declared the registration effective on June 13, 2012.
The Registration Rights Agreement obligates the Company to bear all fees and expenses incident to the performance of and compliance with its obligations under the Registration Rights Agreement regardless of whether or not any securities are sold pursuant to any registration statement filed pursuant to the Registration Rights Agreement. The Company is obligated to indemnify, defend and hold harmless any stockholder or affiliates, directors or employees thereof, for losses, claims, damages, liabilities and costs arising from violations of the law or the agreement, or any misstatement or omission of a material fact, perpetrated by the Company relating to any registration statement filed pursuant to the Registration Agreement. The 2012 Stockholder is obligated to indemnify, defend and hold harmless the Company and its directors, employees and agents for losses arising from any misstatement or omission of a material fact perpetrated by the Stockholder relating to any registration statement filed pursuant to the Registration Rights Agreement.
11. Stock Based Compensation
On July 24, 2008, at the Company’s 2008 Annual Meeting of Stockholders (the “2008 Annual Meeting”), stockholders approved the Amended and Restated 2006 Long-Term Incentive Plan (the “Incentive Plan”), which became effective immediately following its approval and replaced the Company’s original 2006 Long-Term Incentive Plan. The Incentive Plan provides for the issuance of up to 3,000,000 shares of the Company’s common stock. 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 December 31, 2012, 1,407,342 shares of common stock remain eligible to be issued under the Incentive Plan.
At the 2008 Annual Meeting, stockholders approved the Amended and Restated Employee Stock Purchase Plan (the “Stock Purchase Plan”), which became effective immediately following its approval and replaced the Company’s original 2006 Employee Stock Purchase Plan. The Stock Purchase Plan permits eligible employees of the Company to automatically purchase at the end of each month at a discounted price, a certain number of shares of the Company’s common stock by having the effective purchase price of such shares withheld from their base pay. The Stock Purchase Plan provides for the issuance of up to 2,000,000 shares of the Company’s common stock, increased from 250,000 under the Company’s original 2006 Employee Stock Purchase Plan. On August 20, 2008, the Company filed a registration statement on Form S-8 under the Securities Act covering 1,750,000 shares reserved for issuance under the Stock Purchase Plan.
As of December 31, 2012, 1,877,612 shares of common stock remain unissued under the Stock Purchase Plan.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
11. Stock Based Compensation, continued
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 and directors was approximately $323, $12, and $2,141 for the years ended December 31, 2012, 2011 and 2010, respectively. For the years ended December 31, 2012, 2011 and 2010, respectively, stock based compensation for employees of $0, $0 and $205 was reflected in selling and marketing expenses, and $323, $12 and $1,936 respectively, was reflected in general and administrative expenses.
Equity instruments issued to non-employees are recorded at their fair value on the grant date. The non-vested portions of the award are adjusted based on market value on a quarterly basis and the adjusted value of the award is amortized over the expected service period. Stock based compensation for non-employees was approximately $0, $0 and $184 for the years ended December 31, 2012, 2011 and 2010, respectively and was reflected in general and administrative expenses.
The following table summarizes total stock based compensation costs for the years ended December 31, 2012, 2011 and 2010.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
11. Stock Based Compensation, continued
Stock Options
The fair value of each option grant during the years ended December 31, 2012 and 2010 was estimated on the date of grant using the Black-Scholes option pricing model. No stock options were granted during the year ended December 31, 2011. The weighted average of the assumptions used to compute the grant date value of the options granted during the years ended December 31, 2012 and 2010 were as follows:
The expected life of options granted was calculated using the simplified method set out in SEC Staff Accounting Bulletin No. 110 using the vesting term of 3 years and the contractual term of 5 years. The simplified method defines the expected life as the average of the contractual term and the vesting period.
The weighted average fair value of the options on the date of grant, using the fair value based methodology for years ended December 31, 2012 and 2010 was $1.61 and $1.06 per share, respectively.
On January 1, 2010, the Company granted, in the aggregate, options for the purchase of 75,000 shares of its common stock at an exercise price of $1.65 per share, under the Incentive Plan, to three members of the Board of Directors. The options have a five year term and vest ratably at the end of each of the four quarterly periods following the date of grant. In the aggregate, these options have a fair value of approximately $80 utilizing the Black-Scholes option pricing model and the following assumptions: expected life of three years; volatility of 103.2%; dividends of 0%; and a risk free interest rate of 2.69%.
On January 1, 2010, the Company granted, in the aggregate, options for the purchase of 100,000 shares of its common stock at an exercise price of $1.65 per share, under the Incentive Plan, to certain members of its advisory boards in exchange for their advisory services to the Company. The options have a five year term and vest ratably at the end of each of the four quarterly periods following the date of grant. The options have a grant date value of approximately $106 utilizing the Black-Scholes option pricing model with the following assumptions used: expected life of three years; volatility of 103.2%; dividends of 0%; and a risk free interest rate of 2.69%.
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 $323 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%.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
11. Stock Based Compensation, continued
Stock Options, continued
At December 31, 2012, 2011 and 2010 the unamortized fair value of employee stock options outstanding was approximately $0, $1 and $29, respectively. For the years ended December 31, 2012, 2011 and 2010 costs of approximately $323, $13 and $82 respectively, were recognized in connection with the vesting of these employee stock options.
A summary of the status of the Company’s stock option plans and the changes during the years ended December 31, 2012, 2011 and 2010, respectively, is presented in the table below:
Restricted Stock Units (“RSUs”)
On May 28, 2008, the Company issued an offer to holders of outstanding stock options issued prior to January 1, 2008 (“Eligible Options”), to exchange their Eligible Options for RSUs on a 3 for 1 basis. Each RSU represented one share of the Company’s common stock to be issued in the future, based on certain time-based vesting requirements. The offer expired on June 25, 2008. As result of this offer, on June 26, 2008, 1,105,188 stock options were accepted for exchange and cancellation, and the Company issued 368,475 RSUs with a grant date fair value of $2.12 per share to participants in the offer. The grant date fair value of the restricted stock units was determined by using the closing price of the Company’s common stock on the day immediately preceding the grant date.
All of the Company’s executive officers and directors participated in the exchange offer, and as a group, accounted for approximately 78% of the stock options exchanged and cancelled and RSUs issued in the offer.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
11. Stock Based Compensation, continued
Restricted Stock Units (“RSUs”), continued
The excess of the aggregate grant date fair value of the RSUs of $781 over the fair value of the stock options canceled of $672 was added to the unamortized value of the options canceled on May 28, 2008, which amounted to $2,863 and was amortized over the vesting period of the RSUs.
RSUs held by executive officers and directors vested ratably on each of the first, second and third anniversaries of the grant date. RSUs held by all other employees and consultants vested ratably on the first and second anniversaries of the grant date. As of December 31, 2012, all RSU’s were fully vested.
At December 31, 2012, there are no unamortized expenses remaining related to the value of RSUs. For the years ended December 31, 2012, 2011 and 2010, a cost of $0, $0 and $582, respectively, was recognized in connection with the vesting of these employee RSUs.
A summary of the activity related to RSUs for the years ended December 31, 2011 and 2010 are presented below:
Stock Purchase Plan
The Stock Purchase Plan was established for eligible employees to purchase shares of the Company’s common stock on a monthly basis at 85% of the lower of the market value of the Company’s common stock on the first or last business day of each month. Under the Stock Purchase Plan, employees may authorize the Company to withhold up to 15% of their compensation during any monthly offering period for common stock purchases, subject to certain limitations. The Stock Purchase Plan was implemented during July 2008 and is qualified under Section 423 of the Internal Revenue Code. For the year ended December 31, 2010, 31,289 shares were issued under the Stock Purchase Plan, resulting in total proceeds of $45. Stock based compensation recognized in connection with the issuance of these shares was $16 for the year ended December 31, 2010. There were no shares issued for the years ended December 31, 2012 or 2011 related to the Stock Purchase Plan.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
11. Stock Based Compensation, continued
Restricted Stock Issued Under Performance Based Executive Bonus Plan
On December 19, 2006, the Company awarded 175,000 shares of restricted stock to two senior officers under the terms of the renewal of their respective employment and consulting agreements.
On July 24, 2008 the Company awarded 250,000 and 187,500 shares of unvested restricted stock to its Chief Executive Office and Chief Financial Officer, respectively, in connection with the 2006 Executive Compensation Performance Bonus Plan.
During the year ended December 31, 2010, in connection with expected performance under a bonus program for senior executives, stock-based compensation of approximately $1,468 was recognized for the vesting of restricted stock (See Note 9 - Commitments and Contingencies - Employment Agreements, for additional discussion regarding these shares).
