UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                  FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
           SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                                   (Mark One)

              |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2005

     |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

           For the transition period from ____________ to ____________

                         Commission file number 0-24277

                               CLARUS CORPORATION

             (Exact name of Registrant as specified in its Charter)

       Delaware                                          58-1972600
(State of Incorporation)                    (I.R.S. Employer Identification No.)

                               One Landmark Square
                           Stamford, Connecticut 06901
                (Address of principal office, including zip code)

                                 (203) 428-2000
              (Registrant's telephone number, including area code)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

    SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock,
                                par value $.0001

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act. YES |_| NO |X|

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Exchange Act. YES |_| NO |X|

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive  proxy or information  statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer  and large  accelerated  filer" in Rule  12b-2 of the Exchange  Act. Large
accelerated filer |_| Accelerated filer |X| Non-accelerated filer |_|

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) YES |_| NO |X|

The aggregate market value of the voting stock and non-voting common equity held
by non-affiliates  of the Registrant at June 30, 2005 was  approximately  $118.2
million  based on $8.25 per share,  the  closing  price of the  common  stock as
quoted on the OTC Pink Sheets Electronic Quotation Service.

The number of shares of the  Registrant's  common stock  outstanding at February
22, 2006 was 17,112,170 shares.

                       DOCUMENT INCORPORATED BY REFERENCE

Portions of our Proxy  Statement for the 2006 Annual Meeting of  Stockholders to
be filed with the  Securities  and  Exchange  Commission  within 120 days of the
Registrant's 2005 fiscal year end are incorporated by reference into Part III of
this report.

<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                           -----

PART I
ITEM 1       BUSINESS                                                          1
ITEM 2       PROPERTIES                                                        6
ITEM 3       LEGAL PROCEEDINGS                                                 7
ITEM 4       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               7

PART II
ITEM 5       MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS          7
ITEM 6       SELECTED FINANCIAL DATA                                           8
ITEM 7       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
             CONDITION AND RESULTS OF OPERATIONS                               9
ITEM 7A      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK       15
ITEM 8       FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA                       16
ITEM 9       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
             ACCOUNTING AND FINANCIAL DISCLOSURE                              36
ITEM 9A      CONTROLS AND PROCEDURES                                          36

ITEM 9B      OTHER INFORMATION                                                37

PART III
ITEM 10      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT               37
ITEM 11      EXECUTIVE COMPENSATION                                           37
ITEM 12      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT   37
ITEM 13      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                   38
ITEM 14      PRINCIPAL ACCOUNTANT FEES AND SERVICES                           38

PART IV
ITEM 15      EXHIBITS, FINANCIAL STATEMENT SCHEDULES                          39
SIGNATURES                                                                    42
EXHIBIT INDEX                                                                 45

<PAGE>

                                     PART I

ITEM 1.  BUSINESS

FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking  statements,  including information
about or related to our future results, certain projections and business trends.
Assumptions  relating  to  forward-looking  statements  involve  judgments  with
respect  to,  among  other  things,  future  economic,  competitive  and  market
conditions  and  future  business  decisions,  all of  which  are  difficult  or
impossible to predict accurately and many of which are beyond our control.  When
used in this  report,  the words  "estimate,"  "project,"  "intend,"  "believe,"
"expect"  and similar  expressions  are  intended  to  identify  forward-looking
statements.   Although  we  believe   that  our   assumptions   underlying   the
forward-looking  statements are reasonable,  any or all of the assumptions could
prove  inaccurate,  and we may  not  realize  the  results  contemplated  by the
forward-looking statements. Management decisions are subjective in many respects
and  susceptible to  interpretations  and periodic  revisions  based upon actual
experience and business developments,  the impact of which may cause us to alter
our business strategy or capital expenditure plans that may, in turn, affect our
results of operations. In light of the significant uncertainties inherent in the
forward-looking  information  included in this report, you should not regard the
inclusion of such  information  as our  representation  that we will achieve any
strategy, objectives or other plans. The forward-looking statements contained in
this report speak only as of the date of this report,  and we have no obligation
to update publicly or revise any of these forward-looking statements.

These and other  statements,  which are not historical  facts, are based largely
upon our current  expectations  and  assumptions  and are subject to a number of
risks and  uncertainties  that could cause actual  results to differ  materially
from those  contemplated  by such  forward-looking  statements.  These risks and
uncertainties  include,  among others, our planned effort to redeploy our assets
and use our  cash  and cash  equivalent  assets  to  enhance  stockholder  value
following the sale of  substantially  all of our electronic  commerce  business,
which  represented  substantially all of our revenue  generating  operations and
related assets,  and the risks and uncertainties set forth in the section headed
"Factors  That May  Affect  Our  Future  Results"  of Part I of this  Report and
described in  "Management's  Discussion and Analysis of Financial  Condition and
Results of Operations"  of Part II of this Report.  We cannot assure you that we
will be  successful  in our  efforts  to  redeploy  our  assets or that any such
redeployment  will  result in  Clarus'  future  profitability.  Our  failure  to
redeploy our assets could have a material  adverse effect on the market price of
our  common  stock  and  our  business,   financial  condition  and  results  of
operations.

OVERVIEW

Clarus Corporation ("Clarus" or the "Company," which may be referred to as "we,"
"us," or "our") was formerly a provider of e-commerce  business  solutions until
the sale of  substantially  all of its operating assets in December 2002. We are
currently  seeking to redeploy  our cash and cash  equivalent  assets to enhance
stockholder   value  and  are  seeking,   analyzing  and  evaluating   potential
acquisition  and merger  candidates.  We were  incorporated  in Delaware in 1991
under the name SQL  Financials,  Inc.  In August  1998,  we changed  our name to
Clarus  Corporation.  Our principal  corporate office is located at One Landmark
Square, Stamford, Connecticut 06901 and our telephone number is (203) 428-2000.

BUSINESS

At the 2002 annual meeting of our stockholders  held on May 21, 2002,  Warren B.
Kanders,  Burtt R. Ehrlich and Nicholas Sokolow were elected by our stockholders
to serve on our Board of Directors. Under the leadership of these new directors,
our Board of  Directors  adopted a strategy  of  seeking to enhance  stockholder
value by pursuing  opportunities  to redeploy our assets  through an acquisition
of, or merger with, an operating business that will serve as a platform company,
using our cash, other non-operating assets (including,  to the extent available,
our net operating loss  carryforward) and our  publicly-traded  stock to enhance
future  growth.  The  strategy  also  sought  to reduce  significantly  our cash
expenditure rate by targeting, to the extent practicable,  our overhead expenses
to the amount of our investment income until the completion of an acquisition or
merger. While the Company's expenses have been significantly reduced, management
currently believes that the Company's  operating expenses will exceed investment
income during 2006.

As part of our strategy to enhance  stockholder  value,  on December 6, 2002, we
consummated  the  sale of  substantially  all of the  assets  of our  electronic
commerce business, which represented substantially all of our revenue generating
operations and related assets,  to Epicor  Software  Corporation  ("Epicor"),  a
Delaware  corporation,  for a purchase price of $1.0 million in cash (the "Asset
Sale").  Epicor is traded on the Nasdaq National Market under the symbol "EPIC."
The  sale  included  licensing,  support  and  maintenance  activities  from our
eProcurement,  Sourcing,  View (for  eProcurement),  eTour  (for  eProcurement),
ClarusNET,  and  Settlement  software  products,  our  customer  lists,  certain
contracts  and certain  intellectual  property  rights  related to the purchased
assets, maintenance payments and certain furniture and equipment.  Epicor agreed
to assume  certain of our  liabilities,  such as executory  obligations  arising
under certain contracts,  agreements and commitments  related to the transferred
assets.  We  remained  responsible  for all of our other  liabilities  including
liabilities under certain  contracts,  including any violations of environmental
laws  and for  our  obligations  related  to any of our  indebtedness,  employee
benefit plans or taxes that were due and payable in connection with the acquired
assets on or before the closing date of the Asset Sale.

                                       1
<PAGE>

Upon the closing of the sale to Epicor,  Warren B. Kanders  assumed the position
of Executive  Chairman of the Board of Directors,  Stephen P. Jeffery  ceased to
serve as Chief  Executive  Officer  and  Chairman  of the  Board,  and  James J.
McDevitt ceased to serve as Chief Financial Officer and Corporate Secretary. Mr.
Jeffery  agreed to  continue to serve on the Board of  Directors  and serve in a
consulting  capacity  for a period of three  years.  In  addition,  the Board of
Directors  appointed Nigel P. Ekern as Chief  Administrative  Officer to oversee
the operations of Clarus and to assist with our asset redeployment strategy.

On January 1, 2003, we sold the assets  related to our Cashbook  product,  which
were excluded from the Epicor transaction, to an employee group headquartered in
Limerick,  Ireland. This completed the sale of nearly all of our active software
operations  as part of our strategy to limit  operating  losses and enable us to
reposition our business in order to enhance  stockholder  value. In anticipation
of the  redeployment  of our  assets,  our  cash  balances  are  being  held  in
short-term,  highly rated instruments  designed to preserve safety and liquidity
and to exempt us from registration as an investment company under the Investment
Company Act of 1940.

We are currently  working to identify  suitable  merger  partners or acquisition
opportunities.  Although we are not targeting specific  industries for potential
acquisitions, we plan to seek businesses with substantial cash flow, experienced
management  teams,  and  operations  in  markets  offering   substantial  growth
opportunities. In addition, we believe that our common stock, which has a strong
institutional  stockholder base,  offers us flexibility as acquisition  currency
and  will  enhance  our   attractiveness  to  potential  merger  or  acquisition
candidates.  This strategy is, however,  subject to certain risks.  See "Factors
That May Affect Our Future Results" below.

As previously  disclosed in our Report on Form 8-K filed with the Securities and
Exchange  Commission on October 4, 2004, the Company's common stock was delisted
from the Nasdaq National  Market  effective with the open of business on October
5,  2004.  The  delisting   followed  a  determination  by  the  Nasdaq  Listing
Qualifications  Panel  that the  Company  was a  "public  shell"  and  should be
delisted due to policy concerns raised under Nasdaq  Marketplace  Rules 4300 and
4300(a)(3).  The  Company's  common  stock is now quoted on the OTC Pink  Sheets
Electronic Quotation Service under the symbol "CLRS.PK."

At the Company's annual stockholders  meeting on July 24, 2003, the stockholders
approved an amendment (the "Amendment") to our Amended and  Restated Certificate
of Incorporation to restrict certain acquisitions of Clarus' securities in order
to help  assure the  preservation  of its net  operating  loss tax  carryforward
("NOL").  Although  the  transfer  restrictions  imposed on our  securities  are
intended to reduce the  likelihood  of an  impermissible  ownership  change,  no
assurance can be given that such  restrictions  would prevent all transfers that
would result in an  impermissible  ownership  change.  The  Amendment  generally
restricts  and requires  prior  approval of our Board of Directors of direct and
indirect  acquisitions of the Company's  equity  securities if such  acquisition
will affect the percentage of our capital stock that is treated as owned by a 5%
stockholder.  The  restrictions  will  generally  only affect  persons trying to
acquire a significant interest in our common stock.

In the fourth quarter of 2005, the Company  incurred $92,000 in expenses related
to an acquisition  negotiation  and due diligence  process and also recognized a
credit  of  $151,000  in  transaction  expenses  from the  final  settlement  of
outstanding expenses arising out of an acquisition negotiation and due diligence
process that  terminated  in  September  2004  without the  consummation  of the
acquisition.  In the third quarter of 2004, the Company  recognized $1.5 million
in  transaction  expenses  arising  out  of  negotiations  associated  with  the
terminated  acquisition in September  2004.  The Company  incurred an additional
$0.1 million of  transaction  expenses  during the fourth  quarter of 2004.  The
Company expects to recognize  approximately $1.3 million of transaction expenses
in the first quarter of 2006, arising out of an acquisition  negotiation and due
diligence  process that  terminated in January 2006 without the  consummation of
the acquisition.  Transaction  expenses  represent the costs incurred during due
diligence and negotiation of potential acquisitions,  such as legal, accounting,
appraisal and other professional fees and related expenses.

PRIOR BUSINESS

Prior to the sale of substantially all of our operating assets in December 2002,
we  developed,   marketed  and  supported  Internet-based   business-to-business
e-commerce software that automated the procurement,  sourcing, and settlement of
goods and services.  Our software was designed to help organizations  reduce the
costs  associated  with the  purchasing  and  payment  settlement  of goods  and
services, and help to maximize procurement economies of scale.

There were several  milestones  in the  evolution  of our business  prior to the
December 2002 sale. On May 26, 1998, we completed an initial public  offering of
our common  stock in which we sold 2.5 million  shares of common stock at $10.00
per share,  resulting in net proceeds to us of approximately  $22.0 million.  On
October 18, 1999, we sold  substantially  all of the assets of our financial and
human resources  software  ("ERP") business to Geac Computer  Systems,  Inc. and
Geac Canada Limited.  In this sale, we received  approximately $13.9 million. On
March 10, 2000, we sold 2,243,000  shares of common stock in a secondary  public
offering at $115.00 per share  resulting in net proceeds to us of  approximately
$244.4 million.

                                       2
<PAGE>

EMPLOYEES

All of our employees are based in the United States. As of December 31, 2005, we
had a  total  of six  employees,  all of  which  are  located  in our  Stamford,
Connecticut headquarters.  Our employees only devote as much of their time as is
necessary  to the affairs of the  Company  and also serve in various  capacities
with other public and private entities. None of our employees are represented by
a labor union or are subject to a collective bargaining  agreement.  We have not
experienced any work stoppages and consider our relationship  with our employees
to be good.

FACTORS THAT MAY AFFECT OUR FUTURE RESULTS

In  addition  to other  information  in this  annual  report on Form  10-K,  the
following risk factors should be carefully considered in evaluating our business
because such factors may have a significant  impact on our  business,  operating
results, liquidity and financial condition. However, the risks and uncertainties
described  below  are  not  the  only  ones  we  face.   Additional   risks  and
uncertainties not presently known to us or which are currently deemed immaterial
may also impair our financial  condition.  If any of these risks actually occur,
our financial condition could be materially adversely affected.

                       RISKS RELATED TO CLARUS CORPORATION

WE CONTINUE TO INCUR OPERATING LOSSES.

As a  result  of the  sale  of  substantially  all of  our  electronic  commerce
business,  we will no longer  generate  revenue  previously  associated with the
products and contracts  comprising our electronic commerce business.  We are not
profitable and have incurred an  accumulated  deficit of $280.9 million from our
inception  through  December 31, 2005. Our current ability to generate  revenues
and to achieve  profitability  and positive cash flow will depend on our ability
to redeploy our assets and use our cash and cash equivalent assets to reposition
our  business  whether it is  through a merger or  acquisition.  Our  ability to
become  profitable  will  depend,  among  other  things,  (i) on our  success in
identifying and acquiring a new operating  business,  (ii) on our development of
new products or services  relating to our new operating  business,  and (iii) on
our success in distributing and marketing our new products or services.

WE MAY BE UNABLE TO REDEPLOY OUR ASSETS SUCCESSFULLY.

As part of our strategy to limit operating  losses and enable Clarus to redeploy
its assets and use its cash and cash  equivalent  assets to enhance  stockholder
value,  we  have  sold  our  electronic  commerce  business,  which  represented
substantially  all of our revenue  generating  operations and related assets. We
are pursuing a strategy of identifying  suitable merger partners and acquisition
candidates that will serve as a platform company.  Although we are not targeting
specific  business  industries  for  potential  acquisitions,  we  plan  to seek
businesses  with cash flow,  experienced  management  teams,  and  operations in
markets offering significant growth  opportunities.  We may not be successful in
acquiring such a business or in operating any business that we identify. We have
been working  without  success since December 2002 to identify a suitable merger
partner and consummate an  acquisition.  Failure to redeploy  successfully  will
result in our inability to become profitable.

Even if we identify an appropriate acquisition opportunity,  we may be unable to
negotiate  favorable  terms for that  acquisition.  We may be unable to  select,
manage  or  absorb  or  integrate  any  future  acquisitions  successfully.  Any
acquisition,  even if effectively integrated,  may not benefit our stockholders.
Any  acquisitions  that we attempt or  complete  may  involve a number of unique
risks including:  (i) executing  successful due diligence;  (ii) our exposure to
unforeseen liabilities of acquired companies; and (iii) our ability to integrate
and absorb the acquired company successfully.  We may be unable to address these
problems successfully.  Our failure to redeploy our assets could have a material
adverse  effect  on the  market  price of our  common  stock  and our  business,
financial condition and results of operations.

WE WILL INCUR  SIGNIFICANT  COSTS IN CONNECTION  WITH OUR EVALUATION OF SUITABLE
MERGER PARTNERS AND ACQUISITION CANDIDATES.

As part of our plan to redeploy our assets, our management is seeking, analyzing
and evaluating potential acquisition and merger candidates. We have incurred and
will continue to incur  significant  costs,  such as due diligence and legal and
other professional fees and expenses,  as part of these redeployment efforts. We
incurred  approximately $1.4 million of transaction related expenses during 2005
and the first  quarter of 2006 for due diligence  and  negotiation  of potential
acquisitions.  In 2004, we incurred $1.6 million of transaction related expenses
during due diligence and negotiation of potential acquisitions.  Notwithstanding
these  efforts  and  expenditures,  we cannot  give any  assurance  that we will
identify an appropriate acquisition opportunity in the near term, or at all.

WE WILL LIKELY HAVE NO OPERATING  HISTORY IN OUR NEW LINE OF BUSINESS,  WHICH IS
YET TO BE DETERMINED,  AND THEREFORE WE WILL BE SUBJECT TO THE RISKS INHERENT IN
ESTABLISHING A NEW BUSINESS.

                                       3
<PAGE>

We have not  identified  what our new line of business  will be;  therefore,  we
cannot fully  describe  the specific  risks  presented by such  business.  It is
likely  that we will have had no  operating  history in the new line of business
and it is possible that the target company may have a limited  operating history
in  its  business.  Accordingly,  there  can be no  assurance  that  our  future
operations will generate  operating or net income,  and as such our success will
be subject to the risks, expenses,  problems and delays inherent in establishing
a new line of business  for Clarus.  The  ultimate  success of such new business
cannot be assured.

THE REPORTING  REQUIREMENTS  UNDER RULES ADOPTED BY THE  SECURITIES AND EXCHANGE
COMMISSION  RELATING  TO SHELL  COMPANIES  MAY DELAY OR PREVENT  US FROM  MAKING
CERTAIN ACQUISITIONS.

