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, 2004

     |_| 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  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 an  accelerated  filer (as
defined in Rule 12b-2 of the Act). |X|

The aggregate market value of the voting stock and non-voting common equity held
by non-affiliates  of the Registrant at June 30, 2004 was  approximately  $160.0
million  based on $11.50 per share,  the  closing  price of the common  stock as
quoted on the Nasdaq National Market.

The number of shares of the  Registrant's  common stock  outstanding at March 1,
2005 was 16,787,814 shares.

                       DOCUMENT INCORPORATED BY REFERENCE

Portions of our Proxy  Statement for the 2005 Annual Meeting of  Stockholders to
be filed with the  Securities  and  Exchange  Commission  within 120 days of the
Registrant's 2004 fiscal year end are incorporated by reference into Part III of
this report.
<PAGE>

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
                                                                                                       PAGE
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<S>                                                                                                     <C>
PART I
ITEM 1.    BUSINESS                                                                                     1
ITEM 2.    PROPERTIES                                                                                   6
ITEM 3.    LEGAL PROCEEDINGS                                                                            6
ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                          6

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                                   17
ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA                                                   18
ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE         39
ITEM 9A.   CONTROLS AND PROCEDURES                                                                      39
ITEM 9B    OTHER INFORMATION                                                                            40

PART III
ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                           40
ITEM 11.   EXECUTIVE COMPENSATION                                                                       40
ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                               40
ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                               40
ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                       40

PART IV
ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES                                                      41

SIGNATURES                                                                                              44
EXHIBIT INDEX                                                                                           47
</TABLE>


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<PAGE>

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.  The Company cannot  guarantee
its future performance.

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 2005.

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. In connection
with the sale, we entered into a Transition  Services  Agreement until March 31,
2003,  that allowed Epicor to use a portion of our facility in Suwanee,  Georgia
to operate the electronic  commerce  business that Epicor purchased in the Asset
Sale.  Epicor  agreed to assume  certain of our  liabilities,  such as executory
obligations arising under certain  contracts, agreements and commitments related


                                       1
<PAGE>

to  the  transferred  assets.  We  remain  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 are or were due and payable
in  connection  with the  acquired  assets on or before the closing  date of the
Asset Sale.

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  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  is
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.

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 ("B2B")
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.  Our  client
services  organization  provided  our  customers  and  strategic  partners  with
implementation services, training and technical support.

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.

EMPLOYEES

All of our employees are based in the United States. As of December 31, 2004, we
had a total of  seven  employees,  all of which  are  located  in our  Stamford,
Connecticut headquarters. 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.


                                       2
<PAGE>

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

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 $279.7 million from our
inception  through  December 31, 2004. 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  growth  opportunities.  We may not be successful in acquiring
such a  business  or in  operating  any  business  that we  acquire.  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.

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. 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.

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.


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<PAGE>

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 single, public group "5-percent stockholder,"
regardless of whether they own an aggregate of 5% of a corporation's stock.

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
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."

Although the transfer  restrictions  imposed on our capital stock is 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 dispose of or 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  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


                                       4
<PAGE>

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 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.

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


                                       5
<PAGE>

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 NEW 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 Sections  13(a) or 15(d) of the  Exchange  Act of 1934, a
amended as soon as  reasonably  practicable  after we  electronically  file such
material  with,  or  furnish  it to,  the SEC.  You may  also  read and copy any
document we file at the Securities and Exchange  Commission's  public  reference
room located at 450 Fifth Street, N.W., Washington,  D.C. 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 450 Fifth Street, N.W., Washington,  D.C. 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 $18,275 per month,  pursuant to a
lease, which expires on March 30, 2019.

We also lease 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 expires in
February  2006.  This facility has been  sub-leased for  approximately  $5,000 a
month, pursuant to a sublease, which expires on January 30, 2006.

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  alleges 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,
2004.


                                       6
<PAGE>

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 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, 2003
         First Quarter                                    $ 5.87        $4.92
         Second Quarter                                   $ 6.40        $5.05
         Third Quarter                                    $ 7.50        $5.95
         Fourth Quarter                                   $ 7.76        $6.99

      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

      Calendar Year 2005
         First Quarter (through March 1, 2005)            $ 9.50        $8.50

STOCKHOLDERS

On March 1, 2005,  the last reported  sales price for our common stock was $8.50
per share.  As of March 1, 2005,  there were 147 holders of record of our common
stock.