12. Defined Contribution Plan
The Company has a 401(k) profit sharing plan (the “401(k) Plan”), covering employees who have completed three months of service and meet certain other eligibility requirements. The 401(k) Plan provides for a discretionary matching contribution by the Company, based on employee elective deferrals, determined each payroll period. The 401(k) Plan also provides for an employer discretionary profit sharing contribution. Employees vest at a rate of 25% per year in discretionary employer contributions. The 401(k) Plan expense attributable to continuing operations amounted to approximately $16, $12 and $37 for the years ended December 31, 2012, 2011 and 2010, respectively.
13. Amendments to Bylaws
On January 19, 2012, the Board approved certain amendments to the Bylaws of the Company, (the “Bylaw Amendments”), which became effective immediately upon its adoption by the Board. The Bylaw Amendments: (i) add certain procedural requirements with respect to stockholder action by written consent in lieu of a meeting, consisting of (a) clarifying provisions related to the record date, (b) requiring that an inspector of election reviews and certifies written consents and (c) providing certain requirements with respect to the dating of written consents; (ii) clarify that the Board has the sole ability to fill vacancies on the Board resulting from removal and newly created directorships resulting from any increase in the authorized number of directors; and (iii) increase the requisite percentage of stockholders required to approve a Bylaw amendment to 75% of the votes entitled to be cast at any annual election of directors from a majority of such votes.
14. Changes to Board of Directors
On September 30, 2012, upon the resignation of Mr. Eli Dominitz and Mr. Kenneth Polinsky from the Board of Directors, the Company appointed Mr. Ethan Benovitz and Mr. Daniel Saks to serve on the Board.
GLOBALOPTIONS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands except share and per share amounts)
15. Subsequent Events
Employment Agreements
Harvey W. Schiller, Ph.D.
On March 31, 2012, 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 $300,000, with the fee paid in shares of common stock equal to $300,000 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.
Jeffrey O. Nyweide
On March 31, 2012, 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 $250,000, with the fee paid in shares of common stock equal to $250,000 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.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A.
Item 9A. 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 timely decisions regarding required disclosure. Disclosure controls and procedures include many aspects of internal control over financial reporting.
Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at December 31, 2012.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting refers to a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our Board, management and other personnel, 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, including those policies and procedures that:
·pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
·provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.
It should be noted, however, that because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of the prevention or detection of misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the preparation of this Annual Report on Form 10-K for the year ended December 31, 2012, management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures and internal controls over financial reporting, pursuant to Rule 13a-15 under the Exchange Act, based on criteria for effective internal control over financial reporting described in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our internal control over financial reporting was effective as of December 31, 2012.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls or in other factors that could significantly affect these controls, during our fourth quarter ended December 31, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Item 9B. Other Information
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 $300,000, with the fee paid in shares of common stock equal to $300,000 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.
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 $250,000, with the fee paid in shares of common stock equal to $250,000 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.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth information regarding the members of our Board and our executive officers. Harvey W. Schiller, Ph.D. and Per-Olof Lööf became directors and officers on June 24, 2005. John P. Bujouves was subsequently appointed to the Board on June 27, 2005, John P. Oswald on January 28, 2008, Ethan Benovitz on September 20, 2012, and Daniel Saks on September 20, 2012. All directors hold office until the next annual meeting of shareholders and the election and qualification of their successors. Officers are elected annually by the Board and serve at the discretion of the Board.
Name
Age
Position
Executive Officers and Directors
Harvey W. Schiller, Ph.D.
Chairman of the Board of Directors and Chief Executive Officer
Jeffrey O. Nyweide
Chief Financial Officer, Executive Vice President-Corporate Development, Treasurer and Secretary
Per-Olof Lööf
Vice Chairman of the Board of Directors, Member of the Audit, Compensation, and Nominating Committees
John P. Oswald
Director and Chairman of the Audit, Compensation and the Nominating Committees
John P. Bujouves
Director, Member of the Audit, Compensation, and Nominating Committees
Ethan Benovitz
Director
Daniel Saks
Director
The business experience for the past five years (and, in some instances, for prior years) of each of our directors, officers and key employees are as follows:
Harvey W. Schiller, Ph.D. has been our Chairman of the Board and Chief Executive Officer since June 2005. He also serves as the Vice Chairman and President of the Sports, Media, and Entertainment Practice of Diversified Search Odgers Berndtson, one of the top executive search firms in the U.S. Dr. Schiller had been Chairman of the Board of privately-held GlobalOptions, Inc. since February 2004. Prior to joining GlobalOptions, Dr. Schiller served as Chairman of Assante U.S., a provider of financial and life management products and services, from 2002 to 2004. Prior to joining Assante, he was Chairman and Chief Executive Officer of YankeeNets from 1999 to 2002. His previous experience includes President of Turner Sports, Inc., Executive Director and Secretary General of the United States Olympic Committee and Commissioner of the Southeastern Conference. Prior to joining the United States Olympic Committee, Dr. Schiller served for more than 25 years in the United States Air Force, achieving the rank of Brigadier General. Dr. Schiller is a former partner in QuanStar Group, a management consulting firm in New York, and a former advisory partner of Millennium Technology Value Partners, L.P.
Jeffrey O. Nyweide has been our Chief Financial Officer, Executive Vice President-Corporate Development, Treasurer and Secretary since June 2005. Mr. Nyweide had been Chief Financial Officer and Executive Vice President-Corporate Development of privately-held GlobalOptions, Inc. since April 2003. Mr. Nyweide has been a successful entrepreneur and executive for the past 20 years. Mr. Nyweide has been a Venture Partner with Millennium Technology Ventures, L.P., a New York-based venture capital firm, since 2001. From 1987 to 2000, he co-founded and then grew Dataware Technologies, Inc., a software and services company, as Director, President and Chief Operating Officer, and took the company public. In 1995, he helped found Northern Light Technology LLC. Mr. Nyweide has significant experience in mergers and acquisitions, finance and operations, as well as with establishing international business in Europe and Asia from prior experience as a founder and managing director of Quantum Management in Greenwich, Connecticut and Munich, Germany. In this role he worked with European and United States investment banks and corporations developing merger and acquisition strategies as well as strategic alliances. His previous experience in the services and solutions business also includes sales, marketing and operating experience as an executive with The Service Bureau Company, a subsidiary of Control Data Corporation, in Chicago, Atlanta and Greenwich.
Per-Olof Lööf has been our Vice Chairman of the Board since June 2005. Mr. Lööf had been Vice Chairman of the Board of privately-held GlobalOptions, Inc. since August 2004. Mr. Lööf has been the Chief Executive Officer and a director of Kemet Corporation, a global manufacturer of electronic components/capacitors supplier, since April 2005, and a director of Devcon International Corp., a company with operating divisions in security services, materials and construction, from 2004 to 2009. Prior to joining Kemet, Mr. Lööf was Managing Partner of QuanStar Group from 2003 to 2004. Mr. Lööf has significant experience in acquisition integration efforts through past positions at Sensormatic Electronics Corporation, a manufacturer and provider of electronic article surveillance systems and accessories, where he was President and Chief Executive Officer from 1999 until its acquisition by Tyco International, Ltd. in 2002. Prior to Sensormatic, Mr. Lööf was Senior Vice President at NCR Corporation and Chief Executive Officer of AT&T ISTEL. Mr. Lööf also worked for 12 years at Digital Equipment Corporation as Vice President of Sales and Marketing.
John P. Oswald has been a director since January 2008 and has been appointed Chairman of the Audit Committee, the Compensation Committee and the Nominating Committee. Mr. Oswald has been the President and Chief Executive Officer of the Capital Trust Group, an international merchant/investment bank with offices in London, New York, Washington, D.C. and Beirut, since 1993. Mr. Oswald is responsible for the U.S. operations of Capital Trust Group and its worldwide investment banking operations. His responsibilities have included managing a number of private equity funds, both in U.S. and European markets, which have focused on mezzanine and equity investments ranging from approximately $10 million to $100 million in middle market, private and public companies with revenues from $20 billion to $1 billion. Since 1993, Mr. Oswald has also managed an extensive portfolio of U.S. real estate comprised of office/retail space primarily in suburban areas in the U.S. and Europe. The investment banking/advisory function of Capital Trust Group includes advising clients with respect to mergers and acquisitions, financings and dispositions of holdings in the oil and gas, real estate, entertainment, education, construction, media and communications areas. Mr. Oswald has also been responsible for completing numerous public debt offerings and public issuances of stock for the Capital Trust Group’s portfolio companies and clients. From December 1, 2006 to 2009, Mr. Oswald was the President and Chief Executive Officer of Verus International Group, Ltd., an international merchant bank with offices in New York and Barbados. From 1996 to 2005, Mr. Oswald served as a director of Kirkland’s Inc. From 1986 to 1992, Mr. Oswald was a partner in the international law firm of Lord Day & Lord. He began his career as an accountant at Arthur Andersen & Co. and he is a certified public accountant.