As a result of the final rules adopted by the Securities and Exchange Commission
on June 29,  2005,  Clarus  may be deemed to be a shell  company.  The rules are
designed to ensure that  investors in shell  companies  that acquire  operations
have timely access to the same kind of  information as is available to investors
in public companies generally.  The rules prohibit the use by shell companies of
a Form S-8 and  revise  the Form  8-K to  require  a shell  company  to  include
extensive  registration-level  information  required  to  register  a  class  of
securities  under the Securities  Exchange Act of 1934 (the "Exchange  Act"), in
the filing on Form 8-K that the shell company files to report the acquisition of
a business.

The extensive registration-level  information includes a detailed description of
a company's business and properties, management, executive compensation, related
party  transactions,  legal proceedings and historical market price information,
as well as audited historical financial  statements and management's  discussion
and analysis of results of operations. The revised Form 8-K rules also require a
shell  company  to file pro  forma  financial  statements  giving  effect to the
acquisition  not  later  than  four  business  days  after   completion  of  the
acquisition, instead of 75 days as required by non-shell companies.

The time and additional costs that may be incurred by some acquisition prospects
to prepare such detailed disclosures and obtain audited financial statements may
significantly  delay  or  essentially  preclude  consummation  of  an  otherwise
desirable  acquisition by Clarus,  or deter potential  targets from  negotiating
with  Clarus.  If  Clarus  were to be  deemed  a shell  company,  any  increased
difficulty in Clarus' ability to identify and consummate an acquisition  with an
appropriate merger candidate can materially  adversely affect Clarus' ability to
successfully implement its redeployment strategy.

WE MAY BE UNABLE TO REALIZE THE BENEFITS OF OUR NET  OPERATING  LOSS ("NOL") AND
TAX CREDIT CARRYFORWARDS.

NOLs may be carried forward to offset federal and state taxable income in future
years and  eliminate  income taxes  otherwise  payable on such  taxable  income,
subject to certain  adjustments.  Based on current federal  corporate income tax
rates, our NOL and other  carryforwards  could provide a benefit to us, if fully
utilized,  of significant future tax savings.  However, our ability to use these
tax  benefits  in future  years will  depend  upon the  amount of our  otherwise
taxable income.  If we do not have sufficient  taxable income in future years to
use the tax benefits  before they expire,  we will lose the benefit of these NOL
carryforwards  permanently.  Consequently,  our ability to use the tax  benefits
associated with our substantial NOL will depend  significantly on our success in
identifying  suitable merger partners and/or  acquisition  candidates,  and once
identified,  successfully  consummate a merger with and/or  acquisition of these
candidates.

Additionally,  if  we  underwent  an  ownership  change,  the  NOL  carryforward
limitations  would  impose an annual  limit on the amount of the taxable  income
that may be offset by our NOL  generated  prior to the ownership  change.  If an
ownership change were to occur, we may be unable to use a significant portion of
our NOL to offset taxable income.  In general,  an ownership change occurs when,
as of any testing date,  the  aggregate of the increase in percentage  points of
the total  amount of a  corporation's  stock owned by  "5-percent  stockholders"
within  the  meaning  of  the  NOL  carryforward  limitations  whose  percentage
ownership of the stock has increased as of such date over the lowest  percentage
of the stock owned by each such  "5-percent  stockholder" at any time during the
three-year  period  preceding  such date is more than 50 percentage  points.  In
general,  persons  who own 5% or more of a  corporation's  stock are  "5-percent
stockholders,"  and all other  persons  who own less than 5% of a  corporation's
stock are treated together as a public group.

The amount of NOL and tax credit carryforwards that we have claimed has 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 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 carry forward
our NOL to offset taxable income in future years. If the IRS was successful with
respect  to  any  such   challenge,   the  potential  tax  benefit  of  the  NOL
carryforwards to us could be substantially reduced.

CERTAIN TRANSFER  RESTRICTIONS  IMPLEMENTED BY US TO PRESERVE OUR NOL MAY NOT BE
EFFECTIVE OR MAY HAVE SOME UNINTENDED NEGATIVE EFFECTS.

On July 24,  2003,  at our Annual  Meeting  of  Stockholders,  our  stockholders
approved an amendment (the "Amendment") to our Amended and Restated  Certificate
of Incorporation to restrict certain  acquisitions of our securities in order to
help assure the  preservation  of our NOL.  The  Amendment  generally  restricts
direct and indirect  acquisitions of our equity  securities if such  acquisition
will affect the percentage of Clarus'  capital stock that is treated as owned by
a "5-percent stockholder."

                                       4
<PAGE>

Although the transfer  restrictions imposed on our capital stock are intended to
reduce  the  likelihood  of  an  impermissible  ownership  change,  there  is no
guarantee that such  restrictions  would prevent all transfers that would result
in an  impermissible  ownership  change.  The  transfer  restrictions  also will
require any person  attempting to acquire a  significant  interest in us to seek
the approval of our Board of Directors.  This may have an "anti-takeover" effect
because  our Board of  Directors  may be able to prevent  any  future  takeover.
Similarly,  any limits on the amount of capital stock that a stockholder may own
could have the effect of making it more  difficult for  stockholders  to replace
current management.  Additionally,  because the transfer  restrictions will have
the effect of restricting a  stockholder's  ability to acquire our common stock,
the liquidity and market value of our common stock might suffer.

WE COULD BE REQUIRED TO REGISTER AS AN INVESTMENT  COMPANY UNDER THE  INVESTMENT
COMPANY ACT OF 1940, WHICH COULD  SIGNIFICANTLY LIMIT OUR ABILITY TO OPERATE AND
ACQUIRE AN ESTABLISHED BUSINESS.

The  Investment  Company Act of 1940 (the  "Investment  Company  Act")  requires
registration, as an investment company, for companies that are engaged primarily
in  the  business  of  investing,   reinvesting,   owning,  holding  or  trading
securities.  We have  sought  to  qualify  for an  exclusion  from  registration
including  the  exclusion  available to a company that does not own  "investment
securities"  with a value  exceeding  40% of the value of its total assets on an
unconsolidated  basis,  excluding  government  securities  and cash items.  This
exclusion,  however, could be disadvantageous to us and/or our stockholders.  If
we were unable to rely on an exclusion under the Investment Company Act and were
deemed to be an investment company under the Investment Company Act, we would be
forced to comply with  substantive requirements of the Investment  Company  Act,
including:  (i)  limitations on our ability to borrow;  (ii)  limitations on our
capital structure; (iii) restrictions on acquisitions of interests in associated
companies;  (iv) prohibitions on transactions with affiliates;  (v) restrictions
on specific investments; (vi) limitations on our ability to issue stock options;
and (vii) compliance with reporting,  record keeping,  voting,  proxy disclosure
and other rules and  regulations.  Registration  as an investment  company would
subject us to restrictions that would significantly impair our ability to pursue
our  fundamental  business  strategy of acquiring and  operating an  established
business.  In the event the Securities  and Exchange  Commission or a court took
the position that we were an investment  company,  our failure to register as an
investment company would not only raise the possibility of an enforcement action
by the Securities and Exchange Commission or an adverse judgment by a court, but
also could threaten the validity of corporate actions and contracts entered into
by us during the period we were deemed to be an unregistered investment company.
Moreover,  the  Securities  and Exchange  Commission  could seek an  enforcement
action  against us to the extent we were not in compliance  with the  Investment
Company Act during any point in time.

FOR FIVE  YEARS  AFTER THE  CLOSING  OF THE  ASSET  SALE TO  EPICOR,  WE WILL BE
PROHIBITED FROM COMPETING WITH THE ASSETS SOLD TO EPICOR.

The  Noncompetition  Agreement we entered into with Epicor  provides  that for a
period of five years  after the  closing of the Asset Sale  (December  6, 2002),
neither  we nor  any of our  affiliated  entities  are  permitted,  directly  or
indirectly,  anywhere in the world:  (i) to engage in any business that competes
with  the  business  of  developing,  marketing  and  supporting  Internet-based
business-to-business,   electronic   commerce   solutions   that   automate  the
procurement, sourcing and settlement of goods and services including through the
eProcurement,  Sourcing,  View (for  eProcurement),  eTour  (for  eProcurement),
ClarusNET and Settlement  software  products and all improvements and variations
of these products;  (ii) to attempt to persuade any customer or vendor of Epicor
to cease to do  business  with  Epicor or reduce  the amount of  business  being
conducted  with Epicor;  (iii) to solicit the business of any customer or vendor
of Epicor, if the solicitation could cause a reduction in the amount of business
that  Epicor  does with the  customer  or vendor;  or (iv) to hire,  solicit for
employment or encourage to leave the  employment of Epicor any person who was an
employee of Epicor within 90 days before the closing of the Asset Sale.

The  prohibitions  contained in our  Noncompetition  Agreement  with Epicor will
restrict the business  opportunities  available to us and  therefore  may have a
material  adverse effect on our ability to  successfully  redeploy our remaining
assets.

                        RISKS RELATED TO OUR COMMON STOCK

OUR COMMON STOCK IS NO LONGER LISTED ON THE NASDAQ NATIONAL MARKET.

On October  5, 2004,  our common  stock was  delisted  from the Nasdaq  National
Market.   The  delisting   followed  a  determination   by  the  Nasdaq  Listing
Qualifications  Panel  that the  Company  was a  "public  shell"  and  should be
delisted due to policy concerns raised under Nasdaq  Marketplace  Rules 4300 and
4300(a)(3).  Additional information concerning the delisting is set forth in the
Company's  Report on Form 8-K filed with the Securities and Exchange  Commission
on October 4, 2004.  The  Company's  common  stock is now quoted on the OTC Pink
Sheets  Electronic  Quotation Service under the symbol "CLRS.PK." As a result of
the  delisting,  stockholders  may find it more  difficult  to dispose of, or to
obtain accurate  quotations as to the price of, our common stock,  the liquidity
of our stock may be reduced,  making it difficult  for a  stockholder  to buy or
sell our stock at competitive  market prices or at all, we may lose support from
institutional  investors  and/or market  makers that  currently buy and sell our
stock and the price of our common stock could decline.

                                       5
<PAGE>

WE ARE VULNERABLE TO VOLATILE MARKET CONDITIONS.

The market prices of our common stock have been highly volatile.  The market has
from time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular  companies.  Please see the
table  contained in Item 5 of this Report which sets forth the range of high and
low closing prices of our common stock for the calendar quarters indicated.

WE DO NOT EXPECT TO PAY DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE FUTURE.

Although our stockholders may receive  dividends if, as and when declared by our
Board of Directors, we do not intend to pay dividends on our common stock in the
foreseeable future.  Therefore,  you should not purchase our common stock if you
need immediate or future income by way of dividends from your investment.

OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AUTHORIZES THE ISSUANCE OF
SHARES OF PREFERRED STOCK.

Our Amended and Restated Certificate of Incorporation provides that our Board of
Directors  will be  authorized  to  issue  from  time to time,  without  further
stockholder  approval,  up to 5,000,000 shares of preferred stock in one or more
series  and to fix or  alter  the  designations,  preferences,  rights  and  any
qualifications,  limitations  or  restrictions  of the  shares  of each  series,
including the dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption,  including  sinking fund  provisions,  redemption  price or
prices, liquidation preferences and the number of shares constituting any series
or  designations  of any  series.  Such  shares of  preferred  stock  could have
preferences  over our common  stock with respect to  dividends  and  liquidation
rights. We may issue additional  preferred stock in ways  which may delay, defer
or  prevent  a change  in  control  of  Clarus  without  further  action  by our
stockholders.  Such shares of preferred  stock may be issued with voting  rights
that may adversely affect the voting power of the holders of our common stock by
increasing  the number of outstanding  shares having voting  rights,  and by the
creation of class or series voting rights.

WE MAY ISSUE A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK IN THE FUTURE, WHICH COULD
CAUSE  DILUTION TO CURRENT  INVESTORS AND OTHERWISE  ADVERSELY  AFFECT OUR STOCK
PRICE.

A key  element of our growth  strategy is to make  acquisitions.  As part of our
acquisition  strategy,  we may  issue  additional  shares  of  common  stock  as
consideration for such  acquisitions.  These issuances could be significant.  To
the extent  that we make  acquisitions  and issue our shares of common  stock as
consideration,  your equity  interest in us will be diluted.  Any such  issuance
will also increase the number of outstanding shares of common stock that will be
eligible for sale in the future. Persons receiving shares of our common stock in
connection with these  acquisitions  may be more likely to sell off their common
stock,  which may  influence  the price of our common  stock.  In addition,  the
potential   issuance  of  additional   shares  in  connection  with  anticipated
acquisitions  could  lessen  demand for our  common  stock and result in a lower
price than might otherwise be obtained.  We may issue common stock in the future
for other  purposes  as well,  including  in  connection  with  financings,  for
compensation  purposes,  in connection with strategic  transactions or for other
purposes.

WHERE YOU CAN FIND MORE INFORMATION

We file  annual,  quarterly  and special  reports,  proxy  statements  and other
information with the Securities and Exchange Commission, and we have an internet
website address at  www.claruscorp.com.  We make available free of charge on our
internet  website address our annual report on Form 10-K,  quarterly  reports on
Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished  pursuant  to Section  13(a) or 15(d) of the Exchange  Act, as soon as
reasonably  practicable  after we  electronically  file such  material  with, or
furnish it to, the  Securities  and Exchange  Commission.  You may also read and
copy any document we file at the  Securities  and Exchange  Commission's  public
reference room located at 100 F Street,  NE, Washington,  DC 20549.  Please call
the Securities and Exchange Commission at 1-800-732-0330 for further information
on the operation of such public  reference  room. You also can request copies of
such documents,  upon payment of a duplicating fee, by writing to the Securities
and Exchange  Commission  at 100 F Street,  NE,  Washington,  DC 20549 or obtain
copies of such documents from the Securities and Exchange  Commission's  website
at http://www.sec.gov.

ITEM 2. PROPERTIES

Our corporate  headquarters is currently located in Stamford,  Connecticut where
we lease  approximately  8,600 square feet for $24,438 per month,  pursuant to a
lease, which expires on March 31, 2019.

We also leased  approximately 5,200 square feet near Toronto,  Canada, at a cost
of  approximately  $11,000 per month,  which prior to October 2001, was used for
the delivery of services as well as research and development. This lease expired
on February 14, 2006. This facility had been sub-leased for approximately $5,000
a month, pursuant to a sublease, which expired on January 30, 2006.

                                       6
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

We are not a  party  to nor are any of our  properties  subject  to any  pending
legal,  administrative  or judicial  proceedings  other than routine  litigation
incidental to our business.

A complaint  was filed on May 14, 2001 in the United States  District  Court for
the Northern  District of Georgia on behalf of all purchasers of common stock of
the Company during the period  beginning  December 8, 1999 and ending on October
25, 2000.  Generally the  complaint  alleged that the Company and certain of its
directors and officers made material  misrepresentations and omissions in public
filings made with the  Securities  and Exchange  Commission and in certain press
releases and other  public  statements.  The Company  agreed to settle the class
action  in  exchange  for a  payment  of $4.5  million,  which  was  covered  by
insurance.  The Court approved the final  settlement and dismissed the action on
January 6, 2005.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No  matters  were  submitted  to  a  vote  of  security  holders,   through  the
solicitation  of proxies or  otherwise,  during the quarter  ended  December 31,
2005.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our  common  stock was listed on the Nasdaq  National  Market  System on May 26,
1998, the effective date of our initial public offering,  until October 5, 2004,
when our common stock was delisted from the Nasdaq National  Market  following a
determination by the Nasdaq Listing  Qualifications Panel that the Company was a
"public shell" and should be delisted due to policy concerns raised under Nasdaq
Marketplace  Rules 4300 and 4300(a)(3).  Additional  information  concerning the
delisting  is set  forth in the  Company's  Report  on Form 8-K  filed  with the
Securities  and Exchange  Commission on October 4, 2004.  The  Company's  common
stock is now quoted on the OTC Pink Sheets  Electronic  Quotation  Service under
the symbol "CLRS.PK".

The  following  table sets forth,  for the indicated  periods,  the high and low
closing  sales  prices for our common  stock as reported by the NASDAQ  prior to
October  5,  2004 and the  range of high  and low bids for our  common  stock as
reported by the OTC Bulletin Board or the OTC Pink Sheets  Electronic  Quotation
Service  on and after  October 5, 2004.  The  quotes  listed  below on and after
October 5, 2004  reflect  inter-dealer  prices or  transactions  solely  between
market-makers,  without  retail  mark-up,  mark-down or  commission  and may not
represent actual transactions.

                                                          High         Low
                                                          ----         ---
Year ended December 31, 2004
         First Quarter                                 $    9.94  $   7.34
         Second Quarter                                $   12.33  $   9.86
         Third Quarter                                 $   11.78  $   8.28
         Fourth Quarter                                $    9.30  $   7.40

Year ended December 31, 2005
         First Quarter                                 $    9.50  $   7.90
         Second Quarter                                $    9.00  $   7.20
         Third Quarter                                 $    8.50  $   7.27
         Fourth Quarter                                $    8.75  $   7.60

Calendar Year 2006
         First Quarter (through February 22, 2006)     $    8.45  $   6.90

STOCKHOLDERS

On February 22,  2006,  the last  reported  sales price for our common stock was
$7.05 per share.  As of February 22,  2006,  there were 159 holders of record of
our common stock.

                                       7
<PAGE>

DIVIDENDS

We currently  anticipate  that we will retain all future earnings for use in our
business  and do not  anticipate  that we will  pay any  cash  dividends  in the
foreseeable  future.  The  payment  of  any  future  dividends  will  be at  the
discretion of our Board of Directors  and will depend upon,  among other things,
our results of operations,  capital  requirements,  general business conditions,
contractual  restrictions on payment of dividends,  if any, legal and regulatory
restrictions  on the  payment  of  dividends,  and  other  factors  our Board of
Directors deems relevant.

ITEM 6. SELECTED FINANCIAL DATA

Our selected financial information set forth below should be read in conjunction
with our  consolidated  financial  statements,  including  the notes thereto and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" of Part II of this Report. The following statement of operations and
balance  sheet data have been  derived from our audited  consolidated  financial
statements  and  should  be  read  in  conjunction  with  those  statements  and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" of Part II of this Report.