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.


                                       7
<PAGE>

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,
                                                                             ------------------------
                                                                 2004        2003          2002        2001         2000
                                                              ---------    ---------    ---------    ---------    ---------
Statement of Operations Data:                                             (in thousands, except per share data)
----------------------------
<S>                                                           <C>          <C>          <C>          <C>          <C>
Revenues:
  License fees ............................................   $   1,106    $      --    $   2,808    $   7,807    $  24,686
  Service fees ............................................          --          130        6,226        9,866       10,327
                                                              ---------    ---------    ---------    ---------    ---------
             Total Revenues ...............................       1,106          130        9,034       17,673       35,013
Cost of Revenues:
  License fees ............................................          --           --           26          211          154
  Service fees ............................................          --           --        5,498       12,921       12,901
                                                              ---------    ---------    ---------    ---------    ---------
             Total Cost of Revenues .......................          --           --        5,524       13,132       13,055
Operating expenses:
  Research and development ................................          --           --        7,263       16,220       31,114
  Sales and marketing .....................................          --           --        7,938       34,034       43,231
  General and administrative ..............................       3,395        4,986       12,574        9,633       10,995
Provision (credit) for doubtful accounts ..................          --           18         (560)       5,537        5,824
  Transaction expenses ....................................       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)      (1,347)
  Depreciation and amortization ...........................         186          762        4,243       12,212        8,132
                                                              ---------    ---------    ---------    ---------    ---------
             Total Operating Expenses .....................       5,217        5,802       43,566      114,372       97,949
                                                              ---------    ---------    ---------    ---------    ---------
Operating Loss ............................................      (4,111)      (5,672)     (40,056)    (109,831)     (75,991)

Other income (expense) ....................................          19          169           27           96         (100)
Loss on impairment of marketable securities and investments          --           --           --      (16,461)      (4,128)
Interest income ...........................................       1,203        1,238        2,441        6,570       10,902
Interest expense, including amortization of debt discount .          --          (66)        (225)        (228)      (1,330)
                                                              ---------    ---------    ---------    ---------    ---------

Net Loss ..................................................   $  (2,889)   $  (4,331)   $ (37,813)   $(119,854)   $ (70,647)
                                                              =========    =========    =========    ==========   =========

Loss Per Share
             Basic ........................................   $   (0.18)   $   (0.27)   $   (2.42)   $   (7.72)   $   (4.90)
             Diluted ......................................   $   (0.18)   $   (0.27)   $   (2.42)   $   (7.72)   $   (4.90)
Weighted Average Common Shares Outstanding
             Basic ........................................      16,092       15,905       15,615       15,530       14,420
             Diluted ......................................      16,092       15,905       15,615       15,530       14,420

<CAPTION>
Balance Sheet Data:                                                                As of December 31,
------------------                                                                 ------------------
                                                                 2004        2003          2002        2001         2000
                                                              ---------    ---------    ---------    ---------    ---------
<S>                                                           <C>          <C>          <C>          <C>          <C>
Cash and cash equivalents .................................   $  48,377    $  15,045    $  42,225    $  55,628    $ 118,303
  Marketable securities ...................................      35,119       73,685       52,885       65,264       50,209
Total assets ..............................................      86,437       89,445       97,764      145,274      266,904
Long-term debt, net of current portion.....................          --           --           --        5,000        5,000
Total stockholders' equity ................................      84,854       86,819       89,360      126,328      246,822
</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.  The Company
cannot guarantee its future performance.

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.  THE
YEAR ENDED DECEMBER 31, 2004 PRIMARILY  REFLECTS,  AND FUTURE PERIODS PRIOR TO A
REDEPLOYMENT  OF OUR ASSETS ARE  EXPECTED  TO  PRIMARILY  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 has recognized  revenue in connection with its prior business from
two primary  sources,  software  licenses and  services.  Revenue from  software
licensing  and services  fees is  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 exists; (2) delivery has occurred; (3) the
fee is fixed or determinable; and (4) collectibility is probable.