John P. Bujouves has been a director since June 2005. Mr. Bujouves serves as Chairman of Globacor Capital Inc., a Canadian private equity investment firm that invests and holds interests in a wide range of companies, since 1996. From 2003 to 2010, Mr. Bujouves was the President and a director of Bayshore Asset Management Inc., a provider of asset management services, and from 1999 to 2010 was the Chief Executive Officer of Integris Funds Ltd., a Cayman Islands based mutual fund company. From 1998 to 2010 Mr. Bujouves served as Chairman of J&T Bank and Trust, Inc. (formerly known as Bayshore Bank & Trust Corp.), one of Barbados’ largest private banks. Mr. Bujouves is also a director of Safe Storage Depot, a real-estate development company, Numeric Answers Inc., a corporate accounting firm, DLK on Avenue, a cosmetic medical clinic, and the former Chairman of the Ontario Arthritis Society. Mr. Bujouves’ former experience includes directing CIBC’s International Private Banking group in Canada from 1993 to 1996. Prior to that, in 1990, as Managing Partner for Royal Trust International, Mr. Bujouves worked globally and launched Royal Trust Corporation’s first two international offices located in the United States.
Ethan Benovitz was appointed to the Board in September 2012. Mr. Benovitz has been a managing member of Genesis Capital Advisors LLC, a New York based asset management firm, since 2007. From 2004 to 2007, Mr. Benovitz was a director of DKR Oasis Capital Management LP, a multi-strategy hedge fund. Mr. Benovitz previously was an associate in the corporate finance and investment management groups at Schulte Roth & Zabel LLP. Mr. Benovitz earned a J.D. from Harvard Law School and a B.A. from Yeshiva University.
Daniel Saks was appointed to the Board in September 2012. Mr. Saks has been a managing member of Genesis Capital Advisors LLC, a New York based asset management firm, since 2007. From 2004 to 2007, Mr. Saks was a director of DKR Oasis Capital Management LP, a multi-strategy hedge fund, where he managed a portfolio of structured debt and equity investments in small cap and micro cap companies. From 1997 to 2003, Mr. Saks was a founder and general partner of WEC Asset Management LLC, a New York based asset manager. Mr. Saks previously was an associate in the corporate finance group at Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Saks earned an M.B.A. from New York University’s Leonard N. Stern School of Business and a J.D. from New York University School of Law.
Arrangements or Understandings with Respect to Nominations for Election to the Board
Messrs. Benovitz and Saks were appointed to the Board in accordance with the terms of the Support Agreement, dated March 27, 2012 (the “Genesis Support Agreement”), by and among the Company and Genesis Capital Advisors LLC, Genesis Opportunity Fund, L.P., and Genesis Asset Opportunity Fund, L.P. (collectively, “Genesis”). The Genesis Support Agreement provides, among other things, that the Company is required to appoint two designees selected by Genesis (the “Genesis Designees”) to serve on the Board as long as Genesis beneficially owns 22% of the Company’s common stock. Eli Dominitz and Kenneth Polinsky were previously appointed to serve on the Board as the Genesis Designees and, upon their resignation, Genesis selected Messrs. Benovitz and Saks to serve on the Board as the new Genesis Designees.
Director Qualifications
We believe that the collective skills, experiences and qualifications of our directors provide our Board with the expertise and experience necessary to advance the interests of our stockholders. While the Nominating Committee of the Board has not established any specific, minimum qualifications that must be met by each of our directors, it uses a variety of criteria to evaluate the qualifications and skills necessary for each member of the Board. In general, the Nominating Committee expects directors to have broad experience at the policy-making level in business, exhibit commitment to enhancing shareholder value, have sufficient time to carry out their duties and provide insight and practical wisdom based on their past experience. Additionally, we believe that having the highest professional and personal ethics and values, consistent with our longstanding values and standards, is an essential characteristic for our directors.
A brief discussion of the experiences and skills that led to the conclusion is provided below:
·Harvey W. Schiller, Ph.D. The Board believes that, from his military career and as an executive of numerous entities, Dr. Schiller brings to the Board strong leadership and organizational skills and a deep commitment to integrity and excellence.
·Per-Olof Lööf. The Board believes that, as a result of his experiences serving in the role of Chief Executive Officer for multiple companies, Mr. Lööf possesses significant senior management experience and provides the Board with valuable insight on strategic initiatives.
·John P. Oswald. The Board believes that Mr. Oswald’s in-depth knowledge of numerous industries, international business experience and service on the board of directors of several companies provides the Board with important knowledge and perspective on the evaluation of business opportunities.
·John P. Bujouves. The Board believes that Mr. Bujouves provides the Board with extensive business and finance knowledge earned through his significant experience in banking and his service as a member of the board of directors of numerous entities.
·Ethan Benovitz. The Board believes that Mr. Benovitz provides the Board with significant business and financial knowledge, as well as an ability to identify and pursue business opportunities, by virtue of his prior experience as an executive at a private investment company specializing in the analysis of financial transactions.
·Daniel Saks. The Board believes that Mr. Saks’ financial and legal experience will provide a valuable perspective that will augment the Board’s ability to analyze and execute proposed transactions of the type with which the Board may be confronted.
Family Relationships
There are no family relationships among our executive officers and directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers and holders of more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in the ownership of our common stock and other equity securities of ours. Such persons are required to furnish us copies of all Section 16(a) filings.
Based solely upon a review of the copies of the forms furnished to us, we believe that our officers and directors complied with all applicable filing requirements during the 2012 fiscal year except as set forth below:
Form 3s were not timely filed upon the appointment of Mr. Saks and Mr. Benovitz to our Board.
Board Committees
Our Board has three standing committees to assist it with its responsibilities. These committees are described below.
The Audit Committee, which is comprised solely of directors who satisfy the SEC audit committee membership requirements, is governed by a Board-approved charter that contains, among other things, the committee’s membership requirements and responsibilities. The Audit Committee oversees our accounting, financial reporting process, internal controls and audits, and consults with management and our independent registered public accounting firm on, among other items, matters related to the annual audit, the published financial statements and the accounting principles applied. As part of its duties, the Audit Committee appoints, evaluates and retains our independent registered public accounting firm. It maintains direct responsibility for the compensation, termination and oversight of our independent registered public accounting firm and evaluates its qualifications, performance and independence. The committee also monitors compliance with our policies on ethical business practices and reports on these items to the Board. The Audit Committee has established policies and procedures for the pre-approval of all services provided by our independent registered public accounting firm. Our Audit Committee is comprised of Messrs. Oswald, Bujouves and Lööf, and Mr. Oswald is the Chairman of the committee.
The Board has determined that Mr. Oswald, who currently is a member of the Board and chairman of the Audit Committee, is the Audit Committee financial expert, as defined under the Exchange Act, and is independent as defined by the rules of NASDAQ. The Board made a qualitative assessment of Mr. Oswald’s level of knowledge and experience based on a number of factors, including his experience as a certified public accountant for a major accounting firm and financial sophistication from his years managing private investment funds.
The Compensation Committee, which is comprised solely of independent directors, determines all compensation for our Chief Executive Officer; reviews and approves corporate goals relevant to the compensation of our Chief Executive Officer and evaluates our Chief Executive Officer’s performance in light of those goals and objectives; reviews and approves objectives relevant to other executive officer compensation; reviews and approves the compensation of other executive officers in accordance with those objectives; administers our stock option plans; approves severance arrangements and other applicable agreements for executive officers; and consults generally with management on matters concerning executive compensation and on pension, savings and welfare benefit plans where Board or stockholder action is contemplated with respect to the adoption of or amendments to such plans. The committee makes recommendations on organization, succession, the election of officers, consultantships and similar matters where Board approval is required. Our Compensation Committee is comprised of Messrs. Oswald, Bujouves and Lööf. Mr. Oswald is the Chairman of the committee.