<TABLE>
<CAPTION>
                                                                                      Years ended December 31,
                                                                                      ------------------------
                                                                 2005          2004           2003            2002          2001
                                                              ---------      ---------      ---------      ---------      ---------
                                                                                  (in thousands, except per share data)
Statement of Operations Data:
------------------------------------
Revenues:
<S>                                                           <C>            <C>                  <C>      <C>            <C>
  License fees                                                $      --      $   1,106            $--      $   2,808      $   7,807
  Service fees                                                       --             --            130          6,226          9,866
                                                              ---------      ---------      ---------      ---------      ---------
             Total Revenues                                          --          1,106            130          9,034         17,673
Cost of Revenues:
  License fees                                                       --             --             --             26            211
  Service fees                                                       --             --             --          5,498         12,921
                                                              ---------      ---------      ---------      ---------      ---------

             Total Cost of Revenues                                  --             --             --          5,524         13,132
Operating expenses:
  Research and development                                           --             --             --          7,263         16,220
  Sales and marketing                                                --             --             --          7,938         34,034
  General and administrative                                      3,504          3,395          4,986         12,574          9,633
  Provision/(credit) for doubtful accounts                           --             --             18           (560)         5,537
  Transaction expenses                                              (59)         1,636             --             --             --
  Loss on impairment of goodwill and intangible assets               --             --             --         10,360         36,756
  Loss/(Gain) on sale or disposal of assets                          --             --             36          1,748            (20)
  Depreciation and amortization                                     334            186            762          4,243         12,212
                                                              ---------      ---------      ---------      ---------      ---------
             Total Operating Expenses                             3,779          5,217          5,802         43,566        114,372
                                                              ---------      ---------      ---------      ---------      ---------
Operating Loss                                                   (3,779)        (4,111)        (5,672)       (40,056)      (109,831)
Other income/ (expense)                                              (2)            19            169             27             96
Loss on impairment of marketable securities and investments          --             --             --             --        (16,461)
Interest income                                                   2,490          1,203          1,238          2,441          6,570
Interest expense, including amortization of debt discount            --             --            (66)          (225)          (228)
                                                              ---------      ---------      ---------      ---------      ---------

Net Loss                                                      $  (1,291)     $  (2,889)     $  (4,331)     $ (37,813)     $(119,854)
                                                              =========      =========      =========      =========      =========

Loss Per Share
             Basic                                            $   (0.08)     $   (0.18)     $   (0.27)     $   (2.42)     $   (7.72)
             Diluted                                          $   (0.08)     $   (0.18)     $   (0.27)     $   (2.42)     $   (7.72)
Weighted Average Common Shares Outstanding
             Basic                                               16,329         16,092         15,905         15,615         15,530
             Diluted                                             16,329         16,092         15,905         15,615         15,530

Balance Sheet Data:                                                                      As of December 31,
-----------------------                                                              --------------------------
                                                                 2005           2004           2003          2002           2001
                                                              ---------      ---------       ---------     ---------      ---------

Cash and cash equivalents                                     $  23,270      $  48,377      $  15,045      $  42,225      $  55,628
Marketable securities                                            61,601         35,119         73,685         52,885         65,264
Total assets                                                     88,278         86,437         89,445         97,764        145,274
Long-term debt, net of current portion                               --             --             --             --          5,000
Total stockholders' equity                                    $  86,609      $  84,854      $  86,819      $  89,360      $ 126,328
</TABLE>

                                       8
<PAGE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking  statements,  including information
about or related to our future results, certain projections and business trends.
Assumptions  relating  to  forward-looking  statements  involve  judgments  with
respect  to,  among  other  things,  future  economic,  competitive  and  market
conditions  and  future  business  decisions,  all of  which  are  difficult  or
impossible to predict accurately and many of which are beyond our control.  When
used in this  report,  the words  "estimate,"  "project,"  "intend,"  "believe,"
"expect"  and similar  expressions  are  intended  to  identify  forward-looking
statements.   Although  we  believe   that  our   assumptions   underlying   the
forward-looking  statements are reasonable,  any or all of the assumptions could
prove  inaccurate,  and we may  not  realize  the  results  contemplated  by the
forward-looking statements. Management decisions are subjective in many respects
and  susceptible to  interpretations  and periodic  revisions  based upon actual
experience and business developments,  the impact of which may cause us to alter
our business strategy or capital expenditure plans that may, in turn, affect our
results of operations. In light of the significant uncertainties inherent in the
forward-looking  information  included in this report, you should not regard the
inclusion of such  information  as our  representation  that we will achieve any
strategy, objectives or other plans. The forward-looking statements contained in
this report speak only as of the date of this report,  and we have no obligation
to update publicly or revise any of these forward-looking statements.

These and other  statements,  which are not historical  facts, are based largely
upon our current  expectations  and  assumptions  and are subject to a number of
risks and  uncertainties  that could cause actual  results to differ  materially
from those  contemplated  by such  forward-looking  statements.  These risks and
uncertainties  include,  among others, our planned effort to redeploy our assets
and use our substantial cash and cash equivalent  assets to enhance  stockholder
value  following  the  sale  of  substantially  all of our  electronic  commerce
business,  which  represented   substantially  all  of  our  revenue  generating
operations and related assets,  and the risks and uncertainties set forth in the
section  headed  "Factors That May Affect Our Future  Results" of Part I of this
Report and  described  in  "Management's  Discussion  and  Analysis of Financial
Condition and Results of Operations" of Part II of this Report. We cannot assure
you that we will be successful in our efforts to redeploy our assets or that any
such  redeployment will result in Clarus' future  profitability.  Our failure to
redeploy our assets could have a material  adverse effect on the market price of
our  common  stock  and  our  business,   financial  condition  and  results  of
operations.

OVERVIEW

AS PART OF OUR  PREVIOUSLY  ANNOUNCED  STRATEGY  TO LIMIT  OPERATING  LOSSES AND
ENABLE THE COMPANY TO REDEPLOY ITS ASSETS AND USE ITS SUBSTANTIAL  CASH AND CASH
EQUIVALENT  ASSETS TO ENHANCE  STOCKHOLDER  VALUE,  ON DECEMBER 6, 2002, WE SOLD
SUBSTANTIALLY  ALL  OF  OUR  ELECTRONIC  COMMERCE  BUSINESS,  WHICH  REPRESENTED
SUBSTANTIALLY ALL OF OUR REVENUE  GENERATING  OPERATIONS AND RELATED ASSETS. THE
INFORMATION  APPEARING BELOW,  WHICH RELATES TO PRIOR PERIODS,  IS THEREFORE NOT
INDICATIVE  OF THE RESULTS  THAT MAY BE  EXPECTED  FOR ANY  SUBSEQUENT  PERIODS.
RESULTS FOR THE YEAR ENDED  DECEMBER 31, 2005  PRIMARILY  REFLECT AND ANY FUTURE
PERIODS PRIOR TO A REDEPLOYMENT OF OUR ASSETS ARE EXPECTED PRIMARILY TO REFLECT,
GENERAL AND ADMINISTRATIVE EXPENSES AND TRANSACTION EXPENSES ASSOCIATED WITH THE
CONTINUING ADMINISTRATION OF THE COMPANY AND ITS EFFORTS TO REDEPLOY ITS ASSETS.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

The  Company's  discussion  of financial  condition and results of operations is
based on the  consolidated  financial  statements,  which have been  prepared in
accordance with accounting principles generally accepted in the United States of
America.  The preparation of these  consolidated  financial  statements  require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities  and disclosure of contingent  liabilities at the date of
the  consolidated  financial  statements.  Estimates  also  affect the  reported
amounts of revenues  and  expenses  during the  reporting  periods.  The Company
continually  evaluates its estimates and assumptions  including those related to
revenue recognition,  allowance for doubtful accounts,  impairment of long-lived
assets, impairment of investments, and contingencies and litigation. The Company
bases its  estimates on historical  experience  and other  assumptions  that are
believed to be reasonable under the  circumstances.  Actual results could differ
from these estimates.

The Company believes the following critical accounting policies include the more
significant  estimates and assumptions  used by management in the preparation of
its consolidated  financial  statements.  Our accounting policies are more fully
described in Note 1 of our consolidated financial statements.

- The Company  accounts for its  marketable  securities  under the provisions of
Statement of Financial  Accounting  Standards ("SFAS") No. 115,  "Accounting for
Certain Investments in Debt and Equity  Securities".  Pursuant to the provisions
of SFAS No.  115,  the Company  has  classified  its  marketable  securities  as
available-for-sale.  Available-for-sale  securities  have been  recorded at fair
value and related  unrealized  gains and losses have been excluded from earnings
and are reported as a separate  component  of  accumulated  other  comprehensive
income (loss) until realized.

                                       9
<PAGE>

- Through 2004, the Company had recognized  revenue in connection with its prior
business from two primary sources, software licenses and services.  Revenue from
software licensing and services fees was recognized in accordance with Statement
of  Position  ("SOP")  97-2,  "Software  Revenue  Recognition",  and  SOP  98-9,
"Software Revenue Recognition with Respect to Certain  Transactions" and related
interpretations.  The Company  recognized  software  license  revenue when:  (1)
persuasive evidence of an arrangement  existed;  (2) delivery had occurred;  (3)
the fee was fixed or determinable; and (4) collectibility was probable.

SOURCES OF REVENUE

Prior to the December 6, 2002 sale of substantially all of the Company's revenue
generating  operations and assets,  the Company's  revenue  consisted of license
fees and services  fees.  License fees were  generated from the licensing of the
Company's  suite  of  software  products.  Services  fees  were  generated  from
consulting,  implementation,   training,  content  aggregation  and  maintenance
support  services.  Following  the sale of  substantially  all of the  Company's
operating  assets,  the Company's revenue consisted solely of the recognition of
deferred services fees that were recognized ratably over the maintenance term of
the license agreements for our prior suite of software  products.  The remaining
deferred  revenue was fully  recognized by September 30, 2004 upon expiration of
the maintenance term.

Until a redeployment  of the Company's  assets occurs,  the Company's  principal
income will  consist of  interest,  dividend  and other  investment  income from
short-term  investments,  which is reported as interest  income in the Company's
statement of operations.

OPERATING EXPENSES

General and  administrative  expenses  consist  primarily of  personnel  related
expenses  for  financial,  administrative  and  management  personnel,  fees for
professional  services,  board of director  fees and the  provision for doubtful
accounts.

Transaction expenses consist primarily of professional fees and expenses related
to due diligence,  negotiation and  documentation of acquisition,  financing and
related agreements.

RESTRUCTURING AND RELATED COSTS

During 2002 and 2001, the Company's  management approved  restructuring plans to
reorganize and reduce  operating  costs.  Restructuring  and related  charges of
$12.8  million  were  expensed  in 2001 and  2002 in an  attempt  to  align  the
Company's cost structure with projected revenue.

During  2003,  the  Company  determined  that actual  restructuring  and related
charges were in excess of the amounts provided for in 2002 and 2001 and recorded
additional restructuring charges of $250,000. This amount was charged to general
and  administrative  costs  in  the  accompanying   consolidated   statement  of
operations  during  2003.  The charges for 2003 were  comprised  of $223,000 for
employee  separation  costs and $27,000 for facility  closure and  consolidation
costs.

During 2004, the Company recorded an additional  restructuring charge of $33,000
for  facility  closure  costs.  The  increase  was  the  result  of  significant
fluctuations in exchange rates and increased rent expense.

                                       10
<PAGE>

The following is a reconciliation of the components of the accrual for
restructuring and related costs, the amounts charged against the accrual during
2005, 2004 and 2003 and the balance of the accrual as of December 31, 2005 (in
thousands):

                                 Employee          Facility
                               Separation           Closing  Total Restructuring
                                    Costs         Costs and      Related Costs
                               ----------         --------       --------------

Balance at December 31, 2002     $  927             $  137             $1,064
Accruals during 2003                223                 27                250
Expenditures during 2003          1,025                 59              1,084
                                 ------             ------             ------
Balance at December 31, 2003        125                105                230
Accruals during 2004                 --                 33                 33
Expenditures during 2004            125                 65                190
                                 ------             ------             ------
Balance at December 31, 2004         --                 73                 73
Accruals during 2005                 --                 --                 --
Expenditures during 2005             --                 56                 56
                                 ------             ------             ------
Balance at December 31, 2005     $   --             $   17             $   17
                                 ======             ======             ======


COMPARISON  OF RESULTS OF OPERATIONS  BETWEEN THE YEARS ENDED  DECEMBER 31, 2005
AND 2004

On December 6, 2002, the Company  completed the disposition of substantially all
its operating  assets,  and the Company is now  evaluating  alternative  ways to
redeploy its assets into new businesses.  The discussion  below is therefore not
meaningful to an understanding of future revenue, earnings, operations, business
or prospects of the Company following such a redeployment of its assets.

REVENUES

Total revenues  decreased to zero in 2005 compared to $1.1 million in 2004. This
decrease  is  entirely  due to a  non-recurring  deferred  license  fee  revenue
recognized in the third quarter of 2004 that was recognized  upon the expiration
of the  maintenance  term of the  license  agreements  for our  prior  suite  of
software products.

GENERAL AND ADMINISTRATIVE EXPENSE

During the year ended  December 31, 2005,  general and  administrative  expenses
were $3.5  million  compared to $3.4 million in 2004.  This trend is  consistent
with  management's  stated strategy to limit our expenditure  rate to the extent
practicable,  to levels of our  investment  income  until the  completion  of an
acquisition or merger. General and administrative  expenses include salaries and
employee benefits,  rent,  insurance,  legal,  accounting and other professional
fees as well as public company  expenses such as transfer agent and listing fees
and expenses.

TRANSACTION EXPENSES

In the fourth quarter of 2005, the Company  incurred $92,000 in expenses related
to an acquisition  negotiation  and due diligence  process and also recognized a
credit of $151,000 in expenses from the final settlement of outstanding expenses
arising  out of an  acquisition  negotiation  and  due  diligence  process  that
terminated in September 2004 without the consummation of the acquisition. In the
third  quarter of 2004,  the  Company  recognized  $1.5  million in  transaction
expenses arising out of negotiations  associated with the terminated acquisition
in  September  2004.  The  Company   incurred  an  additional  $0.1  million  of
transaction expenses during the fourth quarter of 2004.

                                       11
<PAGE>

The Company  expects to  recognize  approximately  $1.3  million of  transaction
expenses in the first quarter of 2006, arising out of an acquisition negotiation
and  due  diligence   process  that  terminated  in  January  2006  without  the
consummation  of the  acquisition.  Presently,  $0.9  million  of  the  expenses
associated  with this process are  reflected on the balance sheet as of December
31,  2005  in  "Deposits  and  other  long-term  assets".  Transaction  expenses
represent the costs incurred  during due diligence and  negotiation of potential
acquisitions,  such as legal, accounting,  appraisal and other professional fees
and related expenses.

LOSS/ (GAIN) ON SALE OR DISPOSAL OF ASSETS

During the year ended  December  31, 2005 and 2004,  the Company did not incur a
loss or gain from the sale or disposal of assets.

DEPRECIATION AND AMORTIZATION EXPENSE

Depreciation and amortization expense in 2005 increased to $0.3 million compared
to  $0.2  million  in  2004.  The  increase  is  primarily  attributable  to the
depreciation  of the Company's  headquarters  located in Stamford,  Connecticut.
Occupancy of the space commenced in the second quarter of 2004.

INTEREST INCOME

Interest  income  increased to $2.5 million for the year ended December 31, 2005
compared to $1.2  million in 2004.  The  increase in interest  income was due to
higher rates of return on investments.

INTEREST EXPENSE

Interest expense in 2005 and 2004 was zero.

INCOME TAXES

As a result of the operating losses incurred since the Company's  inception,  no
provision or benefit for income taxes was recorded in 2005 or in 2004.

COMPARISON  OF RESULTS OF OPERATIONS  BETWEEN THE YEARS ENDED  DECEMBER 31, 2004
AND 2003

On December 6, 2002, the Company  completed the disposition of substantially all
its operating  assets,  and the Company is now  evaluating  alternative  ways to
redeploy its assets into new businesses.  The discussion  below is therefore not
meaningful to an understanding of future revenue, earnings, operations, business
or prospects of the Company following such a redeployment of its assets.

REVENUES

Total  revenues  increased to $1.1  million in 2004  compared to $0.1 million in
2003.  This  increase is entirely due to a  non-recurring  deferred  license fee
revenue  recognized  in the third quarter of 2004 that were  recognized  ratably
over the  maintenance  term of the  license  agreements  for our prior  suite of
software products.

GENERAL AND ADMINISTRATIVE EXPENSE

During the year ended  December 31, 2004,  general and  administrative  expenses
were  reduced to $3.4 million  compared to $5.0  million in 2003.  This trend is
consistent with  management's  stated strategy to reduce our expenditure rate to
the extent practicable,  to levels of our investment income until the completion
of an  acquisition  or  merger.  General  and  administrative  expenses  include
salaries and employee benefits,  rent,  insurance,  legal,  accounting and other
professional  fees as well as public company expenses such as transfer agent and
listing fees and expenses.

TRANSACTION EXPENSES

In the third quarter of 2004, the Company recognized $1.5 million in transaction
expenses arising out of negotiations  relating to an acquisition that terminated
in  September  2004 without the  consummation  of the  acquisition.  The Company
incurred an additional  $0.1 million of transaction  expenses  during the fourth
quarter of 2004.  Transaction  expenses  represent the costs incurred during due
diligence and negotiation of potential acquisitions,  such as legal, accounting,
appraisal  and  other   professional  fees  and  related  expenses.   Comparable
transaction  expenses  incurred  during the year ended  December  31,  2003 were
immaterial and were not broken out of general and administrative expenses.

LOSS/ (GAIN) ON SALE OR DISPOSAL OF ASSETS

During the year ended  December  31,  2004,  the Company did not incur a loss or
gain from the sale or  disposal  of  assets  compared  to 2003 when the  Company
recorded a loss on the sale or disposal of assets of $36,000.

                                       12
<PAGE>

DEPRECIATION AND AMORTIZATION EXPENSE

Depreciation and amortization  expense in 2004 declined to $0.2 million compared
to  $0.8  million  in  2003,  a  reduction  of 75%.  The  decline  is  primarily
attributable to the sale of substantially all of the Company's  operating assets
in the fourth quarter of 2002,  resulting in lower depreciation and amortization
on property and equipment coupled with the write off of intangibles  assets with
definite lives during 2002. As a result of this write off of assets during 2002,
there was no amortization expense on intangible assets in 2004 and 2003.

INTEREST INCOME

Interest  income remained stable at $1.2 million for the year ended December 31,
2004 compared to $1.2 million in 2003. The negligible  change in interest income
was due to lower levels of cash,  cash  equivalents  and  marketable  securities
available for investment in 2004, offset by an increase in interest rates during
2004, that resulted in slightly higher rates of return on investments.

INTEREST EXPENSE

Interest  expense in 2004 was zero  compared to an expense of $66,000 in 2003, a
decline of 100%,  due to the  repayment  of $5.0  million of  indebtedness  that
resulted in the interest expense in 2003.