                                       9
<PAGE>

- 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.

- The Company  maintains  allowances  for  doubtful  accounts  based on expected
losses resulting from the inability of the Company's  customers to make required
payments.  The Company  recorded a provision  for  doubtful  accounts of $18,000
during the year ended December 31, 2003. The Company  recorded a reversal of the
provision for doubtful accounts of ($560,000) during the year ended December 31,
2002.

- The Company had significant  long-lived assets,  primarily  intangibles,  as a
result of acquisitions completed during 2000. During 2002, the Company evaluated
the carrying value of its long-lived assets, including intangibles, according to
Statement of Financial  Accounting  Standards  ("SFAS") No. 142,  "Goodwill  and
Other  Intangible  Assets" and SFAS No. 144  "Accounting  for the  Impairment or
Disposal  of  Long-Lived  Assets".  Prior  to  2002,  the  Company  periodically
evaluated the carrying value of its long-lived  assets,  including  intangibles,
according to SFAS No. 121,  "Accounting for the Impairment of Long-Lived  Assets
and for Long-Lived  Assets to Be Disposed Of." The Company  recorded  impairment
charges  on  goodwill  of $6.8  million  and  $36.8  million  in 2002 and  2001,
respectively,  and  impairment  charges on intangible  assets of $3.5 million in
2002.

STOCK OPTION EXCHANGE PROGRAM

On April 9, 2001,  the  Company  announced  a voluntary  stock  option  exchange
program  for  its  employees.  Under  the  program,  employees  were  given  the
opportunity to cancel outstanding stock options previously granted to them on or
after  November 1, 1999,  in exchange  for an equal  number of new options to be
granted at a future date. The exercise price of the new options was equal to the
fair market value of the Company's common stock on the date of grant. During the
first phase of the program  366,174  options  with a weighted  average  exercise
price of $30.55 per share were  canceled  and new  options to  purchase  263,920
shares  with an  exercise  price of $3.49 per share were  granted on November 9,
2001.  During the second  phase of the program  273,188  options with a weighted
average  exercise  price of $43.87 per share were  canceled  and new  options to
purchase  198,052  shares with an exercise price of $4.10 per share were granted
on February 11, 2002.  Employees who participated in the first exchange were not
eligible for the second  exchange.  The exchange  program was designed to comply
with  Financial  Accounting  Standards  Board  ("FASB")  Interpretation  No.  44
"Accounting for Certain  Transactions  Involving Stock Compensation" and did not
result in any  additional  compensation  charges  or  variable  accounting  with
respect to the new grants.  Members of the Company's  Board of Directors and its
executive officers were not eligible to participate in the exchange program.

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 has consisted solely of the recognition
of deferred service fees that are recognized  ratably over the maintenance term.
The remaining  deferred revenue was fully recognized by September 2004. Prior to
a redeployment  of the Company's  assets,  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.

REVENUE RECOGNITION

Prior to the December 6, 2002 sale of substantially all of the Company's revenue
generating  operations  and assets,  the  Company  recognized  revenue  from two
primary sources, software licenses and services. Revenue from software licensing
and services fees was recognized in accordance with SOP 97-2,  "Software Revenue
Recognition",  and SOP 98-9,  "Software  Revenue  Recognition  with  Respect  to
Certain  Transactions"  and  related  interpretations.  The  Company  recognizes
software license revenue when: (1) persuasive evidence of an arrangement exists;
(2)  delivery  has  occurred;  (3) the fee is  fixed  or  determinable;  and (4)
collectibility is probable.

COST OF REVENUES AND OPERATING EXPENSES

Cost  of  license  fees  includes   royalties  and  software   duplication   and
distribution  costs. The Company recognized these costs as the applications were
shipped.


                                       10
<PAGE>

Cost of services  fees  includes  personnel  related  expenses  and  third-party
consulting  fees  incurred  to provide  implementation,  training,  maintenance,
content aggregation, and upgrade services to customers and partners. These costs
were recognized as they were incurred for time and material arrangements and are
recognized   using  the   percentage  of  completion   method  for  fixed  price
arrangements.