The Nominating Committee considers and makes recommendations on matters related to the practices, policies and procedures of the Board and takes a leadership role in shaping our corporate governance. As part of its duties, the committee assesses the size, structure and composition of the Board and its committees, coordinates evaluation of Board performance and reviews Board compensation. The committee also acts as a screening and nominating committee for candidates considered for election to the Board. In this capacity it concerns itself with the composition of the Board with respect to depth of experience, balance of professional interests, required expertise and other factors. The committee evaluates prospective nominees identified on its own initiative or referred to it by other Board members, management, stockholders or external sources and all self-nominated candidates. The committee uses the same criteria for evaluating candidates nominated by stockholders and self-nominated candidates as it does for those proposed by other Board members, management and search companies. Our Nominating Committee is comprised of Messrs. Oswald, Bujouves and Lööf. Mr. Oswald is the chairman of the committee.
Code of Business Conduct and Ethics
We have adopted a Code of Ethics applying to all of our directors, officers and employees. The Code of Ethics is reasonably designed to deter wrongdoing and promote (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, (ii) full, fair, accurate, timely and understandable disclosure in reports and documents filed with, or submitted to, the SEC and in other public communications made by us, (iii) compliance with applicable governmental laws, rules and regulations, (iv) the prompt internal reporting of violations of the Code of Ethics to appropriate persons identified in the Code of Ethics, and (v) accountability for adherence to the Code of Ethics.
A copy of the Code of Ethics is available in the Investor Relations; Corporate Governance, portion of our website, www.globaloptionsgroup.com. Additional copies of the Code of Ethics may be obtained without charge, from us by writing or calling: 415 Madison Avenue, 17th Floor, New York, New York 10017, Attn: Chief Financial Officer, Tel: (212) 445-6261.
Item 11.
Item 11. Executive Compensation
(Dollar amounts in thousands, except per share amounts)
Summary Compensation Table
The following table sets forth information with respect to compensation earned by the named executive officers:
(1)Amount represents the probable value of the award of an option to each of Dr. Schiller and Mr. Nyweide to purchase 125,000 and 75,000 shares of common stock respectively, with and exercise price of $3.05 per share, scheduled vesting of six months and a term of five years.
(2)Amount includes cash payments of $126 for the rental of an apartment in New York City, $15 for the reimbursement of professional fees, and $1 for life insurance.
(3)Amount includes cash payments of $126 for the rental of an apartment in New York City, $13 for the reimbursement of professional fees, and payments toward travel to and from Dr. Schiller’s home.
(4)Amount includes payments of a housing allowance of $108 for the rental of an apartment in New York City, $10 related to a 401(k), reimbursement of professional fees of $20, and $3 for the reimbursement of parking fees.
(5)Amount includes payments of a housing allowance of $108 for the rental of an apartment in New York City, $10 related to a 401(k), reimbursement of professional fees of $13, and $3 for the reimbursement of parking fees.
Employment Agreements and Payments upon a Change of Control
Harvey W. Schiller, Ph.D.
We entered into a three-year employment agreement with Dr. Schiller, our Chairman and Chief Executive Officer, in January 2004. The agreement was initially amended on December 19, 2006 to extend the term through January 31, 2010; subsequently on August 13, 2009 the term was extended through January 31, 2011 and on January 31, 2010 pursuant to its terms was extended to January 31, 2012. Effective May 11, 2010, we again modified our employment agreement with Dr. Schiller to induce him to remain with the Company in the event that he became entitled to terminate his employment agreement as a result of the occurrence of a “change of control,” as defined under his employment agreement, which the Compensation Committee of the Board determined would result from the completion of the sale of Preparedness Services. On December 14, 2010 and again on December 12, 2011 and March 31, 2012, we further modified our agreement with Dr. Schiller, principally, to extend the term of Dr. Schiller’s employment with the Company through April 30, 2012, then to July 31, 2012, and then to December 31, 2012 (see Schiller Amendment, below). Pursuant to the terms of the modified employment agreement which expired on December 31, 2012, Dr. Schiller continued to have the right to terminate his employment agreement if a “change of control” event occurred prior to the end of the term of his employment agreement. A change of control event could have occurred if more than fifty percent of the combined voting power of the outstanding securities of the Company had changed.
The sale of Preparedness Services was completed on July 16, 2010. As a result of this sale, our employment agreement with Dr. Schiller, as modified (the “Schiller Employment Agreement”), provided that Dr. Schiller would continue to serve as our Chairman and Chief Executive Officer through April 30, 2012, and devote the necessary working time and efforts, but less than substantial working time and efforts, to the business of GlobalOptions Group. The Schiller Employment Agreement provided for a base salary of $180 per annum, plus certain living expenses through December 31, 2010 and then reduced to $150 per annum through July 31, 2012. In addition to his base salary, in December 2010, Dr. Schiller was awarded a cash bonus of $150 and Dr. Schiller became eligible for a discretionary cash bonus on or before the end of the term.
Additionally, pursuant to the terms of the Schiller Employment Agreement, upon the sale of Preparedness Services, 268,750 shares of restricted stock granted under the Performance Bonus Plan and 31,912 restricted stock units (“RSUs”) held by Dr. Schiller became fully vested and non-forfeitable, and the target cash bonus award for the year 2010 was deemed to be earned. Out of the amount of the 2010 award that was deemed earned through the date of the sale of Preparedness Services, $270 was paid on August 13, 2010, and the remaining $230 was paid in March 2011. In addition, $1,685 was paid into a “rabbi trust” on August 20, 2010 representing: (i) salary that would have been earned by Dr. Schiller for the period August 1, 2010 through January 31, 2012; (ii) the target cash bonus for the period January 1, 2011 through January 31, 2012; and (iii) cash in lieu of additional shares of stock, for the number of shares of stock deemed earned upon the vesting of the target stock bonus awards that were in excess of the number of shares of restricted stock previously granted to Dr. Schiller. Pursuant to the terms of Dr. Schiller’s employment agreement, all amounts held in rabbi trust were to be paid to Dr. Schiller six months after his separation of service for any reason (for purposes of Section 409A of the Internal Revenue Code, the deferred compensation rules, which may include a point in time when Dr. Schiller works part-time). The Compensation Committee determined that December 31, 2010 was the date of such separation of service for purposes of Section 409A of the Internal Revenue Code, and the $1,685 held in rabbi trust was disbursed to Dr. Schiller on July 6, 2011.
Dr. Schiller elected to have 113,650 shares, valued at $225, withheld in satisfaction of his tax obligation related to the vesting of the restricted stock and RSUs in connection with the sale of Preparedness Services.
On March 26, 2012, we entered into an amendment (“the Schiller Amendment”) to Dr, Schiller’s employment agreement. Pursuant to the Schiller Amendment, the expiration date of Dr. Schiller’s employment with the Company was extended from July 31, 2012 to December 31, 2012. The Schiller Amendment further provided that Dr. Schiller’s base salary shall be increased from $150,000 per annum to $180,000 per annum; and provided that, as an inducement to Dr. Schiller to enter into the Schiller Amendment, Dr. Schiller was granted an option to purchase 125,000 shares of our common stock at an exercise price of $3.05 per share which vested six months after the grant date with a five year term. If Dr. Schiller’s employment with the Company was terminated without cause prior to the vesting period, all options would have vested upon the termination date. The Schiller Amendment further provided that, should we have merged or acquired an operating company before December 31, 2012, we would have been required to pay to Dr. Schiller as severance a sum equal to 12 months of his part-time base salary ($15 per month) plus all benefits and cash payments accruing throughout those 12 months in a lump sum within 30 days of the date on which Dr. Schiller’s employment with the Company was terminated. The Schiller Amendment further provided that we pay to Dr. Schiller certain professional fees for personal accounting and legal fees relating to the preparation and execution of the Schiller Amendment. The Schiller Employment Agreement, as amended, expired on December 31, 2012, and through March 30, 2013, Dr. Schiller has been working for us as our Chairman and Chief Executive Officer without an employment agreement and has been compensated at a base salary consistent with the Schiller Amendment.
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 $300,000, with the fee paid in shares of common stock equal to $300,000 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.
Jeffrey O. Nyweide
Effective as of August 1, 2007, we and Mr. Nyweide terminated his consulting agreement and entered into an employment agreement providing for Mr. Nyweide’s service as our Chief Financial Officer, Executive Vice President-Corporate Development, Treasurer and Secretary, reporting to the Chairman of the Board. The employment agreement, which had an initial term through January 31, 2010, was amended on August 13, 2009 to extend its term through January 31, 2011, and pursuant to its terms, on January 31, 2010, was further extended to January 31, 2012. Effective May 11, 2010, we again modified our employment agreement with Mr. Nyweide to induce him to remain with the Company in the event that he became entitled to terminate his employment agreement as a result of the occurrence of a “change of control,” as defined under his employment agreement, which the Compensation Committee determined would result from the sale of Preparedness Services. On December 14, 2010, we further modified our agreement with Mr. Nyweide to extend the term of his employment agreement to July 31, 2012 and then on March 31, 2012 we extended the term of his employment agreement to December 31, 2012 (see Nyweide Amendment, below). Pursuant to the terms of the modified employment agreement, which expired on December 31, 2012, Mr. Nyweide had the right to terminate his employment agreement if a “change of control” event had occurred prior to the end of the term of his employment agreement. A change of control event could have occurred if more than fifty percent of the combined voting power of the outstanding securities of the Company changed.