INCOME TAXES

As a result of the operating losses incurred since the Company's  inception,  no
provision or benefit for income taxes was recorded in 2004 or in 2003.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash  equivalents  decreased to $23.3 million at December
31,  2005  from  $48.4  million  at  December  31,  2004  due to a shift  in the
composition of the investment portfolio to investments with longer duration that
are characterized as marketable securities instead of cash equivalents under the
accounting  principles  generally  accepted  in the  United  States of  America.
Marketable securities increased to $61.6 million at December 31, 2005 from $35.1
million at December 31, 2004. The overall  combined  increase of $1.4 million in
cash and cash  equivalents  and  marketable  securities  is primarily due to the
exercise of stock options offset by the  liquidation of investments  required to
fund operating activities.

Cash used in operating  activities was  approximately  $1.8 million during 2005.
The cash used was primarily  attributable  to the Company's net loss, a decrease
in accounts payable and accrued  liabilities and interest  receivable,  prepaids
and other  current  assets  offset by an increase in deferred  rent and non-cash
items. Cash used in operating  activities was approximately  $2.1 million during
2004.  The cash used was  primarily  attributable  to the  Company's net loss, a
decrease in deferred revenue,  interest  receivable,  prepaids and other current
assets offset by an increase in deferred rent and non-cash  items.  The trend in
cash  used in  operating  activities  is  consistent  with  management's  stated
strategy,  following the sale of  substantially  all of the Company's  operating
assets in December 2002, to reduce our cash  expenditure  rate by targeting,  to
the extent  practicable,  our overhead  expenses to the amount of our investment
income until the completion of an acquisition or merger.

Cash used by investing  activities was approximately  $25.9 million during 2005.
The cash was used by the purchase of  marketable  securities  and an increase in
transaction related costs including legal and professional fees partially offset
by the maturity of marketable securities.  Cash provided by investing activities
was  approximately  $35.0 million during 2004. The cash was provided by the sale
and  maturity  of  marketable  securities  partially  offset by the  purchase of
investments and marketable securities.

Cash provided by financing  activities  during 2005 and 2004 was attributable to
stock option exercises.  Cash provided by financing activities was approximately
$2.6 million  during 2005 compared to cash provided by financing of $0.5 million
during 2004.

On December 30, 2005, the Board of Directors of Clarus  accelerated  the vesting
of  unvested  stock  options  previously  awarded  to  employees,  officers  and
directors of the Company under its Amended and Restated Stock  Incentive Plan of
Clarus  Corporation (as amended and restated  effective as of June 13, 2000) and
the Clarus  Corporation  2005 Stock Incentive  Plan,  subject to such optionees'
entering into lock-up,  confidentiality  and  non-competition  agreements.  As a
result of this action,  options to purchase  676,669 shares of common stock that
would have vested over the next one to three years became fully vested.

The decision to accelerate  the vesting of these  options was made  primarily to
reduce  non-cash  compensation  expense that would have been  recorded in future
periods  following  the  Company's   application  of  the  Financial  Accounting
Standards  Board  Statement No. 123,  "Share Based Payment  (revised 2004) ("FAS
123R"). The Company will be required to apply the expense recognition provisions
of FAS 123R  beginning  January  1, 2006.  The  acceleration  of the  options is
expected to reduce the Company's non-cash  compensation expense related to these
options by approximately $1.5 million or $0.09 per share (pre-tax) for the years
2006 - 2008,  based on  estimated  value  calculations  using the  Black-Scholes
methodology.

                                       13
<PAGE>

On December 6, 2002,  the  Company  had  granted  options to purchase  1,250,000
shares of common stock to three senior executives. 450,000 of these options were
issued with an exercise  price of $5.35 per share.  The options  issued at $5.35
per share were issued at less than the fair market  value on that date of $5.45;
accordingly  a  compensation  charge of $65,000  was being  recognized  over the
vesting period of five years. Twenty percent of the options vested annually over
five years on the anniversary of the date of grant.  Due to the  acceleration of
the vesting of stock options by the Company,  the remaining  compensation charge
of $8,500 was recognized as of December 31, 2005.

At  December  31,  2005,  the  Company  has net  operating  loss,  research  and
experimentation credit and alternative minimum tax credit carryforwards for U.S.
federal income tax purposes of  approximately  $226.4 million,  $1.3 million and
$53,000,  respectively,  which expire in varying  amounts  beginning in the year
2009.  The Company also has a capital loss  carryforward  of $15.2 million which
expires in varying amounts  beginning in the year 2006. The Company's ability to
benefit from certain net operating loss and tax credit  carryforwards is limited
under section 382 of the Internal  Revenue Code due to a prior ownership  change
of greater than 50%.  Accordingly,  approximately  $220.0  million of the $226.4
million of U.S. net operating loss carryforward is available currently to offset
taxable income that the Company may recognize in the future.

CONTRACTUAL OBLIGATIONS

The following  summarizes the Company's  contractual  obligations and commercial
commitments at December 31, 2005 with initial or remaining  terms of one or more
years, and the effect such obligations are expected to have on our liquidity and
cash flow in future periods:

Contractual Obligations              Payment Due By Period
(in thousands)                       ---------------------
                     Total     1 Year    2-3 Years     4-5 Years   After 5 Years
                    ------     ------    ---------     ---------   -------------
Operating Leases    $3,227     $  400     $  822        $  877        $1,128
                    ------     ------     ------        ------        ------
             Total  $3,227     $  400     $  822        $  877        $1,128
                    ======     ======     ======        ======        ======

The Company does not have commercial  commitments under capital leases, lines of
credit, stand-by lines of credit, guaranties, stand-by repurchase obligations or
other such  arrangements,  other than the  stand-by  letter of credit  described
below. The Company has no debt and is not a guarantor of any debt.

The Company does not engage in any  transactions or have  relationships or other
arrangements  with  unconsolidated  entities.  These include special purpose and
similar entities or other off-balance sheet arrangements.  The Company also does
not engage in energy, weather or other commodity-based contracts.

Our corporate  headquarters is currently located in Stamford,  Connecticut where
we lease  approximately  8,600  square  feet for  $24,438 a month  during  2005,
pursuant to a lease that  includes  annual rent  escalations,  which  expires on
March 31, 2019.

In  September  2003,  the  Company and  Kanders & Company,  an entity  owned and
controlled by the Company's Executive Chairman,  Warren B. Kanders, entered into
a  15-year  lease  with a  five-year  renewal  option,  as  co-tenants  to lease
approximately  11,500  square  feet in  Stamford,  Connecticut.  The Company and
Kanders & Company have initially  agreed to allocate the total lease payments of
$24,438 per month on the basis of Kanders & Company  renting  2,900  square feet
initially  for $6,163 per month,  and the  Company  renting  8,600  square  feet
initially for $18,275 per month,  which are subject to increase  during the term
of the lease.  The lease provides the co-tenants with an option to terminate the
lease in years eight and ten in  consideration  for a termination  payment.  The
Company and Kanders & Company agreed to pay for their proportionate share of the
build-out  construction  costs,  fixtures,  equipment and furnishings related to
preparation of the space. In connection with the lease,  the Company  obtained a
stand-by letter of credit in the amount of $850,000 to secure lease  obligations
for the  Stamford  facility.  The bank that issued the letter of credit holds an
$850,000 deposit against the letter of credit.  Kanders & Company reimburses the
Company for a pro rata portion of the  approximately  $5,000  annual cost of the
letter of credit.

We also leased  approximately 5,200 square feet near Toronto,  Canada, at a cost
of approximately  $11,000 per month, which was used for the delivery of services
as well as research and development  through October 2001. This lease expired on
February 14, 2006. This facility had been sub-leased for approximately  $5,000 a
month, pursuant to a sublease,  which expired on January 30, 2006. The cost, net
of  the   estimated   sublease   income,   has  been  included  in  general  and
administrative expense in the accompanying statement of operations in 2002.

                                       14
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

In December  2004,  the FASB issued SFAS No. 123  (revised  2004),  "Share-Based
Payment" ("SFAS No. 123R").  This statement  requires that the compensation cost
relating to  share-based  payment  transactions  be  recognized in the financial
statements.  Compensation  cost is to be measured  based on the  estimated  fair
value of the equity-based  compensation  awards issued as of the grant date. The
related  compensation  expense will be based on the  estimated  number of awards
expected to vest and will be recognized over the requisite service period (often
the  vesting  period)  for  each  grant.  The  statement  requires  the  use  of
assumptions  and  judgments  about  future  events and some of the inputs to the
valuation models will require considerable judgment by management. SFAS No. 123R
replaces FASB Statement No. 123 ("SFAS No. 123"),  "Accounting  for  Share-Based
Compensation,"  and supersedes APB Opinion No. 25,  "Accounting for Stock Issued
to  Employees."  The  provisions  of SFAS No. 123R are required to be applied by
public  companies as of the first annual reporting period that begins after June
15, 2005 (as of January 1, 2006 for the Company).  Accordingly, as of January 1,
2006 the Company uses the modified  prospective  application  transition  method
without restatement of prior interim periods in the year of adoption.  This will
result in the Company recognizing compensation cost based on the requirements of
SFAS No. 123R for all equity-based  compensation  awards issued after January 1,
2006. For all equity-based  compensation  awards that are unvested as of January
1, 2006,  compensation  cost will be recognized for the  unamortized  portion of
compensation cost not previously included in the SFAS No. 123 pro forma footnote
disclosure.

QUARTERLY DATA

The  following  table sets forth  selected  quarterly  data for the years  ended
December 31, 2005 and 2004 (in thousands,  except per share data). The operating
results are not indicative of results for any future period.

                                                2005
                                               ------
                          First         Second         Third         Fourth
                         Quarter        Quarter       Quarter       Quarter
                        ---------      ---------     ---------     ---------

Revenues                $    --      $      --      $    --      $      --
Operating loss             (871)        (1,082)        (797)        (1,029)
Net loss                   (390)          (516)        (127)          (258)
Net loss per share:
    Basic               $ (0.02)     $   (0.03)     $ (0.01)     $   (0.02)
    Diluted             $ (0.02)     $   (0.03)     $ (0.01)     $   (0.02)

                                                2004
                                               ------

                         First          Second        Third          Fourth
                        Quarter        Quarter       Quarter        Quarter
                       ---------      ---------     ---------      ---------
Revenues                $    --      $      --      $ 1,106      $      --
Operating loss             (723)        (1,216)        (845)        (1,327)
Net loss                   (471)          (963)        (532)          (923)
Net loss per share:
    Basic               $ (0.03)     $   (0.06)    $  (0.03)     $   (0.06)
    Diluted             $ (0.03)     $   (0.06)    $  (0.03)     $   (0.06)

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not hold derivative financial investments, derivative commodity
investments, engage in foreign currency hedging or other transactions that
expose us to material market risk.

                                       15
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

                       CLARUS CORPORATION AND SUBSIDIARIES

                          Index to Financial Statements

<TABLE>
<CAPTION>
                                                                                                                     Page
                                                                                                                     ----
<S>                                                                                                                  <C>
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements..........................17
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting.............................................................................................................18
Consolidated Balance Sheets-December 31, 2005 and 2004................................................................19
Consolidated Statements of Operations-Years Ended December 31, 2005, 2004 and 2003....................................20
Consolidated Statements of Stockholders' Equity and Comprehensive Loss-Years Ended December 31, 2005, 2004
and 2003 .............................................................................................................21
Consolidated Statements of Cash Flows-Years Ended December 31, 2005, 2004 and 2003....................................23
Notes to Consolidated Financial Statements............................................................................24
</TABLE>

                                       16
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Clarus Corporation:

We  have  audited  the  accompanying   consolidated  balance  sheets  of  Clarus
Corporation  and  subsidiaries  ("Clarus") as of December 31, 2005 and 2004, and
the related  consolidated  statements of  operations,  stockholders'  equity and
comprehensive  loss,  and cash  flows  for each of the  years in the  three-year
period ended December 31, 2005. These consolidated  financial statements are the
responsibility  of  Clarus'  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 audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes 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 financial position of Clarus Corporation
and  subsidiaries  as of December  31,  2005 and 2004,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended December 31, 2005, in conformity with U.S. generally  accepted  accounting
principles.

We also have  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight  Board  (United  States),  the  effectiveness  of  Clarus'
internal  control over  financial  reporting  as of December 31, 2005,  based on
criteria  established in Internal  Control - Integrated  Framework issued by the
Committee of Sponsoring  Organizations of the Treadway Commission ("COSO"),  and
our report dated March 7, 2006, expressed an unqualified opinion on management's
assessment of, and the effective  operation of, internal  control over financial
reporting.

/s/ KPMG LLP
---------------------------
Stamford, Connecticut
March 7, 2006

                                       17
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Clarus Corporation:

We  have  audited   management's   assessment,   included  in  the  accompanying
Management's  Report on Internal  Control over  Financial  Reporting in Item 9A,
that  Clarus  Corporation  and  subsidiaries   ("Clarus")  maintained  effective
internal  control over  financial  reporting  as of December 31, 2005,  based on
criteria  established in Internal  Control - Integrated  Framework issued by the
Committee  of  Sponsoring  Organizations  of the Treadway  Commission  ("COSO").
Clarus'  management is responsible for maintaining  effective  internal  control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's  assessment and an opinion on the effectiveness of Clarus' internal
control over financial reporting based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain  reasonable  assurance  about whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects. Our audit included obtaining an understanding of internal control over
financial reporting,  evaluating management's assessment, testing and evaluating
the design and operating  effectiveness of internal control, and performing such
other  procedures as we considered  necessary in the  circumstances.  We believe
that our audit provides a reasonable basis for our opinion.

A company's  internal control over financial  reporting is a process designed 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. A company's internal control over
financial  reporting  includes those policies and procedures that (1) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect the  transactions  and  dispositions  of the assets of the company;  (2)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of  unauthorized  acquisition,  use or  disposition  of the  company's
assets that could have a material effect on the financial statements.

Because of its inherent  limitations,  internal control over financial reporting
may not prevent or detect misstatements.  Also, 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  our  opinion,  management's  assessment  that  Clarus  maintained  effective
internal  control over  financial  reporting as of December 31, 2005,  is fairly
stated,  in all material  respects,  based on criteria  established  in Internal
Control - Integrated Framework issued by the COSO. Also, in our opinion,  Clarus
maintained, in all material respects,  effective internal control over financial
reporting  as of December 31, 2005,  based on criteria  established  in Internal
Control - Integrated Framework issued by the COSO.

We also have  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board (United States),  the consolidated balance sheets of
Clarus  Corporation  and  subsidiaries as of December 31, 2005 and 2004, and the
related  consolidated   statements  of  operations,   stockholders'  equity  and
comprehensive  loss,  and cash  flows  for each of the  years in the  three-year
period ended December 31, 2005, and our report dated March 7, 2006 expressed  an
unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP
---------------------------
Stamford, Connecticut
March 7, 2006


                                       18
<PAGE>
                       CLARUS CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2005 and 2004
               (In Thousands, Except Share and Per Share Amounts)


                                     ASSETS
<TABLE>
<CAPTION>
                                                                                      2005             2004
                                                                                    ---------       ---------
CURRENT ASSETS:
<S>                                                                                 <C>            <C>
    Cash and cash equivalents                                                       $  23,270      $  48,377
    Marketable securities                                                              61,601         35,119
    Interest receivable                                                                   320            350
    Prepaids and other current assets                                                     135            182
                                                                                    ---------      ---------
       Total current assets                                                            85,326         84,028
                                                                                    ---------      ---------
PROPERTY AND EQUIPMENT, NET                                                             1,996          2,367
                                                                                    ---------      ---------
OTHER ASSETS:
    Deposits and other long-term assets                                                   956             42
                                                                                    ---------      ---------
       Total assets                                                                 $  88,278      $  86,437
                                                                                    =========      =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable and accrued liabilities                                        $   1,461      $   1,468
                                                                                    ---------      ---------
       Total current liabilities                                                        1,461          1,468
    Deferred rent                                                                         208            115
                                                                                    ---------      ---------
       Total liabilities                                                                1,669          1,583
                                                                                    ---------      ---------
COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY:
    Preferred stock, $.0001 par value; 5,000,000 shares authorized; none issued            --             --
    Common stock, $.0001 par value; 100,000,000 shares authorized;
         17,187,170 and 16,734,947 shares issued and 17,112,170 and 16,659,947
         outstanding in 2005 and 2004, respectively                                         2              2
    Additional paid-in capital                                                        370,704        368,385
    Accumulated deficit                                                              (280,947)      (279,656)
    Less treasury stock, 75,000 shares at cost                                             (2)            (2)
    Accumulated other comprehensive loss                                                  (88)          (130)
    Deferred compensation                                                              (3,060)        (3,745)
                                                                                    ---------      ---------
       Total stockholders' equity                                                      86,609         84,854
                                                                                    ---------      ---------
       Total liabilities and stockholders' equity                                   $  88,278      $  86,437
                                                                                    =========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       19
<PAGE>
                       CLARUS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  Years Ended December 31, 2005, 2004 and 2003
                    (In Thousands, Except Per Share Amounts)


<TABLE>
<CAPTION>
                                                 2005          2004          2003
                                               --------      --------      --------
REVENUES:
<S>                                            <C>           <C>           <C>
    License fees                               $     --      $  1,106      $     --
    Services fees                                    --            --           130
                                               --------      --------      --------
       Total revenues                                --         1,106           130

OPERATING EXPENSES:
    General and administrative                    3,504         3,395         4,986
    Provision for doubtful accounts                  --            --            18
    Transaction expenses                            (59)        1,636            --
    Loss on sale or disposal of assets               --            --            36
    Depreciation and amortization                   334           186           762
                                               --------      --------      --------
       Total operating expenses                   3,779         5,217         5,802
                                               --------      --------      --------
OPERATING LOSS                                   (3,779)       (4,111)       (5,672)

 OTHER INCOME /(EXPENSE)                             (2)           19           169
 INTEREST INCOME                                  2,490         1,203         1,238
 INTEREST EXPENSE                                    --            --           (66)
                                               --------      --------      --------
NET LOSS                                       $ (1,291)     $ (2,889)     $ (4,331)
                                               ========      ========      ========


NET LOSS PER SHARE

    Basic                                      $  (0.08)     $  (0.18)     $  (0.27)

    Diluted                                    $  (0.08)     $  (0.18)     $  (0.27)


WEIGHTED AVERAGE COMMON SHARES OUTSTANDING


     Basic                                       16,329        16,092        15,905

     Diluted                                     16,329        16,092        15,905

</TABLE>


          See accompanying notes to consolidated financial statements.