Prior to December 6, 2002, research and development expenses consisted primarily
of personnel  related  expenses and  third-party  consulting  fees.  The Company
accounts for software  development costs under Statement of Financial Accounting
Standards  No. 86,  "Accounting  for the Costs of Computer  Software to be Sold,
Leased or Otherwise  Marketed".  The Company  charged  research and  development
costs  related to new  products or  enhancements  to expense as  incurred  until
technological feasibility was established,  after which the remaining costs were
capitalized until the product or enhancement is available for general release to
customers. The Company defines technological feasibility as the point in time at
which  a  working  model  of  the  related   product  or   enhancement   exists.
Historically,  the costs incurred  during the period between the  achievement of
technological  feasibility  and the point at which the product is available  for
general release to customers have not been material.

Sales and marketing expenses consisted  primarily of personnel related expenses,
including sales  commissions and bonuses,  expenses related to travel,  customer
meetings,  trade show participation,  public relations,  promotional activities,
regional sales offices, and advertising.

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 $4.2
million were expensed in 2001 to align better the Company's  cost structure with
projected  revenue.  The charges  were  comprised  of $3.0  million for employee
separation  and related  costs for 181  employees  and $1.2 million for facility
closure and consolidation costs.

During the first quarter of 2002, the Company determined that amounts previously
charged  during  2001  of  approximately   $202,000  that  related  to  employee
separation  and  related  charges  were no longer  required  and this amount was
credited  to  sales  and  marketing  expense  in the  accompanying  consolidated
statement of operations  during 2002.  Restructuring and related charges of $8.6
million were expensed  during 2002.  The charges for 2002 were comprised of $4.6
million for employee  separation  and related  costs for 183  employees and $4.0
million for facility closures and consolidation costs.

During  2003,  the  Company  determined  that actual  restructuring  and related
charges  were  in  excess  of the  amounts  provided  for in 2002  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 facility  closures and  consolidation  costs for 2001 and 2002 relate to the
abandonment of the Company's leased  facilities in Suwanee,  Georgia;  Limerick,
Ireland; Maidenhead, England; and near Toronto, Canada. Total facilities closure
and consolidation costs include remaining lease liabilities,  construction costs
and brokerage  fees to sublet the  abandoned  space,  net of estimated  sublease
income.  The estimated costs of abandoning  these leased  facilities,  including
estimated  costs to sublease,  were based on market  information  trend analysis
provided by a commercial real estate brokerage firm retained by the Company. The
Company  incurred  a charge  in the  fourth  quarter  2002 of $2.1  million  for
facility closure and  consolidation  costs as a result of the termination of its
lease for the facility in Suwanee, Georgia.

The  following  is a  reconciliation  of  the  components  of  the  accrual  for
restructuring  and related costs, the amounts charged against the accrual during
2004,  2003 and 2002 and the balance of the accrual as of December  31, 2004 (in
thousands):


                                       11
<PAGE>

<TABLE>
<CAPTION>
                                         Employee       Facility
                                        Separation       Closing       Total Restructuring
                                           Costs          Costs          and Related Costs
                                        ---------       ---------      -------------------
<S>                                     <C>             <C>                 <C>
      Balance at December 31, 2001      $     680       $   1,209           $   1,889

      Accruals during 2002                  4,645           3,905               8,550

      Expenditures during 2002              4,196           4,977               9,173

      Credits in 2002                         202              --                 202
                                        ---------       ---------           ---------
      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
                                        =========       =========           =========
</TABLE>

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 deferred  license fee revenue  recognized
in the third  quarter of 2004.  Following the sale of  substantially  all of the
Company's  remaining  operating  assets,  the  Company's  revenue  was  from the
recognition  of deferred  service  fees that were  recognized  ratably  over the
maintenance term.

COST OF REVENUES

The Company did not have any cost of revenues in 2004 or 2003, since all revenue
was the recognition of deferred revenue related to maintenance arrangements.

RESEARCH AND DEVELOPMENT

The Company did not have any research and development costs in 2004 or 2003.

SALES AND MARKETING

The Company did not have any sales and marketing costs in 2004 or 2003.