The sale of Preparedness Services was completed on July 16, 2010. As a result of this sale, our employment agreement with Mr. Nyweide, as modified (the “Nyweide Employment Agreement”), provided that Mr. Nyweide would continue to serve as its Chief Financial Officer and Executive Vice President through July 31, 2012. Mr. Nyweide received a base salary of $375 per annum for the first eighteen month period of such term and a reduced base salary of $180 per annum for the remaining six months, during which period Mr. Nyweide’s responsibilities were intended to be reduced. In addition to his base salary, Mr. Nyweide earned a performance bonus of $150,000 in connection with the sale of Preparedness Services, of which $75 paid on August 11, 2010 and the remainder paid on October 15, 2010, and on November 30, 2010, Mr. Nyweide earned a performance bonus of $250 in connection with the sale of Bode, of which $125 paid on December 10, 2010 and the remainder was paid on January 5, 2012.
Additionally, pursuant to the terms of the Nyweide Employment Agreement, upon the sale of Preparedness Services, 201,813 shares of restricted stock granted under the Performance Bonus Plan and 14,093 RSUs held by Mr. Nyweide became fully vested and non-forfeitable, and the target cash bonus award for the year 2010 was deemed to be earned. Out of the amount of the 2010 award that was deemed earned through the sale of Preparedness Services, $202was paid on August 13, 2010, and the remaining $173 was paid in March 2011. In addition, $821was paid into a “rabbi trust” on August 23, 2010 to be disbursed to Mr. Nyweide six months after his separation of service for any reason (for purposes of Section 409A of the Internal Revenue Code, the deferred compensation rules, which may include a point in time when Mr. Nyweide works part-time), representing: (i) 50% of the salary and 100% of benefits, including a housing allowance, that would have been earned for the period August 1, 2010 through January 31, 2012; (ii) 50% of the target cash bonus for the period January 1, 2011 through January 31, 2012 ; and (iii) cash in lieu of additional shares of stock for 50% of the number of shares of stock deemed earned upon the vesting of the target stock bonus awards that were in excess of the number of shares of restricted stock previously granted to Mr. Nyweide. The Compensation Committee has determined that January 31, 2012 is the date of such separation of service for purposes of Section 409A of the Internal Revenue Code, and the $821 held in the rabbi trust was disbursed to Mr. Nyweide on July 31, 2012.
Mr. Nyweide elected to have 72,977 shares, valued at $144, withheld in satisfaction of his tax obligations in connection with the vesting of the restricted stock and RSUs in connection with the sale of Preparedness Services.
On March 26, 2012, we entered into an amendment (the “Nyweide Amendment”) to Mr. Nyweide’s employment agreement. Pursuant to the Nyweide Amendment, the expiration date of Mr. Nyweide’s employment with the Company was extended from July 31, 2012 to December 31, 2012. The Nyweide Amendment further provided that, for the period March 1, 2012 through December 31, 2012, Mr. Nyweide would be paid a base salary of approximately $31 per month as a full time employee. The Nyweide Amendment provided that, as an inducement to Mr. Nyweide to enter into the Nyweide Amendment, the Mr. Nyweide was granted an option for the purchase of 75,000 shares of our common stock at an exercise price of $3.05 per share, which vested six months after the grant date with a five year term. The Nyweide Amendment further provided that, should we have merged or acquired an operating company before December 31, 2012, we would have been required to pay to Mr. Nyweide as severance a sum equal to 12 months compensation at $15 per month, plus all benefits and cash payments accruing throughout those 12 months in a lump sum within 30 days of the date on which Mr. Nyweide’s employment with the Company was terminated (the “Nyweide Severance Payment”). The Nyweide Amendment further provides that the Severance Payment would have been reduced by an amount equal to $15 times the number of completed months worked by Mr. Nyweide from March 1, 2012 to the date of termination due to acquisition or merger. The Nyweide Amendment further provided that the Company pay to Mr. Nyweide certain professional fees for personal accounting and legal fees relating to the preparation and execution of the Nyweide Amendment. The Nyweide Employment Agreement as amended expired on December 31, 2012 and through March 30, 2013, Mr. Nyweide has been working for us as our Chief Financial Officer, Executive Vice President - Corporate Development, Treasurer and Secretary without an employment agreement and has been compensated at a base salary consistent with the Nyweide Amendment.
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 $250,000, with the fee paid in shares of common stock equal to $250,000 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 for 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 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.
Benefit Plans
Amended and Restated 2006 Long-Term Incentive Plan
Our 2006 Long-Term Incentive Plan was originally adopted on December 5, 2006. On July 24, 2008, our stockholders approved the Amended and Restated 2006 Long-Term Incentive Plan (the “Incentive Plan”), which became effective immediately following its approval and replaced the original 2006 Long-Term Incentive Plan.
The Incentive Plan provides for the issuance of up to 3,000,000 shares of our common stock, increased from 1,500,000 under the original 2006 Long-Term Incentive Plan. As of March 28, 2013 there are options to purchase 200,000 shares of our common outstanding under this plan. The Compensation Committee has the authority to determine the amount, type and terms of each award, but may not grant awards under the Incentive Plan, in any combination, for more than 625,000 shares of our common stock to any individual during any calendar year, increased from 312,500 under the original 2006 Long-Term Incentive Plan. As of March 28, 2013, 1,407,342 shares remain eligible to be issued under the Incentive Plan.
The Incentive Plan is administered by the Compensation Committee, or in the absence of the Compensation Committee, the entire Board. The Compensation Committee has sole authority to interpret the Incentive Plan and set the terms of all awards, including, without limitation, determining the performance goals associated with performance-based awards, determining the recipients of awards, determining the types of awards to be granted, and the making policies and procedures relating to administration of the Incentive Plan.
The purpose of the Incentive Plan is to allow us to continue to provide incentives to such participants who are responsible for our success and growth, assist us in attracting, rewarding and retaining employees of experience and ability, facilitate the completion of strategic acquisitions, link incentives with increases in stockholder value and to further align participants’ interests with those of other stockholders. In general, the Incentive Plan empowers us to grant stock options and stock appreciation rights, and performance-based cash and stock and other equity based awards, including restricted stock and restricted stock units. The Incentive Plan will also continue to allow us to grant performance-based compensation awards that meet the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), thereby preserving our ability to receive tax deductions for the awards.
The Incentive Plan may be amended, suspended or terminated by the Board, except that (a) no amendment shall be made that would impair the rights of any participant under any award theretofore granted without the participant’s consent, and (b) no amendment shall be made which, without the adoption of our stockholders, would (i) materially increase the number of shares that may be issued under the Incentive Plan, except as the Compensation Committee may appropriately make adjustments; (ii) materially increase the benefits accruing to the participants under the Incentive Plan; (iii) materially modify the requirements as to eligibility for participation in the Incentive Plan; (iv) decrease the exercise price of an option to less than 100% of the Fair Market Value (as defined under the Incentive Plan) per share of common stock on the date of grant thereof; or (v) extend the term of any option beyond ten years.
No award may be granted under the Incentive Plan after the tenth anniversary of the Incentive Plan’s effective date, December 5, 2006.
Amended and Restated 2006 Employee Stock Purchase Plan
Our 2006 Stock Purchase Plan was originally adopted on December 5, 2006. On July 24, 2008, our stockholders approved the Amended and Restated 2006 Employee Stock Purchase Plan (the “Stock Purchase Plan”), which became effective immediately following its approval and replaced the original 2006 Employee Stock Purchase Plan.
The Stock Purchase Plan permits eligible employees to automatically purchase at the end of each month at a discounted price, a certain number of shares of our common stock by having the effective purchase price of such shares withheld from their base pay. The Stock Purchase Plan provides for the issuance of up to 2,000,000 shares of our common stock, increased from 250,000 under the original 2006 Employee Stock Purchase Plan. As of March 28, 2013, 1,877,612 shares remain eligible to be issued under the Stock Purchase Plan.
The Stock Purchase Plan is administered by the Compensation Committee. Pursuant to the terms of the Stock Purchase Plan, the Compensation Committee has the authority to make rules and regulations for the administration of the Stock Purchase Plan.