                                       20
<PAGE>



                       CLARUS CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
                               COMPREHENSIVE LOSS
                  Years Ended December 31, 2005, 2004 and 2003
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                                   Treasury             Accumulated
                                              Common Stock        Additional                         Stock                 Other
                                              -------------        Paid-In      Accumulated    -------------------     Comprehensive
                                          Shares     Amount        Capital        Deficit      Shares     Amount       Income (loss)
                                         --------    ---------     ---------      ----------   --------   ---------     -----------
<S>                                       <C>        <C>           <C>            <C>            <C>      <C>            <C>
BALANCES, December 31, 2002               15,763     $       2     $ 361,715      $(272,436)     (75)     $      (2)     $     146
   Exercise of stock options                 384            --         1,656             --       --             --             --
   Issuance of restricted shares,
      net of amortization                    500            --         3,650             --       --             --             --
   Issuance of shares under
      employee stock purchase plan             2            --            10             --       --             --             --
   Net loss                                   --            --            --         (4,331)      --             --             --
   Decrease in foreign currency
      translation adjustment                  --            --            --             --       --             --            (78)
   Decrease in unrealized gain on
      marketable securities                   --            --            --             --       --             --            (85)

------------------------------------------------------------------------------------------------------------------------------------
BALANCES, December 31, 2003               16,649             2       367,031       (276,767)     (75)            (2)           (17)
   Exercise of stock options                  86            --           454             --       --             --             --
   Issuance of restricted shares,
      net of amortization                     --            --           900             --       --             --             --
   Net loss                                   --            --            --         (2,889)      --             --             --
   Decrease in unrealized gain on
      marketable securities                   --            --            --             --       --             --           (113)
------------------------------------------------------------------------------------------------------------------------------------
BALANCES, December 31, 2004               16,735             2       368,385       (279,656)     (75)            (2)          (130)
   Exercise of stock options                 448            --         2,594             --       --             --             --
   Issuance of restricted shares,
      net of amortization                      4            --          (275)            --       --             --             --
   Net loss                                   --            --            --         (1,291)      --             --             --
   Increase in unrealized gain on
      marketable securities                   --            --            --             --       --             --             42
------------------------------------------------------------------------------------------------------------------------------------
BALANCES,December 31, 2005                17,187     $       2     $ 370,704      $(280,947)     (75)     $      (2)     $     (88)
====================================================================================================================================
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       21
<PAGE>

                       CLARUS CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
                           COMPREHENSIVE LOSS (Cont.)
                  Years Ended December 31, 2005, 2004 and 2003
                                 (In Thousands)




                                                       Total
                                        Deferred     Stockholders' Comprehensive
                                      Compensation     Equity           Loss
                                      ------------     ------         ---------
BALANCES, December 31,2002             $    (65)     $ 89,360         $     --
   Exercise of stock options                 --         1,656               --
   Issuance of restricted shares,
      net of amortization                (3,363)          287               --
   Issuance of shares under
      employee stock purchase plan           --            10               --
   Net loss                                  --        (4,331)          (4,331)
   Decrease in foreign currency
      translation adjustment                 --           (78)             (78)
   Decrease in unrealized gain on
      marketable securities                  --           (85)             (85)
                                                                      --------
   Total comprehensive loss                                             (4,494)
-------------------------------------------------------------         ========
BALANCES, December 31, 2003              (3,428)       86,819               --
   Exercise of stock options                 --           454               --
   Issuance of restricted shares,
      net of amortization                  (317)          583               --
   Net loss                                  --        (2,889)          (2,889)
   Decrease in unrealized gain on
      marketable securities                  --          (113)            (113)
                                                                      --------
 Total comprehensive loss                                               (3,002)
-------------------------------------------------------------         ========
BALANCES, December 31, 2004              (3,745)       84,854               --
   Exercise of stock options                 --         2,594               --
   Issuance of restricted shares,
      net of amortization                   685           410               --
   Net loss                                  --        (1,291)          (1,291)
Increase in unrealized gain on
      marketable securities                  --            42               42
                                                                      --------
 Total comprehensive loss                                             $ (1,249)
-------------------------------------------------------------         ========
BALANCES, December 31,2005            $  (3,060)    $  86,609
=============================================================


          See accompanying notes to consolidated financial statements.

                                       22
<PAGE>

                       CLARUS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years Ended December 31, 2005, 2004 and 2003
                      (In Thousands, Except Share Amounts)


<TABLE>
<CAPTION>
                                                                                         2005           2004           2003
                                                                                      ---------      ---------      ---------
OPERATING ACTIVITIES:
<S>                                                                                   <C>            <C>            <C>
Net loss                                                                              $  (1,291)     $  (2,889)     $  (4,331)
Adjustments to reconcile net loss to net cash used in operating activities:
  Depreciation and amortization of property and equipment                                   334            186            762
  Amortization of premium and discount on securities, net                                  (669)           982             --
  Gain on sale of marketable securities and other                                            --            (17)            --
  Provision for doubtful accounts                                                            --             --             18
  Amortization of deferred employee compensation plans                                      410            583            287
  Loss on sale or disposal of property and equipment                                         --             --             36
  Changes in operating assets and liabilities:
    Accounts receivable                                                                      --             --            449
    Interest receivable, prepaids and other current assets                                   77            107            623
    Assets held for sale                                                                     --             --             48
    Deposits and other long-term assets                                                      (1)            (4)            30
    Accounts payable and accrued liabilities                                               (731)           (52)          (416)
    Deferred revenue                                                                         --         (1,106)          (142)
    Deferred rent                                                                            93            115             --
    Liabilities to be assumed                                                                --             --           (220)
                                                                                      ---------      ---------      ---------
     Net cash used in operating activities                                               (1,778)        (2,095)        (2,856)
                                                                                      ---------      ---------      ---------
INVESTING ACTIVITIES:
  Purchase of marketable securities                                                     (93,887)       (59,754)      (117,881)
  Proceeds from the sale and maturity of marketable securities                           68,116         97,242         96,918
  Purchase of property and equipment                                                        (17)        (2,515)           (38)
  Increase in transaction expenses                                                         (135)            --             --
  Proceeds from sale of property and equipment                                               --             --             11
                                                                                      ---------      ---------      ---------
     Net cash (used in) provided by investing activities                                (25,923)        34,973        (20,990)

FINANCING ACTIVITIES:
  Proceeds from the exercise of stock options                                             2,594            454          1,656
  Proceeds from issuance of common stock related to employee stock
        purchase plans                                                                       --             --             10
  Repayment of long-term debt                                                                --             --         (5,000)
                                                                                      ---------      ---------      ---------
     Net cash provided by (used in) financing activities                                  2,594            454         (3,334)
                                                                                      ---------      ---------      ---------

CHANGE IN CASH AND CASH EQUIVALENTS                                                     (25,107)        33,332        (27,180)
CASH AND CASH EQUIVALENTS, beginning of year                                             48,377         15,045         42,225
                                                                                      ---------      ---------      ---------
CASH AND CASH EQUIVALENTS, end of year                                                $  23,270      $  48,377      $  15,045

                                                                                      =========      =========      =========

SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITES:

Increase in transaction expenses included in accounts payable and
accrued liabilities                                                                   $     778      $      --      $      --
Increase in transaction expenses included in other assets                             $     913      $      --      $      --
Grant of restricted stock                                                             $      50      $      50      $   2,680
</TABLE>

See accompanying notes to consolidated financial statements

                                       23
<PAGE>


                       CLARUS CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2005, 2004 and 2003

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Clarus  Corporation,  a  Delaware  corporation,   and  its  subsidiaries,   (the
"Company")  prior to the sale of  substantially  all of its operating  assets in
December   2002,    developed,    marketed,    and   supported    Internet-based
business-to-business   electronic   commerce   solutions   that   automated  the
procurement and management of operating resources.

During 2002, the Company  adopted a strategic plan to sell or abandon all active
software  operations and redeploy Company capital to enhance  stockholder value.
On  December  6,  2002,  the  Company  sold  substantially  all of its  software
operations  (comprised  of the  eProcurement,  Sourcing and  Settlement  product
lines) to Epicor Software Corporation for $1.0 million in cash.  Separately,  on
January 1, 2003,  the Company sold the assets  related to the Cashbook  product,
which  were  excluded  from  the  Epicor  transaction,   to  an  employee  group
headquartered  in Limerick,  Ireland.  Therefore,  as of December 31, 2002,  the
Company had discontinued or abandoned substantially all software operations.

All of the revenues,  cost of revenues and a substantial amount of the operating
expenses in the accompanying  consolidated  statements of operations,  relate to
the divested products  discussed above as well as other  discontinued  products.
The Company is not expected to  recognize  any  significant  amounts of revenue,
costs of revenue or incur operating  expenses related to the Company's  software
operations in the future.

Management now consists of four corporate executive officers and a support staff
of two,  all of whom are located in  Stamford,  Connecticut.  Management  is now
engaged in analyzing and evaluating potential  acquisition and merger candidates
as part of its  strategy  to  redeploy  its cash and cash  equivalent  assets to
enhance stockholder value.

BASIS OF PRESENTATION

The consolidated  financial  statements  include the accounts of the Company and
its wholly owned subsidiaries.  All intercompany  transactions and balances have
been  eliminated.  The Company's  subsidiaries  include or included  Clarus CSA,
Inc.,  Clarus  International,  Inc.,  SAI  Recruitment  Limited,  SAI  (Ireland)
Limited,  Clarus eMEA Ltd.,  i2Mobile.com  Limited,  SAI America Limited,  REDEO
Technologies,  Inc., Software Architects International,  Limited and SAI America
LLC. As of December 31, 2005 all of these  subsidiaries  have ceased trading and
been dissolved or are in the process of being dissolved.

USE OF ESTIMATES

The  preparation  of these  financial  statements  requires  management  to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and  disclosure  of  contingent  liabilities  at  the  date  of the
financial statements. Estimates also affect the reported amounts of revenues and
expenses  during the  reporting  periods.  The Company  regularly  evaluates its
estimates  and  assumptions  including  those  related to  revenue  recognition,
allowance for doubtful accounts, and impairment of long-lived assets, impairment
of  investments,  and  contingencies  and  litigation.  The  Company  bases  its
estimates on historical experience and other assumptions that are believed to be
reasonable  under the  circumstances.  Actual  results  could  differ from these
estimates.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid  investments  purchased with an original
maturity  of  three  months  or less to be cash  equivalents.  The  Company  had
approximately  $23.3  million  and $48.4  million  in cash and cash  equivalents
included in the  accompanying  consolidated  balance  sheets for the years ended
December 31, 2005 and 2004, respectively.

MARKETABLE SECURITIES

Marketable  securities  for the  periods  ended  December  31,  2005  and  2004,
respectively,  consist of government  notes and bonds.  The Company accounts for
its  marketable  securities  under the  provisions  of  Statement  of  Financial
Accounting  Standards ("SFAS") No. 115,  "Accounting for Certain  Investments in
Debt and Equity  Securities".  Pursuant to the  provisions  of SFAS No. 115, the
Company  has  classified  its  marketable   securities  as   available-for-sale.
Available-for-sale  securities  have been  recorded  at fair  value and  related
unrealized gains and losses have been excluded from earnings and are reported as
a separate  component of  accumulated  other  comprehensive  income (loss) until
realized.

                                       24
<PAGE>

PROPERTY AND EQUIPMENT

Property and equipment  consists of furniture and fixtures,  computers and other
office equipment and leasehold  improvements.  These assets are depreciated on a
straight-line  basis over periods  ranging  from one to eight  years.  Leasehold
improvements  are  amortized  over the shorter of the useful life or the term of
the lease.

Property and equipment are summarized as follows (in thousands):


<TABLE>
<CAPTION>
                                                       December 31,
                                                     -------------------
                                                                            Useful Life
                                                      2005          2004    (in years)
                                                     ------       ------    ----------
<S>                                                 <C>          <C>            <C> <C>
Computers and equipment                             $   200      $   190        1 - 5
Furniture and fixtures                                  488          488            7
Leasehold improvements                                1,893        1,944            8
                                                    -------      -------
                                                      2,581        2,622
Less: accumulated depreciation and amortization        (585)        (255)
                                                    -------      -------
Property and equipment, net                           1,996      $ 2,367
                                                    =======      =======
</TABLE>


Depreciation and amortization  expense related to property and equipment totaled
$334,000,  $186,000 and $762,000 for the years ended December 31, 2005, 2004 and
2003, respectively.

INVESTMENTS

Prior to 2002,  the Company made several  equity  investments  in privately held
companies.  The Company's equity ownership in these entities ranged from 2.5% to
12.5%. These investments were accounted for using the cost method of accounting.
The Company did not recognize any material  income from these  companies  during
2005,  2004 or 2003.  The  Company  continues  to retain  ownership  interest in
several of the  companies  although  they have been  written down to a zero cost
basis in the Company's consolidated balance sheet at December 31, 2005 and 2004,
respectively.

LONG-LIVED ASSETS

In accordance with SFAS 144,  long-lived  assets,  such as property,  plant, and
equipment,  and  purchased  intangibles  assets  subject  to  amortization,  are
reviewed for impairment  whenever  events or changes in  circumstances  indicate
that the carrying amount of an asset may not be recoverable.  Recoverability  of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to estimated undiscounted future cash flows expected to be generated by
the asset. If the carrying amount of an asset exceeds its estimated  future cash
flows,  an  impairment  charge is recognized by the amount by which the carrying
amount of the asset  exceeds the fair value of the asset.  Assets to be disposed
of are  separately  presented in the balance  sheet and reported at the lower of
the  carrying  amount or fair value  less costs to sell,  and would be no longer
depreciated.  The assets and liabilities of a disposal group  classified as held
for sale would be presented  separately in the  appropriate  asset and liability
sections of the balance sheet.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities include the following as of December
31, 2005 and 2004 (in thousands):

                                                    2005        2004
                                                   ------      ------
Accounts payable                                   $  150     $  218
Accrued compensation, benefits and commissions        220        172
Restructuring accruals                                 17         73
Accrued professional services                       1,023        595
Accrued franchise taxes                                43        365
Other                                                   8         45
                                                   ------     ------
                                                   $1,461     $1,468
                                                   ======     ======

                                       25
<PAGE>


FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company uses financial instruments in the normal course of its business. The
carrying  values of cash and cash  equivalents,  accounts  payable and long-term
debt approximates fair value.  Marketable  securities are carried at fair value.
The fair value of the Company's  investments  in privately held companies is not
readily  available.  The Company  believes the fair values of these  investments
approximated their respective carrying values at December 31, 2005 and 2004.

STOCK-BASED COMPENSATION PLAN

The Company has an employee stock option plan,  which is described more fully in
Note 8. In December  2002,  the Financial  Accounting  Standards  Board ("FASB")
issued Statement No. 148, "Accounting for Stock-Based  Compensation - Transition
and  Disclosure"  which  amends  SFAS  No.  123,   "Accounting  for  Stock-Based
Compensation",  to provide alternative methods of transition for a change to the
fair based-value method of accounting for stock-based employee compensation.  In
addition,  SFAS No.148  amends the  disclosure  requirements  of SFAS No. 123 to
require prominent  disclosures in both annual and interim  financial  statements
about the method of accounting for  stock-based  employee  compensation  and the
effect of the method used on reported results. As permitted by SFAS 148 and SFAS
123,  the Company has elected to follow the  guidance of  Accounting  Principles
Board  ("APB")  Opinion No. 25,  "Accounting  for Stock Issued to  Employees" in
measuring and recognizing its stock-based  transactions with employees. As such,
compensation expense is measured on the date of grant only if the current market
price on the date of the grant of the  underlying  stock  exceeds  the  exercise
price. Such compensation  expense is recorded on a straight-line  basis over the
related vesting period.

On December 30, 2005, the Board of Directors of Clarus  accelerated  the vesting
of  unvested  stock  options  previously  awarded  to  employees,  officers  and
directors of the Company under its Amended and Restated Stock  Incentive Plan of
Clarus  Corporation (as amended and restated  effective as of June 13, 2000) and
the Clarus  Corporation  2005 Stock  Incentive  Plan,  subject to such  optionee
entering into lock-up,  confidentiality  and  non-competition  agreements.  As a
result of this action,  options to purchase  676,669 shares of common stock that
would have vested over the next one to three years became fully vested.

The decision to accelerate  the vesting of these  options was made  primarily to
reduce  non-cash  compensation  expense that would have been  recorded in future
periods  following  the  Company's   application  of  the  Financial  Accounting
Standards  Board  Statement No. 123,  "Share Based Payment  (revised 2004) ("FAS
123R"). The Company will be required to apply the expense recognition provisions
of FAS 123R  beginning  January  1, 2006.  The  acceleration  of the  options is
expected to reduce the Company's non-cash  compensation expense related to these
options by approximately $1.5 million or $0.09 per share (pre-tax) for the years
2006 - 2008,  based on  estimated  value  calculations  using the  Black-Scholes
methodology.

The  following  table shows the effect on net loss and earnings per share if the
fair value method of accounting had been applied. For purposes of this pro forma
disclosure,  the estimated fair value of an option  utilizing the  Black-Scholes
option  pricing  model is assumed to be  amortized  to expense over the option's
vesting periods (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                 2005          2004            2003
                                                              ----------     ----------     ----------
<S>                                                           <C>            <C>            <C>
Net loss, as reported                                         $  (1,291)     $  (2,889)     $  (4,331)
Add stock-based employee compensation expense included in
  reported net loss                                                 410            584            287
Deduct total stock-based employee compensation expense
  determined under fair-value based method for all awards        (3,467)        (2,613)        (5,049)
                                                              ---------      ---------      ---------
Pro forma net loss                                            $  (4,348)     $  (4,918)     $  (9,093)
                                                              =========      =========      =========
Earnings per Share:

  Basic - as reported                                         $   (0.08)     $   (0.18)     $   (0.27)

  Basic - pro forma                                           $   (0.27)     $   (0.31)     $   (0.57)


  Diluted - as reported                                       $   (0.08)     $   (0.18)     $   (0.27)

  Diluted - pro forma                                         $   (0.27)     $   (0.31)     $   (0.57)
                                                              =========      =========      =========
</TABLE>


Refer to Note 8 to the consolidated financial statements for assumptions used in
the Black-Scholes option pricing model.

                                       26
<PAGE>

INCOME TAXES

Income taxes are accounted for under the asset and  liability  method.  Deferred
income tax assets and liabilities are recognized for the future tax consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and  liabilities  and their  respective tax bases and operating
loss and tax credit  carryforwards.  Deferred  income tax assets and liabilities
are measured  using enacted tax rates expected to apply to taxable income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled. The effect on deferred income tax assets and liabilities of a change in
tax rates is  recognized  in income in the period that  includes  the  enactment
date.

NET LOSS PER SHARE

Basic and diluted net loss per share was  computed in  accordance  with SFAS No.
128,  "Earnings Per Share," using the weighted  average  number of common shares
outstanding.  The diluted net loss per share for the years  ended  December  31,
2005, 2004 and 2003 excludes  incremental  shares  calculated using the treasury
stock method,  assumed from the  conversion of stock options due to the net loss
for the years ended December 31, 2005,  2004 and 2003. The potential  effects of
excluded incremental shares are as follows (in thousands):

<TABLE>
<CAPTION>
<S>                                                                 <C>       <C>       <C>
                                                                    2005      2004      2003
                                                                   -----     -----     -----
Effect of shares issuable under stock option plan                    316       616       202
Effect of shares issuable under restricted stock awards              502       504        28
                                                                   -----     -----     -----
Total effect of potential incremental shares                         818     1,120       230
                                                                   =====     =====     =====
</TABLE>

At December 31, 2005,  1,111,250  options were  excluded in the  computation  of
diluted  earnings per share due to the net loss for the year ended  December 31,
2005 and 570,000  options were excluded in the  computation of diluted  earnings
per share  because the  options'  exercise  prices were greater than the average
market share price of the common shares.

At December 31, 2004,  1,561,617  options were  excluded in the  computation  of
diluted  earnings per share due to the net loss for the year ended  December 31,
2004 and 400,000  options were excluded in the  computation of diluted  earnings
per share  because the  options'  exercise  prices were greater than the average
market share price of the common shares.

At December 31, 2003,  1,283,867  options were  excluded in the  computation  of
diluted  earnings per share due to the net loss for the year ended  December 31,
2003 and 815,000  options were excluded in the  computation of diluted  earnings
per share  because the  options'  exercise  prices were greater than the average
market share price of the common shares.

COMPREHENSIVE INCOME (LOSS)

The Company utilizes SFAS No. 130, "Reporting  Comprehensive  Income".  SFAS No.
130 establishes standards for reporting and presentation of comprehensive income
(loss) and its components in a full set of financial  statements.  Comprehensive
income (loss)  primarily  consists of net income (loss) and unrealized gains and
losses  from  available-for-sale  marketable  securities.  Comprehensive  income
(loss) is presented in the consolidated statements of stockholders' equity.

SEGMENT AND GEOGRAPHIC INFORMATION

In accordance with the provisions of SFAS No. 131,  "Disclosures  about Segments
of an  Enterprise  and Related  Information",  the Company has  determined  that
during  2005,  2004 and 2003 the  Company  operated  in one  principal  business
segment.  Due to the  sale  of our  operating  assets  as  discussed  in  "Prior
Business", the Company is a holding company.

                                       27
<PAGE>

Geographic  revenue and the carrying  value of property and  equipment as of and
for the years ended December 31, 2005, 2004 and 2003 were as follows:

(in thousands)                 2005       2004       2003
                             ------     ------     ------
 Revenue:
 United States               $   --     $   --     $  130
 International                   --      1,106         --
                             ------     ------     ------
 Total                       $   --     $1,106     $  130
                             ======     ======     ======

 Property and equipment:
 United States               $1,996     $2,367     $   38
                             ------     ------     ------
 Total                       $1,996     $2,367     $   38
                             ======     ======     ======

NEW ACCOUNTING PRONOUNCEMENTS

In December  2004,  the FASB issued SFAS No. 123  (revised  2004),  "Share-Based
Payment" ("SFAS No. 123R").  This statement  requires that the compensation cost
relating to  share-based  payment  transactions  be  recognized in the financial
statements.  Compensation  cost is to be measured  based on the  estimated  fair
value of the equity-based  compensation  awards issued as of the grant date. The
related  compensation  expense will be based on the  estimated  number of awards
expected to vest and will be recognized over the requisite service period (often
the  vesting  period)  for  each  grant.  The  statement  requires  the  use  of
assumptions  and  judgments  about  future  events and some of the inputs to the
valuation models will require considerable judgment by management. SFAS No. 123R
replaces FASB Statement No. 123 ("SFAS No. 123"),  "Accounting  for  Stock-Based
Compensation,"  and supersedes APB Opinion No. 25,  "Accounting for Stock Issued
to  Employees."  The  provisions  of SFAS No. 123R are required to be applied by
public  companies as of the first annual reporting period that begins after June
15, 2005 (as of January 1, 2006 for the Company).  Accordingly, as of January 1,
2006, the Company uses the modified  prospective  application  transition method
without restatement of prior interim periods in the year of adoption.  This will
result in the Company recognizing compensation cost based on the requirements of
SFAS No. 123R for all equity-based  compensation  awards issued after January 1,
2006. For all equity-based  compensation  awards that are unvested as of January
1, 2006,  compensation  cost will be recognized for the  unamortized  portion of
compensation cost not previously included in the SFAS No. 123 pro forma footnote
disclosure.

On December 30, 2005, the Board of Directors of Clarus  accelerated  the vesting
of  unvested  stock  options  previously  awarded  to  employees,  officers  and
directors of the Company under its Amended and Restated Stock  Incentive Plan of
Clarus  Corporation (as amended and restated  effective as of June 13, 2000) and
the Clarus  Corporation  2005 Stock  Incentive  Plan,  subject to such  optionee
entering into lock-up,  confidentiality  and  non-competition  agreements.  As a
result of this action,  options to purchase  676,669 shares of common stock that
would have vested over the next one to three years became fully vested.

The decision to accelerate  the vesting of these  options was made  primarily to
reduce  non-cash  compensation  expense that would have been  recorded in future
periods  following  the  Company's   application  of  the  Financial  Accounting
Standards  Board  Statement No. 123,  "Share Based Payment  (revised 2004) ("FAS
123R"). The Company will be required to apply the expense recognition provisions
of FAS 123R  beginning  January  1, 2006.  The  acceleration  of the  options is
expected to reduce the Company's non-cash  compensation expense related to these
options by approximately $1.5 million or $0.09 per share (pre-tax) for the years
2006 - 2008,  based on  estimated  value  calculations  using the  Black-Scholes
methodology

RECLASSIFICATIONS

Certain  prior year amounts have been  reclassified  to conform with the current
year presentation.

2. MARKETABLE SECURITIES

As of December 31, 2005, and 2004, those  investments with an original  maturity
of three months or less are classified as cash equivalents and those investments
with  original  maturities  beyond three  months are  classified  as  marketable
securities.  Pursuant  to the  provisions  of SFAS  No.  115,  the  Company  has
classified all of its marketable securities as available-for-sale.

At December 31, 2005,  marketable  securities  consisted of government notes and
bonds  with a fair  market  value  of  $61.6  million.  The  amortized  cost  of
marketable  securities at December 31, 2005 was $61.7 million with an unrealized
loss of $88,000.

                                       28
<PAGE>

The  maturities of all  securities are less than 18 months at December 31, 2005.
Of the $61.7 million in securities,  $49.6 million mature in less than 12 months
and $12.1 million mature between 12 and 18 months.

At December 31, 2004,  marketable  securities  consisted of government notes and
bonds  with a fair  market  value  of  $35.1  million.  The  amortized  cost  of
marketable  securities at December 31, 2004 was $35.2 million with an unrealized
loss of $130,000.

The  maturities of all  securities are less than 18 months at December 31, 2004.
$26.9 million  mature in less than 12 months and $8.2 million  mature between 12
and 18 months.

3. ACQUISITIONS AND DISPOSITIONS

SALE OF OPERATING ASSETS

On December 6, 2002, the Company sold its e-commerce software business to Epicor
Software  Corporation for $1.0 million.  Approximately  $200,000 of the purchase
price was placed in escrow. The escrowed funds were released in February 2004.

4. RELATED-PARTY TRANSACTIONS

In  September  2003,  the  Company and  Kanders & Company,  an entity  owned and
controlled by the Company's Executive Chairman,  Warren B. Kanders, entered into
a  15-year  lease  with a  five-year  renewal  option,  as  co-tenants  to lease
approximately  11,500  square  feet in  Stamford,  Connecticut.  The Company and
Kanders & Company have initially  agreed to allocate the total lease payments of
$24,438 per month on the basis of Kanders & Company  renting  2,900  square feet
initially  for $6,163 per month,  and the  Company  renting  8,600  square  feet
initially for $18,275 per month,  which are subject to increases during the term
of the lease.  Rent expense is recognized  on a straight  line basis.  The lease
provides the co-tenants with an option to terminate the lease in years eight and
ten in  consideration  for a  termination  payment.  The  Company  and Kanders &
Company  agreed  to  pay  for  their   proportionate   share  of  the  build-out
construction costs,  fixtures,  equipment and furnishings related to preparation
of the space.  In  connection  with the lease,  the Company  obtained a stand-by
letter of credit in the amount of $850,000 to secure lease  obligations  for the
Stamford  facility.  Kanders & Company  reimburses  the  Company  for a pro rata
portion of the approximately $5,000 annual cost of the letter of credit.

The Company provides certain telecommunication,  administrative and other office
services as well as  accounting  and  bookkeeping  services to Kanders & Company
that are  reimbursed  by Kanders & Company.  Such services  aggregated  $107,000
during the year ended  December  31,  2005.  During the year ended  December 31,
2005, the Company  expensed  approximately  $35,000 to Kanders  Aviation LLC, an
affiliate of the Company's  Executive Chairman,  Warren B. Kanders,  relating to
aircraft  travel  by  directors  and  officers  of  the  Company  for  potential
redeployment transactions.

As of December  31,  2005,  the Company had  outstanding  a payable of less than
$13,225 to Kanders & Company. The amount due to Kanders & Company is included in
accounts  payable  and  accrued  liabilities  in the  accompanying  consolidated
balance sheet. The outstanding amount was paid in January 2006.

During the year ended  December 31,  2004,  the Company  expensed  approximately
$31,000,  for payments to Kanders  Aviation LLC,  relating to aircraft travel by
directors and officers of the Company for potential  redeployment  transactions.
In 2004, the Company  provided  certain  telecommunication,  administrative  and
other office services as well as accounting and bookkeeping  services to Kanders
& Company that were  reimbursed by Kanders & Company.  Such services  aggregated
$43,000 during the year ended December 31, 2004.

As of December 31, 2004,  the Company had  outstanding a net  receivable of less
than $150 from Kanders & Company  resulting from an  outstanding  payable by the
Company to Kanders Aviation LLC of $23,921 and an outstanding payable by Kanders
& Company to the Company of $24,054.  The amount due to Kanders  Aviation LLC is
included  in  accounts  payable  and  accrued  liabilities  in the  accompanying
consolidated balance sheet and the amount due from Kanders & Company is included
in prepaids and other current assets in the  accompanying  consolidated  balance
sheet. The outstanding amounts were paid in February 2005.

After the closing of the sale of the  e-commerce  software  business in December
2002,  Steven Jeffery,  resigned as the Company's  Chief  Executive  Officer and
Chairman of the Board of Directors. Under Mr. Jeffery's employment agreement, he
was  entitled  to receive a  severance  payment  equal to one  year's  salary of
$250,000,  payable  over one year.  In  addition,  Mr.  Jeffery  entered  into a
three-year   consulting   agreement   with  the  Company  and   received   total
consideration  of $250,000  payable over two years.  At December  31,  2005,  no
balance remained outstanding to Mr. Jeffery under these severance  arrangements.
On April 11, 2005, Mr. Jeffery resigned as a member of our Board of Directors.

In the  opinion  of  management,  the  rates,  terms and  considerations  of the
transactions  with the related parties described above are at least as favorable
as those we could have obtained in arms length  negotiations or otherwise are at
prevailing market prices and terms.

                                       29
<PAGE>

5. RESTRUCTURING AND RELATED COSTS

During 2002 and 2001, the Company's  management approved  restructuring plans to
reorganize and reduce  operating  costs.  Restructuring  and related  charges of
$12.8  million  were  expensed  in 2001 and  2002 in an  attempt  to  align  the
Company's cost structure with projected revenue.

During  2003,  the  Company  determined  that actual  restructuring  and related
charges were in excess of the amounts provided for in 2002 and 2001 and recorded
additional restructuring charges of $250,000. This amount was charged to general
and  administrative  costs  in  the  accompanying   consolidated   statement  of
operations  during  2003.  The charges for 2003 were  comprised  of $223,000 for
employee  separation  costs and $27,000 for facility  closure and  consolidation
costs.

During 2004, the Company recorded an additional  restructuring charge of $33,000
for  facility  closure  costs.  The  increase  was  the  result  of  significant
fluctuations in exchange rates and increased rent expense.

The  following  is a  reconciliation  of  the  components  of  the  accrual  for
restructuring  and related costs, the amounts charged against the accrual during
2005,  2004 and 2003 and the balance of the accrual as of December  31, 2005 (in
thousands):

                                 Employee         Facility
                                 Separation       Closing    Total Restructuring
                                 Costs             Costs      and Related Costs
                                 ------           ------           ------
Balance at December 31, 2002     $  927           $  137           $1,064

Accruals during 2003                223               27              250

Expenditures during 2003          1,025               59            1,084
                                 ------           ------           ------
Balance at December 31, 2003        125              105              230

Accruals during 2004                 --               33               33

Expenditures during 2004            125               65              190
                                 ------           ------           ------
Balance at December 31, 2004         --               73               73

Accruals during 2005                 --               --               --

Expenditures during 2005             --               56               56
                                 ------           ------           ------
Balance at December 31, 2005     $   --           $   17           $   17
                                 ======           ======           ======


For the years ended  December 31, 2005,  2004 and 2003,  the  restructuring  and
related  costs were  classified  in the  Company's  consolidated  statements  of
operations as follows (in thousands):

                                                YEAR ENDED
                                              DECEMBER 31,
                                              ------------

                                         2005     2004     2003
                                       ------     ----     ----
General and administrative             $   --     $ 33     $250
                                       ------     ----     ----
Total                                  $   --     $ 33     $250
                                       ======     ====     ====




                                       30
<PAGE>


6. INCOME TAXES

For financial  reporting  purposes,  losses from  continuing  operations  before
income taxes include the following components (in thousands):

                                                YEAR ENDED
                                               DECEMBER 31,
                                               ------------

                                     2005         2004         2003
                                   -------      -------      -------
Pre-Tax Loss:
                 United States     $(1,291)     $(2,889)     $(4,331)
                 Foreign                --           --           --
                                   -------      -------      -------
                                   $(1,291)     $(2,889)     $(4,331)
                                   =======      =======      =======


The  Company  files a  consolidated  income  tax return  with its  wholly  owned
subsidiaries. The components of the income tax expense (benefit) for each of the
years in the  three-year  period  ended  December  31,  2005 is as  follows  (in
thousands):


<TABLE>
<CAPTION>
                                                               YEAR ENDED
                                                              DECEMBER 31,
                                                              ------------

                                                     2005          2004           2003
                                                   --------      --------      --------
Current:
<S>                                                <C>           <C>           <C>
         Federal                                   $     --      $     --      $     --
         State                                           --            --            --
         Foreign                                         --            --            --
                                                   --------      --------      --------
Deferred:
         Federal                                     (3,122)      (30,455)       (3,492)
         State                                        7,057        (7,251)         (513)
         Foreign                                         --           441         5,962
                                                   --------      --------      --------
                                                      3,935       (37,265)        1,957
Increase/(decrease) in valuation allowance for
deferred income taxes                                (3,935)       37,265        (1,957)
                                                   --------      --------      --------

                                                   $     --      $     --      $     --
                                                   ========      ========      ========
</TABLE>


Total  deferred  income  taxes were  allocated  as follows  for the years  ended
December 31 (in thousands):

<TABLE>
<CAPTION>
                                                    2005                   2004                 2003
                                               --------------         -------------         -------------
<S>                                            <C>                    <C>                   <C>
Income(loss) from operations                   $      (3,935)         $      37,265         $     (1,957)
Shareholders' equity                                       34                  --                   --
                                               --------------         -------------         -------------
   Total                                       $      (3,901)         $      37,265         $     (1,957)
                                               ==============         =============         =============
</TABLE>


The income  taxes  credited to  shareholders'  equity  relate to the tax benefit
arising from unrealized gains on marketable securities.

                                       31
<PAGE>

The  following  is a summary of the items that caused  recorded  income taxes to
differ from income taxes computed using the statutory federal income tax rate of
34% for the years ended December 31, 2005, 2004 and 2003:

<TABLE>
<CAPTION>
                                                                                        YEAR ENDED
                                                                                        DECEMBER 31,
                                                                           ----------------------------------
                                                                            2005          2004          2003
                                                                           -------      --------       ------
<S>                                                                          <C>           <C>         <C>
Computed "expected" income tax expense (benefit)                             (34.0)%       (34.0)%     (34.0)%
Increase (decrease) in income taxes resulting from:
    State income taxes, net of federal income taxes                           (7.4)         (5.0)       (7.7)
    NOL adjustments                                                          376.6      (1,265.9)      (54.2)
    Non-cash stock compensation                                              (29.5)           --          --
    Income tax effect attributable to foreign operations                        --          15.3       135.6
    Nondeductible expired/cancelled warrants and options                        --            --         3.3
    (Decrease) Increase in valuation allowance and other items              (305.7)      1,289.6       (43.0)
                                                                           -------      --------       ------
Income tax expense (benefit)                                                    --%           --%         --%
                                                                           =======      ========       ======
</TABLE>

Deferred  income  tax  assets  and  liabilities  are  determined  based  on  the
difference  between the financial  reporting  carrying  amounts and tax bases of
existing assets and liabilities and operating loss and tax credit carryforwards.
Significant  components of the Company's existing deferred income tax assets and
liabilities as of December 31, 2005 and 2004 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                    YEAR ENDED
                                                                    DECEMBER 31,
                                                              ----------------------
                                                                  2005          2004
                                                              --------      --------
Deferred income tax assets:
<S>                                                           <C>           <C>
    Net operating loss, capital loss, AMT and research &      $ 90,708      $ 94,943
     experimentation credit carryforwards
    Charitable contribution carryforward                             4            --
    Depreciation and amortization                                 (340)         (446)
    Unrealized gain                                                 34            --
    Non-cash compensation                                          499           339
    Accrued liabilities                                             72            42
    Reserves for investments                                     1,728         1,728
                                                              --------      --------
Net deferred income tax assets before valuation allowance       92,705        96,606
Valuation allowance for deferred income tax assets             (92,705)      (96,606)
                                                              --------      --------
Net deferred income tax assets                                $     --      $     --
                                                              ========      ========
</TABLE>

The net change in the  valuation  allowance  for deferred  income tax assets for
2005 was a decrease of $3.9 million as compared to an increase of $37.3  million
in 2004 and a decrease in 2003 of $2.0 million.  In assessing the  realizability
of deferred income tax assets,  management  considers  whether it is more likely
than not that some portion or all of the deferred  income tax assets will not be
realized.  The ultimate  realization of deferred  income tax assets is dependent
upon the  generation of future  taxable income during the periods in which those
temporary  differences  become  deductible.  Management  considers the scheduled
reversal of deferred income tax  liabilities,  projected  future taxable income,
and tax planning strategies in making this assessment. Management has provided a
valuation  allowance  against  deferred  income tax assets at December 31, 2005,
because the ultimate  realization of those benefits and assets does not meet the
more likely than not criteria.