The purpose of the Stock Purchase Plan is to encourage eligible employees to acquire or increase their proprietary interests in our company through the purchase of shares of our common stock, thereby creating a greater community of interest between our stockholders and our employees.
The Stock Purchase Plan may be amended or terminated by the Board, provided that, without stockholder approval, no such amendment may (a) increase the maximum number of shares that may be issued under the Stock Purchase Plan, (b) amend the requirements as to the class of employees eligible to purchase stock under the Stock Purchase Plan, or (c) permit the members of the Compensation Committee to purchase stock under the Stock Purchase Plan. No termination, modification, or amendment of the Stock Purchase Plan may adversely affect the rights of an employee with respect to an option previously granted to him or her under such option without his or her written consent.
Unless the Stock Purchase Plan is previously terminated by the Board, no additional stock will be available for purchase under the Stock Purchase Plan at the earlier of (a) October 17, 2016, or (b) the point in time when no shares of stock appropriately reserved for issuance are available.
Outstanding Equity Awards at Fiscal Year-End
On March 26, 2012, the Company granted to each of Dr. Schiller and Mr. Nyweide options to purchase 125,000 shares of common stock and 75,000 shares of common stock, respectively which are fully vested at December 31, 2012. The following table presents information regarding unexercised option awards for each named executive officer as of the end of the fiscal year ended December 31, 2012:
Director Compensation
The following table sets forth information with respect to compensation earned by or awarded to each of our Directors who is not a named executive officer and who served on our Board during the fiscal year ended December 31, 2012:
(1)On April 2, 2012, Mr. Chapman resigned from the Board of Directors.
(2)On April 2, 2012, Mr. Eli Dominitz and Mr. Kenneth Polinsky were appointed as members of the Board of Directors. On September 20, 2012, Mr. Eli Dominitz and Mr. Kenneth Polinsky reigned from the Board of Directors.
(3)On September 20, 2012, Mr. Ethan Benovitz and Mr. Daniel Saks were appointed as members of the Board of Directors.
2012 Director’s Plan
A compensation plan for our Board was in place for 2012. Following the Directors Plan, each non-employee member of our Board was entitled to receive cash compensation consisting of an annual cash retainer of $20,000 a fee of $2,500 for attending each board meeting, a fee of $2,500 for attending each committee meeting and a fee of $500 for participating via telephone at each board and committee meeting (the committee chair receives a supplemental fee). The compensation committee has determined that the compensation arrangements for our Directors for 2013 will be the same as was in place during 2012.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information regarding the number of shares of our common stock beneficially owned on March 28, 2013 by:
• each person who is known by us to beneficially own 5% or more of our common stock;
• each of our directors and named executive officers; and
• all of our directors and executive officers, as a group.
Except as otherwise set forth below, the address of each of the persons listed below is GlobalOptions Group, Inc., 415 Madison Avenue, 17th Floor, New York, New York 10017. Unless otherwise indicated, the common stock beneficially owned by a holder includes shares owned by a spouse, minor children and relatives sharing the same home, as well as entities owned or controlled by the named person, and also includes options to purchase shares of our common stock exercisable within 60 days that have been granted under our incentive stock plans.
* Represents holdings of less than 1% of shares outstanding.
(1)Based upon 6,197,760 shares of our common stock outstanding on March 28, 2013 and, with respect to each individual holder, rights to acquire our common stock exercisable within 60 days of March 28, 2013.
(2)Based on a Schedule 13D filed by Genesis Opportunity Fund, LP on April 9, 2012. Represents 1,535,529 shares of common stock held by Genesis Opportunity Fund, L.P. and 173,300 shares of common stock held by Genesis Asset Opportunity Fund, L.P. Genesis Capital Advisors LLC is the investment manager of each of Genesis Opportunity Fund, L.P. and Genesis Asset Opportunity Fund L.P. Each of Ethan Benovitz, Daniel Saks and Jaime Hartman are managing members of Genesis Capital Advisors LLC and share voting and dispositive power over the securities held by Genesis Opportunity Fund, L.P. and Genesis Asset Opportunity Fund L.P. Each of Ethan Benovitz, Daniel Saks, and Jaime Hartman disclaim beneficial ownership of such securities. The business address of Genesis Capital Advisors LLC is 1212 Avenue of the Americas, 19th Floor, New York, NY 10036.
(3)Based on information contained on Schedule 13G filed with the SEC on February 19, 2013. The business address of Punch Associates Investment Management, Inc. is 3601 West 76th Street, Suite 225, Edina, Minnesota.
(4)Consists of 281,143 shares of our common stock and 125,000 shares of our common stock issuable upon exercise of stock options.
(5)Consists of 139,897 shares of our common stock and 75,000 shares of our common stock issuable upon exercise of stock options.
(6)Represents 14,360 shares of common stock and 4,807 shares of our common stock held by Lööf Holdings, LLC, a limited liability company controlled by Mr. Lööf. Mr. Lööf may be deemed to be the beneficial owner of the shares of our common stock held by Lööf Holdings, LLC.
(7)Represents 12,250 shares of common stock and 22,105 shares of our common stock held by Globacor Capital Inc., of which Mr. Bujouves is Chairman. Mr. Bujouves may be deemed to be the beneficial owner of the shares of our common stock held by Globacor Capital Inc. Mr. Bujouves disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein.
(8)Represents 12,669 shares of our common stock and 10,822 shares of our common stock held by Capital Trust Investments Limited, of which Mr. Oswald is a director. Mr. Oswald may be deemed to be the beneficial owner of the shares of our common stock held by Capital Trust Investments Limited. Mr. Oswald disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein.
(9)Represents 1,708,829 shares of common stock held by Genesis Capital Advisors, LLC (See Footnote 2). Mr. Benovitz may be deemed to be the beneficial owner of the shares of our common stock held by Genesis Capital Advisors, LLC. Mr. Benovitz disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein.
(10)Represents 1,708,829 shares of common stock held by Genesis Capital Advisors, LLC (See Footnote 2). Mr. Saks may be deemed to be the beneficial owner of the shares of our common stock held by Genesis Capital Advisors, LLC. Mr. Saks disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein.
(11)Consists of 2,169,148 shares of our common stock and 200,000 shares of our common stock issuable upon exercise of stock options.
Equity Compensation Plan Information
See Part II, Item 5, “Securities Authorized for Issuance under Equity Compensation Plans” for information regarding our equity compensation plans.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Transactions with Related Persons, Promoters and Certain Control Persons
On March 27, 2012, we entered into a support agreement (the “Genesis Support Agreement”) with Genesis Capital Advisors LLC, a Delaware limited liability company, Genesis Opportunity Fund, L.P., a Delaware limited partnership, and Genesis Asset Opportunity Fund, L.P., a Delaware limited partnership (collectively, the “2012 Stockholder”). Pursuant to the Genesis Support Agreement, the 2012 Stockholder agreed to vote all of the shares of our common voting stock owned by the 2012 Stockholder in favor of the election of all director nominees recommended by the Board at the our 2012 Annual Meeting (the “Annual Meeting”).
The Genesis Support Agreement also provided that, as a condition to the 2012 Stockholder’s obligations thereunder, the Board would adopt certain resolutions providing that (i) the Stockholder, together with its affiliates, will not be deemed to be an “Acquiring Person” for the purposes of that certain Rights Agreement, dated as of September 7, 2010, as amended (such amendment is described below) (the “Rights Agreement”), by and between the us and Continental, as rights agent, unless and until the 2012 Stockholder becomes the “Beneficial Owner” (as defined under the Rights Agreement) of more than 35% of the our outstanding common stock, and (ii) that the Board approve, solely for the purposes of Section 203 of the Delaware General Corporation Law, the acquisition of additional shares of our common stock by the 2012 Stockholder. The Genesis Support Agreement also provides that if at any time the 2012 Stockholder beneficially owns less than 25% of our common stock and then at any time it increases its beneficial ownership over 25% it would be deemed an “Acquiring Person” and if at any time the 2012 Stockholder beneficially owns less than 10% of our common stock then at any time it increases its beneficial ownership over 10% it would be deemed an “Acquiring Person”.
Pursuant to its obligations under the Genesis Support Agreement and as a further inducement for the 2012 Stockholder to enter into the Genesis Support Agreement, we, concurrently with the execution of the Genesis Support Agreement, entered into a Registration Rights Agreement with the 2012 Stockholder pursuant to which we agreed to register the resale of the shares of our common stock owned by the 2012 Stockholder (See Note 8 - Stockholder’s Equity - Registration Rights Agreement, below).