At  December  31,  2005,  the  Company  has net  operating  loss,  research  and
experimentation credit and alternative minimum tax credit carryforwards for U.S.
federal income tax purposes of  approximately  $226.4 million,  $1.3 million and
$53,000,  respectively,  which expire in varying  amounts  beginning in the year
2009.  The Company also has a capital loss  carryforward  of $15.2 million which
expires in varying amounts beginning in the year 2006.

The Company's  ability to benefit from certain net operating loss and tax credit
carryforwards is limited under section 382 of the Internal Revenue Code due to a
prior ownership change of greater than 50%.  Accordingly,  approximately  $220.0
million of the  $226.4  million  of U.S.  net  operating  loss  carryforward  is
available  currently to offset  taxable income that the Company may recognize in
the future.

                                       32
<PAGE>

7. EMPLOYEE BENEFIT PLANS

The Company  sponsors a 401(k) Plan (the "Plan"),  a defined  contribution  plan
covering  substantially all employees of the Company.  Under the Plan's deferred
compensation  arrangement,  eligible  employees who elect to  participate in the
Plan may contribute between 2% and 20% of eligible compensation,  as defined, to
the Plan.  The  Company,  at its  discretion,  may elect to provide for either a
matching contribution or discretionary  profit-sharing contribution or both. The
Company made matching  contributions of approximately  $6,000, $6,000 and $2,000
in 2005, 2004 and 2003, respectively.

On June 13, 2000,  the Company  adopted the Clarus  Corporation  Employee  Stock
Purchase Plan (the "U.S. Plan") and the Global Employee Stock Purchase Plan (the
"Global Plan") (collectively,  the "Plans"), which offers employees the right to
purchase  shares of the Company's  common stock at 85% of the market  price,  as
defined. Under the Plans, full-time employees,  except persons owning 5% or more
of the Company's  common  stock,  are eligible to  participate  after 90 days of
employment. Employees may contribute up to 15% of their annual salary toward the
Purchase  Plan. A maximum of  1,000,000  shares of common stock may be purchased
under the Plans.  Common stock is purchased  directly from the Company on behalf
of the  participants.  During the years ended December 31, 2005,  2004 and 2003,
zero,  zero and 2,349 shares were purchased for the benefit of the  participants
under  the  Plans,  respectively.  As  of  December  31,  2005,  there  were  no
participants in either the U.S. or Global Plans.

8. STOCK INCENTIVE PLANS

The  Company  had a stock  option  plan for  employees,  consultants,  and other
individual contributors to the Company, which enabled the Company to grant up to
approximately  1.6 million  qualified and  nonqualified  incentive stock options
(the "1992 Plan"). The 1992 Plan terminated in November 2002. As of December 31,
2005 there were no stock options eligible to be exercised under the 1992 Plan.

The Company  adopted the 1998 Stock  Incentive  Plan (the "1998  Plan") in 1998.
Under the 1998 Plan, the Board of Directors had the flexibility to determine the
type and amount of awards to be granted to  eligible  participants,  who must be
employees of the Company or its subsidiaries or consultants to the Company.  The
1998 Plan provided for grants of incentive  stock  options,  nonqualified  stock
options,  restricted stock awards,  stock  appreciation  rights,  and restricted
units.  During  2000,  the  Board  of  Directors  and  stockholders  adopted  an
amendment,  which  increased  the number of shares  authorized  and reserved for
issuance from 1.5 million shares to 3.0 million shares.  The aggregate number of
shares of common stock that may be granted through awards under the 1998 Plan to
any employee in any calendar year may not exceed 200,000  shares.  The 1998 Plan
was terminated in June 2005, but 1,490,000  stock options awarded under the plan
are vested and remained eligible to be exercised at December 31, 2005.

Upon the  acquisition  of the SAI/Redeo  Companies on May 31, 2000,  the Company
assumed the Stock Incentive Plan of Software Architects  International,  Limited
(the "SAI Plan"), and the options outstanding.  The SAI Plan enabled the Company
to grant up to 750,000  nonqualified  stock  options.  The  Company  could grant
options to eligible  participants  who had to be employees of the Company or its
subsidiaries or consultants,  but not directors or officers of the Company.  The
SAI Plan was terminated in June 2005, but 21,250 stock options awarded under the
plan are vested and remained eligible to be exercised at December 31, 2005.

The Company adopted the 2005 Stock  Incentive Plan (the "2005 Plan"),  which was
approved by stockholders at the Company's annual meeting in June 2005. Under the
2005 Plan, the Board of Directors has the  flexibility to determine the type and
amount of awards to be granted to eligible  participants,  who must be employees
of the Company or its  subsidiaries,  directors,  officers or consultants to the
Company.  The  2005  Plan  provides  for  grants  of  incentive  stock  options,
nonqualified stock options,  restricted stock awards, stock appreciation rights,
and restricted  units. The number of shares authorized and reserved for issuance
under the 2005 Plan is 3.0  million,  subject to an  automatic  annual  increase
equal to 4% of the total number of shares of Clarus'  common stock  outstanding.
The  aggregate  number of shares of common  stock  that may be  granted  through
awards under the 2005 Plan to any  employee in any calendar  year may not exceed
500,000  shares.  The 2005 Plan will  continue in effect  until June 2015 unless
terminated  sooner. As of December 31, 2005, 170,000 stock options awarded under
the plan are vested and eligible for exercise.

On December 6, 2002,  the  Company  had  granted  options to purchase  1,250,000
shares of common stock to three senior executives. 450,000 of these options were
issued with an exercise  price of $5.35 per share.  The options  issued at $5.35
per share were issued at less than the fair market  value on that date of $5.45.
A compensation charge of $65,000 was being recognized over the vesting period of
five years. Twenty percent of the options vested annually over five years on the
anniversary  of the date of grant.  Due to the  acceleration  of the  vesting of
stock options by the Company,  the remaining  compensation  charge of $8,500 was
recognized as of December 31, 2005.

In April 2003, the Company granted 500,000 shares of restricted  stock to Warren
B. Kanders, the Executive Chairman of the Board. The shares vest in ten years or
earlier upon  satisfaction of various  conditions  including  performance  based
conditions  relating  to the  price  of the  Company's  common  stock.  Deferred
compensation of $2.7 million was recorded at the date of grant  representing the
fair value of the shares and adjusted as of December 31, 2005 to $4.2 million to
account for the increase in fair market  value from grant date through  December
31,  2005.  During the years  ended  December  31, 2005 and 2004,  $355,000  and
$513,750,  respectively,  were amortized to compensation expense for this award.
At December 31, 2005, these shares were excluded from the computation of diluted
earnings per share due to the net loss for the year ended December 31, 2005.

                                       33
<PAGE>

On December 30, 2005, the Board of Directors of Clarus  Corporation  accelerated
the vesting of unvested stock options previously awarded to employees,  officers
and directors of the Company under its Amended and Restated Stock Incentive Plan
of Clarus  Corporation  (as amended and restated  effective as of June 13, 2000)
and the Clarus  Corporation 2005 Stock Incentive Plan,  subject to such optionee
entering into lock-up,  confidentiality  and  non-competition  agreements.  As a
result of this action,  options to purchase  676,669 shares of common stock that
would have vested over the next one to three years became fully vested.

The decision to accelerate  the vesting of these  options was made  primarily to
reduce  non-cash  compensation  expense that would have been  recorded in future
periods  following  the  Company's   application  of  the  Financial  Accounting
Standards  Board  Statement No. 123,  "Share Based Payment  (revised 2004) ("FAS
123R"). The Company will be required to apply the expense recognition provisions
of FAS 123R  beginning  January  1, 2006.  The  acceleration  of the  options is
expected to reduce the Company's non-cash  compensation expense related to these
options by approximately $1.5 million or $0.09 per share (pre-tax) for the years
2006 - 2008,  based on  estimated  value  calculations  using the  Black-Scholes
methodology

The Company recorded total non-cash stock compensation  expense of approximately
$0.4  million,  $0.6 million and $0.3  million for the years ended  December 31,
2005, 2004 and 2003, respectively.

Total  options  available for grant under all plans as of December 31, 2005 were
2.8 million. A summary of changes in outstanding  options during the three years
ended December 31, 2005 is as follows:

<TABLE>
<CAPTION>
                                                                                              Weighted
                                                                  Range of                    Average
                                                                  Exercise                    Exercise
                                                   Shares          Prices                      Price
                                                -----------     ----------------            ------------

<S>                                              <C>            <C>    <C>                   <C>
December 31, 2002                                2,854,906      $ 1.00-$ 82.56               $    7.76

     Granted                                         5,000      $ 7.30-$ 7.30                $    7.30
     Canceled                                     (377,047)     $ 3.49-$ 82.56               $   16.69
     Exercised                                    (383,992)     $ 1.00-$ 6.13                $    4.31
                                                 ---------
December 31, 2003                                2,098,867      $ 3.67-$ 10.00               $    6.77

     Granted                                        40,000      $ 8.60-$ 9.00                $    8.65
     Canceled                                      (80,000)     $ 5.35-$ 8.60                $    5.76
     Exercised                                     (85,899)     $ 3.67-$ 7.63                $    5.29
     Prior Period Adjustments                      (11,351)     $ 3.49-$68.38                $    9.95
                                                 ---------
December 31, 2004                                1,961,617      $ 4.83-$10.00                $    6.93

     Granted                                       175,000      $ 7.40-$ 8.50                $    8.16
     Expired                                        (7,500)     $ 7.63                       $    7.63
     Exercised                                    (447,867)     $ 4.83-$ 7.00                $    5.79
                                                 ---------
December 31, 2005                                1,681,250      $ 5.35-$10.00                $    7.36
                                                 =========

Vested and exercisable at December 31, 2005      1,681,250                                   $    7.36
                                                 =========
Vested and exercisable at December 31, 2004      1,117,754                                   $    6.55
                                                 =========
Vested and exercisable at December 31, 2003        864,392                                   $    6.22
                                                 =========
</TABLE>

                                       34
<PAGE>

For  SFAS No.  123  purposes,  the fair  value  of each  option  grant  has been
estimated as of the date of grant using the Black-Scholes  option-pricing  model
with the following assumptions:

                                  2005         2004           2003
                                  ----          ----          ----
Dividend yield                     0%            0%            0%
Expected volatility               57%           57%           62%
Risk-free interest rate           4.31%         2.55%         2.86%
Expected life                  Four years     Four years    Four years

Using these assumptions,  the fair value of the stock options granted during the
years ended December 31, 2005,  2004,  and 2003,  were  approximately  $692,000,
$40,000 and $18,000,  respectively,  which would be  amortized  over the vesting
period of the options. The weighted-average  grant-date fair values of the stock
options  granted during the years ended December 31, 2005,  2004 and 2003,  were
$3.95, $4.22 and $3.50, respectively.

The  following  table  summarizes  the exercise  price range,  weighted  average
exercise  price,  and  remaining  contractual  lives by  significant  ranges for
options outstanding and exercisable as of December 31, 2005:


<TABLE>
<CAPTION>
                          Outstanding                                         Exercisable
---------------------------------------------------------------    ------------------------------
                                                      Weighted
                       Number          Weighted        Average          Number          Weighted
   Exercise          of Shares         Average        Remaining       of Shares         Average
    Price          Outstanding at      Exercise      Contractual     Exercisable at    Exercise
    Range        December 31, 2005      Price       Life (Years)   December 31, 2005    Price
-------------         ---------         --------    ------------      ---------         -----
<C>    <C>            <C>               <C>             <C>           <C>               <C>
$ 5.35-$ 7.50         1,111,250         $   6.24        6.7           1,111,250         $   6.24
$ 8.35-$10.00           570,000         $   9.53        7.1             570,000         $   9.53
                      ---------                                       ---------
                      1,681,250         $   7.36        6.8           1,681,250         $   7.36
                      =========                                       =========
</TABLE>

9. STOCKHOLDERS' EQUITY

WARRANTS

The Company  previously granted 25,000 warrants to a strategic partner in return
for completion of  predetermined  sales and marketing  milestones.  The exercise
price of these warrants was $53.75 per share and the warrants expired on October
31, 2003.

10. COMMITMENTS AND CONTINGENCIES

LEASES

The Company rents certain office space, under  non-cancelable  operating leases.
Rents charged to expense were approximately $0.4 million,  $0.3 million and $0.2
million for the years ended  December 31, 2005,  2004,  and 2003,  respectively.
Future  minimum  lease  payments  for the next five years and  thereafter  under
non-cancelable operating leases with remaining terms greater than one year as of
December 31, 2005, are as follows (in thousands):

                                                Gross Rental      Sub-Lease
                                                Obligations        Income
                                               -----------         ------
Year ending December 31,
                                   2006         $  400            $  100
                                   2007            402               101
                                   2008            420               105
                                   2009            426               106
                                   2010            451               113
                                   Thereafter    1,128               282
                                                ------            ------
                                   Total        $3,227            $  807
                                                ======            ======

                                       35
<PAGE>

Our corporate  headquarters is currently located in Stamford,  Connecticut where
we lease  approximately  8,600  square  feet for  $24,438 a month  during  2005,
pursuant to a lease that  includes  annual rent  escalations,  which  expires on
March 31, 2019.

INDEMNIFICATION

The Company has agreed to indemnify Epicor Software Corporation,  as part of the
sale of the  Company's  e-commerce  business,  for the conduct of this  business
prior  to  December  6,  2002.   Additionally,   the  Company  had  historically
indemnified  its customers  against  damages and costs  resulting from claims of
patent, copyright, or trademark infringement associated with use of the software
in its software licensing agreements.

The Company has not made any accruals or payments  under such  indemnifications.
However, the Company continues to monitor the conditions that are subject to the
indemnifications  to identify  whether it is probable  that a loss has occurred,
and would recognize any such losses under the indemnifications when those losses
are reasonably estimable.

LITIGATION

We are not a  party  to nor are any of our  properties  subject  to any  pending
legal,  administrative  or judicial  proceedings  other than routine  litigation
incidental to our business.

A complaint  was filed on May 14, 2001 in the United States  District  Court for
the Northern  District of Georgia on behalf of all purchasers of common stock of
the Company during the period  beginning  December 8, 1999 and ending on October
25, 2000.  Generally the  complaint  alleged that the Company and certain of its
directors and officers made material  misrepresentations and omissions in public
filings made with the  Securities  and Exchange  Commission and in certain press
releases and other  public  statements.  The Company  agreed to settle the class
action  in  exchange  for a  payment  of $4.5  million,  which  was  covered  by
insurance.  The Court approved the final  settlement and dismissed the action on
January 6, 2005.

ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company's  management  carried out an evaluation,  under the supervision and
with  the  participation  of the  Company's  Chief  Administrative  Officer  and
Controller,  its principal  executive officer and principal  financial  officer,
respectively of the  effectiveness  of the design and operation of the Company's
disclosure  controls and procedures (as such term is defined in Rules  13a-15(e)
and  15d-15(e)  under the  Exchange  Act as of December  31,  2005,  pursuant to
Exchange Act Rule 13a-15.  Such disclosure  controls and procedures are designed
to  ensure  that  information  required  to  be  disclosed  by  the  Company  is
accumulated  and  communicated  to the  appropriate  management  on a basis that
permits timely decisions regarding disclosure.  Based upon that evaluation,  the
Company's  Chief  Administrative  Officer  and  Controller  concluded  that  the
Company's  disclosure  controls  and  procedures  as of  December  31,  2005 are
effective.

Management's Report on Internal Control Over Financial Reporting

Management  of the  Company is  responsible  for  establishing  and  maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f)
and  15d-15(f)  under the Exchange  Act.  The  Company's  internal  control over
financial  reporting is designed to provide reasonable  assurance  regarding the
reliability of financial  reporting and the preparation of financial  statements
for  external  purposes  in  accordance  with  accounting  principles  generally
accepted  in the  United  States of America  ("GAAP").  The  Company's  internal
control over financial reporting includes those policies and procedures that:

o pertain to the maintenance of records that, in reasonable  detail,  accurately
and  fairly  reflect  the  transactions  and  dispositions  of the assets of the
Company;

o provide  reasonable  assurance that  transactions are recorded as necessary to
permit  preparation  of financial  statements in accordance  with GAAP, and that
receipts and  expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and

o provide  reasonable  assurance  regarding  prevention  or timely  detection of
unauthorized acquisition,  use or disposition of the Company's assets that could
have a material effect on the financial statements.

                                       36
<PAGE>

Because of its inherent  limitations,  internal control over financial reporting
may not prevent or detect misstatements.  Also, 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.

As  required  by  Section  404 of the  Sarbanes-Oxley  Act of  2002,  management
assessed the  effectiveness  of the Company's  internal  control over  financial
reporting as of December 31, 2005. In making this  assessment,  management  used
the  criteria  set forth by the  Committee of  Sponsoring  Organizations  of the
Treadway Commission ("COSO") in Internal Control-Integrated Framework.

Based on our  assessment  and  those  criteria,  management  concluded  that the
Company  maintained  effective  internal control over financial  reporting as of
December 31, 2005.

The Company's  independent  registered  public  accounting  firm,  KPMG LLP, has
audited management's assessment of the Company's internal control over financial
reporting as of December 31, 2005.

Changes in Internal Control Over Financial Reporting

No changes in the Company's internal control over financial  reporting have come
to management's attention during the fourth quarter ended December 31, 2005 that
have  materially  affected,  or are reasonably  likely to materially  affect the
Company's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information set forth under the caption "Election of Directors" in our Proxy
Statement used in connection  with our 2006 Annual Meeting of  Stockholders,  is
incorporated herein by reference.

The  Company   has  adopted  a  code  of  ethics  that   applies  to  its  Chief
Administrative  Officer and  Controller,  its  principal  executive  officer and
principal  financial  officer,  and to all of its other officers,  directors and
employees.  The  code of  ethics  may be  accessed  at  www.claruscorp.com,  our
Internet  website,  at the tab "Corporate  Governance".  The Company  intends to
disclose future amendments to, or waivers from,  certain  provisions of its code
of ethics,  if any, on the above website within five business days following the
date of such amendment or waiver.

Other  information  required  by  Item  10,  including   information   regarding
directors,  membership  and  function  of the  audit  committee,  including  the
financial  expertise of its members,  and Section  16(a)  compliance,  appearing
under the captions  "Election of  Directors",  "Information  Regarding  Board of
Directors and  Committees"  and "Other  Matters" in our Proxy  Statement used in
connection with our 2006 Annual Meeting of Stockholders,  is incorporated herein
by reference.

ITEM 11. EXECUTIVE COMPENSATION

The  information  set forth under the caption  "Executive  Compensation"  in our
Proxy Statement used in connection with our 2006 Annual Meeting of Stockholders,
is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  information  set forth under the caption  "Principal  Stockholders"  in our
Proxy Statement used in connection with our 2006 Annual Meeting of Stockholders,
is incorporated herein by reference.

                                       37
<PAGE>

Equity Compensation Plan Information

The following table sets forth certain information regarding our equity plans as
of December 31, 2005:



<TABLE>
<CAPTION>
                                              (A)
                                            Number of
                                        securities to be               (B)                            (C)
                                           issued upon           Weighted-average         Number of securities remaining
                                           exercise of          exercise price of          available for future issuance
                                           outstanding             outstanding            under equity compensation plans
                                        options, warrants       options, warrants       (excluding securities reflected in
          Plan Category                    and rights               and rights                      column (A))
----------------------------------     --------------------     -------------------     ------------------------------------

Equity compensation plans
approved by security holders
<C>                                         <C>                       <C>                            <C>
(1)(2)                                      1,090,036                 $5.96                          3,750,134

Equity compensation plans not
approved by security holders (3)
(4) (5)                                     1,100,000                 $7.83                                 --
                                            ---------                 -----                          ---------
Total

                                            2,190,036                 $7.41                          3,750,134
                                            =========                 =====                          =========
</TABLE>

(1)  Consists of stock  options and  restricted  stock  awards  issued under the
Amended and  Restated  Stock  Incentive  Plan of Clarus  Corporation  (the "2000
Plan").  Also  consists of stock  options  issued by the Company under the Stock
Incentive Plan of Software  Architects  International,  Limited (the "SAI Plan")
assumed by the Company, pursuant to the Stock Purchase Agreement,  dated May 31,
2000,  by and among Clarus,  SAI (Ireland)  Limited,  SAI  Recruitment  Limited,
i2Mobile.com  Limited,  SAI  America  Limited   (collectively,   the  "SAI/Redeo
Companies") and the shareholders of the SAI/Redeo Companies. Under the SAI Plan,
the  Company  could  grant  stock  options  to  eligible  participants  who were
employees of the Company or its  subsidiaries or consultants,  but not directors
or officers of the Company.  Also consists of stock options  issued and issuable
under the 2005 Clarus Corporation Stock Incentive Plan (the "2005 Plan").

(2) Includes  920,134 shares of our common stock remaining  available for future
issuance  under the Clarus  Corporation  Employee  Stock  Purchase  Plan and the
Global  Employee  Stock  Purchase Plan  (collectively,  the "Plans").  Under the
Plans,  employees have an opportunity to purchase shares of the Company's common
stock at a  discount.  Generally,  eligible  employees,  as  defined in the plan
documents,  may elect to have up to 15 percent of their annual  salary,  up to a
maximum of $12,500 per  six-month  purchase  period,  withheld  to purchase  the
Company's common stock at a price equal to the lower of 85 percent of the market
price of our common stock at either the  beginning  or the end of the  six-month
offering period.

(3) Includes  options  granted to the Company's  Executive  Chairman,  Warren B.
Kanders to purchase 400,000 shares of common stock,  having an exercise price of
$7.50 per share.

(4) Includes  options  granted to the Company's  Executive  Chairman,  Warren B.
Kanders to purchase 400,000 shares of common stock,  having an exercise price of
$10.00 per share.

(5)  Includes  300,000  shares of  restricted  stock  granted  to the  Company's
Executive Chairman, Warren B. Kanders, having voting, dividend, distribution and
other rights,  which shall vest and become  nonforfeitable  if Mr. Kanders is an
employee  and/or a director of the Company or a  subsidiary  or affiliate of the
Company on the earlier of (i) the date the closing price of the Company's common
stock  equals or exceeds  $15.00 per share for each of the trading days during a
ninety  consecutive day period, or (ii) April 11, 2013,  subject to acceleration
in certain circumstances.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information set forth under the caption "Certain  Relationships  and Related
Transactions"  in our Proxy  Statement  used in connection  with our 2006 Annual
Meeting of Stockholders, is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The  information  set forth under the  caption  "Principal  Accountant  Fees and
Services" in our Proxy Statement used in connection with our 2006 Annual Meeting
of Stockholders, is incorporated herein by reference.

                                       38
<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Financial Statements, Financial Statement Schedules and Exhibits

(a) Financial Statements

(1) The following financial statements are filed with this report on the
following pages indicated:

<TABLE>
<CAPTION>
                                                                                                                     Page
                                                                                                                     ----
<S>                                                                                                                  <C>
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements..........................17

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting..................18

Consolidated Balance Sheets - December 31, 2005 and 2004..............................................................19

Consolidated Statements of Operations -Years Ended December 31, 2005, 2004 and 2003...................................20

Consolidated Statements of Stockholders' Equity and Comprehensive Loss -Years Ended December 31, 2005,
2004 and 2003.........................................................................................................21

Consolidated Statements of Cash Flows -Years Ended December 31, 2005, 2004 and 2003...................................23

Notes to Consolidated Financial Statements............................................................................24

(2) The following additional financial statement schedule and report of independent registered public accounting
              firm are furnished herewith pursuant to the requirements of Form 10-K:

Schedule II Valuation and Qualifying Accounts.........................................................................44

(3) The following Exhibits are hereby filed as part of this Annual Report on Form 10-K:
</TABLE>

Exhibit
Number       Exhibit
------       -------

3.1         Amended and Restated  Certificate  of  Incorporation  of the Company
            (incorporated  herein by reference  to Exhibit 3.3 of the  Company's
            Form  S-1  Registration  Statement  filed  with the  Securities  and
            Exchange Commission on April 6, 1998 (File No. 333- 46685)).

3.2         Amendment  to Amended  and  Restated  Certificate  of  Incorporation
            (incorporated  herein by reference  to Exhibit 9.1 of the  Company's
            10-Q filed with the Securities and Exchange Commission on August 14,
            2000).

3.3         Amendment to Amended and Restated  Certificate of  Incorporation  of
            the Company  (incorporated herein by reference to Exhibit 3.1 of the
            Company's  Current Report on Form 8-K, filed with the Securities and
            Exchange Commission on July 31, 2003).

3.4         Amended and Restated Bylaws of the Company  (incorporated  herein by
            reference to Exhibit 3.2 of the Company's  Quarterly  Report on Form
            10-Q filed with the Securities and Exchange Commission on August 14,
            2002 (File No. 333-63535)).

3.5         Amendment  No. 1 to the Amended and Restated  Bylaws of the Company.
            (incorporated  herein by reference  to Exhibit 3.4 of the  Company's
            Annual Report on Form 10-K,  filed with the  Securities and Exchange
            Commission on March 31, 2003).

4.1         See  Exhibits  3.1,  3.2,  3.3,  3.4 and 3.5 for  provisions  of the
            Amended and Restated  Certificate of  Incorporation  and Amended and
            Restated  Bylaws of the  Company  defining  rights of the holders of
            Common Stock of the Company.

4.2         Specimen  Stock  Certificate  (incorporated  herein by  reference to
            Exhibit  9.1 of the  Company's  Registration  Statement  on Form S-1
            filed with the  Securities  and Exchange  Commission on May 26, 1998
            (File No. 333-46685)).

4.3         Restricted  Stock  Agreement  dated as of April 11, 2003 between the
            Company and Warren B. Kanders  (incorporated  herein by reference to
            Exhibit 4.1 of the Company's Form 10-Q filed with the Securities and
            Exchange Commission on May 15, 2003). *

10.1        Asset  Purchase  Agreement,  dated as of October 17,  2002,  between
            Epicor  Software  Corporation and the Company  (incorporated  herein
            reference  to Exhibit 2.1 of the  Company's  Form 8-K filed with the
            Securities and Exchange Commission on October 18, 2002).

                                       39
<PAGE>

10.2        Bill of Sale and Assumption Agreement, dated as of December 6, 2002,
            between Epicor Software  Corporation  and the Company  (incorporated
            herein by reference to Exhibit 2.2 of the  Company's  Form 8-K filed
            with the Securities and Exchange Commission on October 18, 2002).

10.3        Trademark Assignment dated as of December 6, 2002, by the Company in
            favor  of  Epicor  Software  Corporation,  (incorporated  herein  by
            reference  to Exhibit 2.3 of the  Company's  Form 8-K filed with the
            Securities and Exchange Commission on October 18, 2002).

10.4        Patent  Assignment,  dated as of  December 6, 2002,  between  Epicor
            Software  Corporation  and  the  Company   (incorporated  herein  by
            reference  to Exhibit 2.4 of the  Company's  Form 8-K filed with the
            Securities and Exchange Commission on October 18, 2002).

10.5        Noncompetition  Agreement,  dated as of  December  6, 2002,  between
            Epicor Software Corporation and the Company  (incorporated herein by
            reference  to Exhibit 2.5 of the  Company's  Form 8-K filed with the
            Securities and Exchange Commission on October 18, 2002).

10.6        Transition Services Agreement, dated as of December 6, 2002, between
            Epicor Software Corporation and the Company  (incorporated herein by
            reference  to Exhibit 2.7 of the  Company's  Form 8-K filed with the
            Securities and Exchange Commission on October 18, 2002).

10.7        Form  of  Indemnification  Agreement  for  Directors  and  Executive
            Officers  of the  Company,  (incorporated  herein  by  reference  to
            Exhibit 10.1 of the Company's Form 8-K filed with the Securities and
            Exchange Commission on December 23, 2002).

10.8        Employment  Agreement,  dated as of  December  6, 2002,  between the
            Company and Warren B. Kanders  (incorporated  herein by reference to
            Exhibit 10.2 of the Company's Form 8-K filed with the Securities and
            Exchange Commission on December 23, 2002).*

10.9        Employment  Agreement,  dated as of  December  6, 2002,  between the
            Company and Nigel P. Ekern.  (incorporated  herein by  reference  to
            Exhibit 10.3 of the Company's Form 8-K filed with the Securities and
            Exchange Commission on December 23, 2002).*

                                       40
<PAGE>

10.10       Consulting  Agreement,  dated as of  December  6, 2002,  between the
            Company and Stephen P. Jeffery  (incorporated herein by reference to
            Exhibit 10.4 of the Company's Form 8-K filed with the Securities and
            Exchange Commission on December 23, 2002).*

10.11       Amended and Restated Stock  Incentive Plan  (incorporated  herein by
            reference to Exhibit 10.2 of the Company's  Form 10-Q filed with the
            Securities and Exchange Commission on August 14, 2000). *

10.12       Employee  Stock Purchase Plan  (incorporated  herein by reference to
            Exhibit 10.3 of the  Company's  Form 10-Q filed with the  Securities
            and Exchange Commission on August 14, 2000). *

10.13       Global  Employee  Stock  Purchase  Plan   (incorporated   herein  by
            reference to Exhibit 10.4 of the Company's  Form 10-Q filed with the
            Securities and Exchange Commission on August 14, 2000). *

10.14       Form of Nonqualified Stock Option Agreement  (incorporated herein by
            reference to Exhibit 10.5 of the Company's Form 10- Q filed with the
            Securities and Exchange Commission on August 14, 2000). *

10.15       Stock Incentive Plan of Software Architects  International,  Limited
            (incorporated  herein by reference  to Exhibit 2.2 of the  Company's
            Form 8-K filed with the Securities  and Exchange  Commission on June
            13, 2000). *

10.16       2000 Declaration of Amendment to Software  Architects  International
            Limited Stock  Incentive Plan  (incorporated  herein by reference to
            Exhibit 2.3 of the Company's  Form 8-K filed with the Securities and
            Exchange Commission on June 13, 2000). *

10.17       Lease dated as of  September  23,  2003  between  Reckson  Operating
            Partnership,   L.P.,  the  Company  and  Kanders  &  Company,   Inc.
            (incorporated  herein by reference to Exhibit 10.1 of the  Company's
            10-Q filed with the Securities  and Exchange  Commission on November
            12, 2003).

10.18       Transportation  Services  Agreement  dated as of  December  18, 2003
            between Kanders Aviation,  LLC and the Company  (incorporated herein
            by reference to Exhibit 10.23 of the  Company's  10-K filed with the
            Securities and Exchange Commission on March 11, 2004).

10.19       Clarus Corporation 2005 Stock Incentive Plan (incorporated herein by
            reference to Appendix A of the Company's  Definitive Proxy Statement
            on Schedule14A filed with the Securities and Exchange  Commission on
            May 2, 2005). *

10.20       Form of Stock Option Agreement for the Clarus Corporation 2005 Stock
            Incentive Plan (incorporated  herein by reference to Exhibit 10.1 of
            the  Company's  Form 10-Q filed  with the  Securities  and  Exchange
            Commission on November 11, 2005). *

10.21       Amendment  to the  form of Stock  Option  Agreement  for the  Clarus
            Corporation  2005  Stock  Incentive  Plan  (incorporated  herein  by
            reference to Exhibit 10.1 of the  Company's  Form 8-K filed with the
            Securities and Exchange Commission on January 6, 2006). *

10.22       Stock Option  Agreement  between  Clarus  Corporation  and Warren B.
            Kanders, dated December 23, 2002.  (incorporated herein by reference
            to Exhibit  4.6 of the  Company's  Registration  Statement  Form S-8
            filed with the  Securities  and  Exchange  Commission  on August 18,
            2005). *

23.1        Consent of Independent Registered Public Accounting Firm.

31.1        Certification of Principal  Executive  Officer,  as required by Rule
            13a-14(a) of the Securities Exchange Act of 1934.

31.2        Certification of Principal  Financial  Officer,  as required by Rule
            13a-14(a) of the Securities Exchange Act of 1934.

32.1        Certification of Principal  Executive  Officer,  as required by Rule
            13a-14(b) of the Securities Exchange Act of 1934.

32.2        Certification of Principal  Financial  Officer,  as required by Rule
            13a-14(b) of the Securities Exchange Act of 1934.

            * Management contract or compensatory plan or arrangement.

            (b) The exhibits are listed in Item 15 (a)(3) above.

            (c) The financial statement schedules are listed in Item 15 (a)(2)
                above.

                                       41
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                               CLARUS CORPORATION

                  Date:  March 9, 2006

                                                By: /s/ Nigel P. Ekern
                                                    ----------------------------
                                                    Nigel P. Ekern
                                                    Chief Administrative Officer

<TABLE>
<CAPTION>
Signature                                       Title                        Date
-----------                                     ------                       -----
<S>                                                                                <C>
/s/ Nigel P. Ekern                                                           March 9, 2006
-----------------------------         Chief Administrative Officer           -------------
Nigel P. Ekern                        (principal executive officer)

 /s/ Susan Luckfield                                                         March 9, 2006
-----------------------------         Controller                             --------------
Susan Luckfield                       (principal financial officer)

 /s/ Warren B. Kanders                Executive Chairman of the Board of     March 9, 2006
-----------------------------         Directors                              --------------
Warren B. Kanders

/s/ Donald L. House                   Director                               March 9, 2006
-----------------------------                                                --------------
Donald L. House

/s/ Burtt R. Ehrlich                  Director                               March 9, 2006
-----------------------------                                                --------------
Burtt R. Ehrlich

/s/ Nicholas Sokolow                  Director                               March 9, 2006
-----------------------------                                                --------------
Nicholas Sokolow
</TABLE>


                                       42
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

of Clarus Corporation:

Under date of March 7, 2006, we reported on the  consolidated  balance sheets of
Clarus  Corporation  and  subsidiaries as of December 31, 2005 and 2004, and the
related  consolidated   statements  of  operations,   stockholders'  equity  and
comprehensive  loss,  and cash  flows  for each of the  years in the  three-year
period ended  December 31,  2005,  which are included in the Clarus  Corporation
2005  Annual  Report  on  Form  10-K.  In  connection  with  our  audits  of the
aforementioned  consolidated  financial statements,  we also audited the related
financial statement schedule as listed in the accompanying index. This financial
statement schedule is the responsibility of Clarus Corporation's management. Our
responsibility  is to express an opinion on this  financial  statement  schedule
based on our audits.

In our opinion,  such financial statement schedule,  when considered in relation
to the  basic  consolidated  financial  statements  taken as a  whole,  presents
fairly, in all material respects, the information set forth therein.

                        /s/ KPMG LLP
                        ---------------------------
                        Stamford, Connecticut
                        March 7, 2006


                                       43
<PAGE>


                                   Schedule II

                        Valuation and Qualifying Accounts
                       Clarus Corporation and Subsidiaries
              For the years ended December 31, 2005, 2004 and 2003
    Allowance for Doubtful Accounts, Valuation Allowance for Deferred Income
                Tax Assets and Restructuring and Related Charges


<TABLE>
<CAPTION>
                                                         Charged
                                        Balance at      (Credited) to                       Balance at
                                       Beginning of      Costs and                           End of
                                         Period          Expenses        Deductions (a)       Period
                                       ------------     ------------      -----------      ------------
Allowance for Doubtful Accounts
<S>                           <C>      <C>              <C>               <C>              <C>
                              2003     $    586,000     $     18,000      $    604,000     $         --
                              2004               --               --                --               --
                              2005               --               --                --               --

Valuation Allowance for Deferred Income Tax Assets
                              2003     $ 61,298,000     $ (1,957,000)     $         --     $ 59,341,000
                              2004       59,341,000       37,265,000                --       96,606,000
                              2005       96,606,000       (3,901,000)               --       92,705,000

Restructuring Accruals
                              2003     $  1,064,000     $    250,000      $  1,084,000     $    230,000
                              2004          230,000           33,000           190,000           73,000
                              2005           73,000               --            56,000           17,000
</TABLE>

(a)  Deductions  related to the  allowance for doubtful  accounts  represent the
write-off of uncollectible  accounts  receivable  balances against the allowance
for doubtful  accounts,  net of recoveries.  Deductions related to restructuring
and related accruals represent cash payments.


                                       44
<PAGE>


                                  EXHIBIT INDEX

Number      Exhibit
------      -------

23.1        Consent of Independent Registered Public Accounting Firm.

31.1        Certification of Principal  Executive  Officer,  as required by Rule
            13a-14(a) of the Securities Exchange Act of 1934.

31.2        Certification of Principal  Financial  Officer,  as required by Rule
            13a-14(a) of the Securities Exchange Act of 1934.

32.1        Certification of Principal  Executive  Officer,  as required by Rule
            13a-14(b) of the Securities Exchange Act of 1934.

32.2        Certification of Principal  Financial  Officer,  as required by Rule
            13a-14(b) of the Securities Exchange Act of 1934


                                       45