Pursuant to the Genesis Support Agreement, the Board expanded its size to a total of six (6) members and appointed two designees of the 2012 Stockholder (the “Stockholder Designees”) to serve as directors on the Board. (See Note 14- Changes to Board of Directors). The Board is further obligated to nominate and recommend the election of the Stockholder Designees, and to solicit proxies to such effect. The Genesis Support Agreement further provides that, should the 2012 Stockholder beneficially own less than 22% of our common stock, the 2012 Stockholder shall only retain authority to appoint one Stockholder Designee to the Board. In such case, the Board shall no longer be obligated to nominate and recommend the election of more than one Stockholder Designee and shall not be obligated to solicit proxies or otherwise promote the election to the Board of such Stockholder Designee. The Genesis Support Agreement further provides that, should the 2012 Stockholder beneficially own less than 10% of our common stock, the 2012 Stockholder shall retain no authority to appoint any Stockholder Designees to the Board. In such case, the Board shall no longer be obligated to nominate and recommend the election of any of the Stockholder Designees and shall not be obligated to solicit proxies or otherwise promote the election to the Board of any Stockholder Designee. Additionally, the 2012 Stockholder agreed to certain standstill restrictions, effective as of the date of the Genesis Support Agreement and expiring on the earlier of 18 months following the execution of the Genesis Support Agreement or the consummation of a change of control of our company and certain restrictions on transfer of certain of the shares owned by them.
Director Independence
The Board has determined that each of our directors, except for Dr. Schiller, a director and our chairman, is “independent” under the independence standards of NASDAQ and applicable SEC rules.
Item 14.
Item 14. Principal Accountant Fees and Services
(Dollar amounts in thousands)
Audit Fees. The aggregate fees billed for professional services rendered was $71 and $142 for the audits of the Company’s annual financial statements for the fiscal years ended December 31, 2012 and 2011, respectively, which services included the cost of the reviews of the condensed consolidated financial statements for the years ended December 31, 2012 and 2011, and other periodic reports for each respective year.
Audit-Related Fees. The aggregate fees billed for professional services categorized as Audit-Related Fees rendered was $6 and $0 for the years ended December 31, 2012 and 2011, respectively.
Tax Fees. For the years ended December 31, 2012 and 2011, the principal accountant billed $14 and $177, respectively, for tax compliance.
All Other Fees. Other than the services described above, the aggregate fees billed for services rendered by the principal accountant which were $0 and $0, respectively, for the fiscal years ended December 31, 2012 and 2011.
Audit Committee Policies and Procedures. The Audit Committee must pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent auditors, subject to the de-minimus exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act, which should be nonetheless be approved by the Board prior to the completion of the audit. Each year the independent auditor’s retention to audit our financial statements, including the associated fee, is approved by the Audit Committee before the filing of the previous year’s Annual Report on Form 10-K. At the beginning of the fiscal year, the Audit Committee will evaluate other known potential engagements of the independent auditor, including the scope of work proposed to be performed and the proposed fees, and approve or reject each service, taking into account whether the services are permissible under applicable law and the possible impact of each non-audit service on the independent auditor’s independence from management. At each such subsequent meeting, the auditor and management may present subsequent services for approval. Typically, these would be services such as due diligence for an acquisition, that would not have been known at the beginning of the year.
Since May 6, 2003, the effective date of the SEC rules stating that an auditor is not independent of an audit client if the services it provides to the client are not appropriately approved, each new engagement of Marcum, LLP, has been approved in advance by the Board, and none of those engagements made use of the de-minimums exception to the pre-approval contained in Section 10A(i)(1)(B) of the Exchange Act.
PART IV
Item 15.
Item 15. Exhibits and Financial Statement Schedules
10.10
Amendment of Employment Agreement of Harvey W. Schiller, Ph.D. with GlobalOptions Group, Inc., dated as of March 26, 2012. (23)
10.11
Amendment of Employment Agreement of Harvey W. Schiller, Ph.D. with GlobalOptions Group, Inc., dated as of March 31, 2013.*
10.12
Employment Agreement, dated July 30, 2007, between Jeffrey O. Nyweide and GlobalOptions Group, Inc. (10)
10.13
Modification of Employment Agreement of Jeffrey O. Nyweide with GlobalOptions Group, Inc., dated as of August 13, 2009. (12)
10.14
Modification of Employment Agreement of Jeffrey O. Nyweide with GlobalOptions Group, Inc., dated as of May 13, 2010. (18)
10.15
Amendment of Employment Agreement of Jeffrey O. Nyweide with GlobalOptions Group, Inc., dated as of December 14, 2010. (21)
10.16
Amendment of Employment Agreement of Jeffrey O. Nyweide with GlobalOptions Group, Inc., dated as of March 26, 2012. (23)
10.17
Amendment of Employment Agreement of Jeffrey O. Nyweide with GlobalOptions Group, Inc., dated as of March 31, 2013.*
10.18
Secured Promissory Note, dated April 30, 2010, by and between Guidepost Solutions LLC and GlobalOptions Group, Inc. (14)
10.19
Security Agreement, dated April 30, 2010, by and between Guidepost Solutions LLC and GlobalOptions Group, Inc. (14)
10.20
Intercreditor Agreement, dated April 30, 2010, by and among Guidepost Solutions LLC, GlobalOptions Group, Inc., Bart M. Schwartz, Joseph Rosetti and 3-DRS International, Ltd. (14)
10.21
License Agreement, dated July 16, 2010, by and between GlobalOptions Group, Inc. and Witt Group Holdings, LLC. (18)
10.22
License Agreement, dated July 19, 2010, by and between GlobalOptions Group, Inc. and GlobalOptions Services, Inc. (18)
10.23
Rapid Data License Agreement, dated July 19, 2010, by and between GlobalOptions Group, Inc. and GlobalOptions Services, Inc. (18)
10.24
Intellectual Property Assignment, dated July 19, 2010, between GlobalOptions Group, Inc., GlobalOptions, Inc. and GlobalOptions Services, Inc. (18)
10.25
Support Agreement, dated October 27, 2010, by and between Weiss Asset Management LP and GlobalOptions Group, Inc. (20)
10.26
Support Agreement, dated March 26, 2012, by and between Genesis Capital Advisors LLC, Genesis Opportunity Fund, L.P., Genesis Asset Opportunity Fund, L.P. and GlobalOptions Group, Inc. (23)
10.27
Registration Rights Agreement, dated March 26, 2012, by and between Genesis Capital Advisors LLC, Genesis Opportunity Fund, L.P., Genesis Asset Opportunity Fund, L.P. and GlobalOptions Group, Inc. (23)
21.1
Subsidiaries of GlobalOptions Group, Inc.*
31.1
Certification of Principal Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.*
31.2
Certification of Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.*
32.1
Certification of Principal Executive Officer of Periodic Report Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.*
32.2
Certification of Principal Financial Officer of Periodic Report Pursuant to Section 906 of 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.
101.PRE
XBRL Taxonomy Extension Presentation Linkbase.
* Filed herewith
** Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.
(1) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on June 30, 2005, as amended.
(2) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on August 11, 2005.
(3) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on June 16, 2006.
(4) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on December 11, 2006.
(5) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on December 22, 2006.
(6) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on February 23, 2007.
(7) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on May 16, 2007.
(8) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on July 26, 2007.
(9) Incorporated by reference to the exhibits included with our registration statement on Form SB-2, as amended, originally filed with the SEC on August 2, 2007.
(10) Incorporated by reference to the exhibits included with our quarterly report on Form 10-QSB filed with the SEC on August 14, 2007.
(11) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on July 30, 2008.
(12) Incorporated by reference to the exhibits included with our quarterly report on Form 10-Q filed with the SEC on August 14, 2009.
(13) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on April 29, 2010.
(14) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on May 6, 2010.
(15) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on May 13, 2010.
(16) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on June 11, 2010.
(17) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on August 12, 2010.
(18) Incorporated by reference to the exhibits included with our quarterly report on Form 10-Q filed with the SEC on August 16, 2010.
(19) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on September 8, 2010.
(20) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on October 28, 2010.
(21) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on January 23, 2012.
(22) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on January 23, 2012.
(23) Incorporated by reference to the exhibits included with our current report on Form 10-K filed with the SEC on March 30, 2012.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: April 1, 2013 By: /s/ Harvey W. Schiller
Harvey W. Schiller
Chairman, Chief Executive Officer and Director
(Principal Executive Officer)
Dated: April 1, 2013 By: /s/ Jeffrey O. Nyweide
Jeffrey O. Nyweide
Executive Vice President-Corporate Development,
Chief Financial Officer, Secretary
(Principal Financial Officer and Principal and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signatures
Title
Date
/s/ Harvey W. Schiller
Chairman, Chief Executive Officer and Director
(Principal Executive Officer)
April 1, 2013
Harvey W. Schiller
/s/ Jeffrey O. Nyweide
Executive Vice President ─ Corporate
Development, Chief Financial Officer, Secretary
(Principal Financial Officer and Principal Accounting Officer)
April 1, 2013
Jeffrey O. Nyweide
/s/ Per-Olof Lööf
Director
April 1, 2013
Per-Olof Lööf
/s/ John P. Oswald
Director
April 1, 2013
John P. Oswald
/s/ John P. Bujouves
Director
April 1, 2013
John P. Bujouves
/s/ Ethan Benovitz
Director
March 31, 2013
Ethan Benovitz
/s/ Daniel Saks
Director
April 1, 2013
Daniel Saks
Exhibit Index
Exhibit No.
Description
2.1
Asset Purchase Agreement, dated as of April 23, 2010, by and among GlobalOptions Group, Inc., GlobalOptions, Inc. and Guidepost Solutions LLC.** (13)
2.2
Asset Purchase Agreement, dated May 13, 2010, by and among GlobalOptions Group, Inc., GlobalOptions, Inc. and Witt Group Holdings, LLC.** (15)
2.3
Asset Purchase Agreement, dated June 11, 2010, by and among GlobalOptions Group, Inc., GlobalOptions, Inc. and GlobalOptions Services, Inc.** (16)
2.4
Stock Purchase Agreement, dated August 11, 2010, by and among GlobalOptions Group, Inc., GlobalOptions, Inc., The Bode Technology Group, Inc. and LSR Acquisition Corp. (now known as SolutionPoint International, Inc.)**(17)
3.1
Certificate of Incorporation of GlobalOptions Group, Inc. (4)
3.2
Certificate of Amendment to Certificate of Incorporation. (6)
3.3
Certificate of Designations, Powers, Preferences and Other Rights and Qualifications of Series D Convertible Preferred Stock. (8)
3.4
Certificate of Designations, Powers, Preferences and Other Rights and Qualifications of Series A Junior Participating Preferred Stock. (19)
3.5
Bylaws. (4)
3.6
Amendment to Bylaws. (7)
3.7
Amendments to Bylaws. (22)
4.1
Rights Agreement, dated as of September 7, 2010, between GlobalOptions Group, Inc. and Continental Transfer & Trust Company. (19)
4.2
Amendment No. 1 to Rights Agreement, dated as of March 26, 2012 between GlobalOptions Group, Inc. and Continental Transfer & Trust Company.(23)
10.1
Amended and Restated 2006 Long-Term Incentive Plan. (11)
10.2
Amended and Restated 2006 Employee Stock Purchase Plan. (11)
10.3
Employment Agreement, dated as of January 29, 2004, between Harvey W. Schiller, Ph.D. and GlobalOptions, Inc. (1)
10.4
Letter Agreement among GlobalOptions Group, Inc., GlobalOptions, Inc. and Harvey W. Schiller, Ph.D., dated January 29, 2004, pursuant to which GlobalOptions Group, Inc. assumed Dr. Schiller’s original employment agreement with GlobalOptions, Inc. (1)
10.5
Amendment to Employment Agreement of Harvey W. Schiller, Ph.D. with GlobalOptions Group, Inc., dated as of December 19, 2006. (5)
10.6
Modification of Employment Agreement of Harvey W. Schiller, Ph.D. with GlobalOptions Group, Inc., dated as of August 13, 2009. (12)
10.7
Modification of Employment Agreement of Harvey W. Schiller, Ph.D. with GlobalOptions Group, Inc., dated as of May 13, 2010. (18)
10.8
Amendment of Employment Agreement of Harvey W. Schiller, Ph.D. with GlobalOptions Group, Inc., dated as of December 14, 2010. (21)
10.9
Amendment of Employment Agreement of Harvey W. Schiller, Ph.D. with GlobalOptions Group, Inc., dated as of December 12, 2011.(23)
10.10
Amendment of Employment Agreement of Harvey W. Schiller, Ph.D. with GlobalOptions Group, Inc., dated as of March 26, 2012.(23)
10.11
Amendment of Employment Agreement of Harvey W. Schiller, Ph.D. with GlobalOptions Group, Inc., dated as of March 31, 2013.*
10.12
Employment Agreement, dated July 30, 2007, between Jeffrey O. Nyweide and GlobalOptions Group, Inc. (10)
10.13
Modification of Employment Agreement of Jeffrey O. Nyweide with GlobalOptions Group, Inc., dated as of August 13, 2009. (12)
10.14
Modification of Employment Agreement of Jeffrey O. Nyweide with GlobalOptions Group, Inc., dated as of May 13, 2010. (18)
10.15
Amendment of Employment Agreement of Jeffrey O. Nyweide with GlobalOptions Group, Inc., dated as of December 14, 2010. (21)
10.16
Amendment of Employment Agreement of Jeffrey O. Nyweide with GlobalOptions Group, Inc., dated as of March 26, 2012. (23)
10.17
Amendment of Employment Agreement of Jeffrey O. Nyweide with GlobalOptions Group, Inc., dated as of March 31, 2013.*
10.18
Secured Promissory Note, dated April 30, 2010, by and between Guidepost Solutions LLC and GlobalOptions Group, Inc. (14)
10.19
Security Agreement, dated April 30, 2010, by and between Guidepost Solutions LLC and GlobalOptions Group, Inc. (14)
10.20
Intercreditor Agreement, dated April 30, 2010, by and among Guidepost Solutions LLC, GlobalOptions Group, Inc., Bart M. Schwartz, Joseph Rosetti and 3-DRS International, Ltd. (14)
10.21
License Agreement, dated July 16, 2010, by and between GlobalOptions Group, Inc. and Witt Group Holdings, LLC. (18)
10.22
License Agreement, dated July 19, 2010, by and between GlobalOptions Group, Inc. and GlobalOptions Services, Inc. (18)
10.23
Rapid Data License Agreement, dated July 19, 2010, by and between GlobalOptions Group, Inc. and GlobalOptions Services, Inc. (18)
10.24
Intellectual Property Assignment, dated July 19, 2010, between GlobalOptions Group, Inc., GlobalOptions, Inc. and GlobalOptions Services, Inc. (18)
10.25
Support Agreement, dated October 27, 2010, by and between Weiss Asset Management LP and GlobalOptions Group, Inc. (20)
10.26
Support Agreement, dated March 26, 2012, by and between Genesis Capital Advisors LLC, Genesis Opportunity Fund, L.P., Genesis Asset Opportunity Fund, L.P. and GlobalOptions Group, Inc. (23)
10.27
Registration Rights Agreement, dated March 26, 2012, by and between Genesis Capital Advisors LLC, Genesis Opportunity Fund, L.P., Genesis Asset Opportunity Fund, L.P. and GlobalOptions Group, Inc. (23)
21.1
Subsidiaries of GlobalOptions Group, Inc.*
31.1
Certification of Principal Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.*
31.2
Certification of Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.*
32.1
Certification of Principal Executive Officer of Periodic Report Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.*
32.2
Certification of Principal Financial Officer of Periodic Report Pursuant to Section 906 of 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.
101.PRE
XBRL Taxonomy Extension Presentation Linkbase.
* Filed herewith
** Schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.
(1) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on June 30, 2005, as amended.
(2) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on August 11, 2005.
(3) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on June 16, 2006.
(4) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on December 11, 2006.
(5) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on December 22, 2006.
(6) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on February 23, 2007.
(7) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on May 16, 2007.
(8) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on July 26, 2007.
(9) Incorporated by reference to the exhibits included with our registration statement on Form SB-2, as amended, originally filed with the SEC on August 2, 2007.
(10) Incorporated by reference to the exhibits included with our quarterly report on Form 10-QSB filed with the SEC on August 14, 2007.
(11) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on July 30, 2008.
(12) Incorporated by reference to the exhibits included with our quarterly report on Form 10-Q filed with the SEC on August 14, 2009.
(13) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on April 29, 2010.
(14) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on May 6, 2010.
(15) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on May 13, 2010.
(16) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on June 11, 2010.
(17) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on August 12, 2010.
(18) Incorporated by reference to the exhibits included with our quarterly report on Form 10-Q filed with the SEC on August 16, 2010.
(19) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on September 8, 2010.
(20) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on October 28, 2010.
(21) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on January 23, 2012.
(22) Incorporated by reference to the exhibits included with our current report on Form 8-K filed with the SEC on January 23, 2012.
(23) Incorporated by reference to the exhibits included with our current report on Form 10-K filed with the SEC on March 30, 2012.