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.


                                       12
<PAGE>

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.

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.

COMPARISON  OF RESULTS OF OPERATIONS  BETWEEN THE YEARS ENDED  DECEMBER 31, 2003
AND 2002

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  declined to $0.1  million in 2003  compared to $9.0  million in
2002.  This  decline is  entirely  due to the sale of  substantially  all of the
Company's operating assets in December 2002.

COST OF REVENUES

The Company  did not have any  significant  cost of revenues in 2003,  since all
2003 revenue was the  recognition  of deferred  revenue  related to  maintenance
arrangements. This compares favorably with 5.5 million expensed in 2002.

RESEARCH AND DEVELOPMENT

The  Company  did not have any  research  and  development  costs in 2003.  This
compares favorably with over $7.3 million expensed in 2002.


                                       13
<PAGE>

SALES AND MARKETING

The Company did not have any sales and  marketing  costs in 2003.  This compares
favorably with over $7.9 million expensed in 2002.

GENERAL AND ADMINISTRATIVE EXPENSE

During the year ended  December 31, 2003,  general and  administrative  expenses
were reduced to $5.0 million  compared to $12.6  million in 2002.  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.

LOSS ON IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS

As a result of a change in the Company's  strategic  direction during the second
quarter of 2002, the Company determined that the carrying value of the remaining
goodwill and intangible  assets  exceeded fair value.  As a result,  the Company
recorded an  additional  impairment  charge to  goodwill of $6.9  million and an
impairment  charge to  intangible  assets of $3.5 million  during the year ended
December 31, 2002, that reduced the cost basis of goodwill and intangible assets
to zero.  The total  impairment  was  $10.4  million.  There was no  comparative
impairment charge in 2003.

LOSS/(GAIN) ON SALE OR DISPOSAL OF ASSETS

During  2003,  the Company  recorded a loss on the sale or disposal of assets of
$36,000.

In 2002, the Company sold its e-commerce  software  business to Epicor  Software
Corporation for approximately  $1.0 million.  The Company recorded a gain during
the  fourth  quarter  of 2002 on the  sale of  this  business  of  approximately
$514,000  that has been  included  in gain on sale or  disposal of assets in the
accompanying  statement of operations for the year ended December 31, 2002. Also
in 2002,  the Company  recorded a loss on the disposal of property and equipment
of $2.3  million.  The loss on the  disposal  of assets  during  the year  ended
December 31, 2002 is primarily  attributable to the write down of assets located
in the Suwanee, Limerick and Maidenhead offices.

DEPRECIATION AND AMORTIZATION EXPENSE

Depreciation and amortization  expense in 2003 declined to $0.8 million compared
to $4.2 million in 2002 a reduction of 81%. The decline in the expense primarily
is  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 intangible
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 2003. The
Company recorded $455,000 of amortization  expense relating to intangible assets
with definite lives in 2002.

INTEREST INCOME

Interest  income  decreased  to $1.2 million or  approximately  50% for the year
ended  December  31, 2003  compared  to $2.4  million in 2002.  The  decrease in
interest income was due to lower levels of cash, cash equivalents and marketable
securities  available for  investment in 2003 coupled with lower  interest rates
during 2003 that resulted in lower rates of return on investments.

INTEREST EXPENSE

Interest expense in 2003 was $66,000 compared to an expense of $225,000 in 2002,
a decline of 71%,  due to the  repayment of $5.0  million of  indebtedness  that
resulted in the interest expense in 2002.

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 2003 or in 2002.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash  equivalents  increased to $48.4 million at December
31,  2004  from  $15.0  million  at  December  31,  2003  due to a shift  in the
composition of the investment  portfolio to  investments  with shorter  duration


                                       14
<PAGE>

that are  characterized  as cash  equivalents  instead of marketable  securities
under the  accounting  principles  generally  accepted  in the United  States of
America.  The  overall  combined  decrease  of $5.2  million  in cash  and  cash
equivalents  and  marketable  securities  is  primarily  due to  liquidation  of
investments required to fund operating  activities,  leasehold  improvements and
transaction related expenses.

Cash used in operating  activities was  approximately  $2.1 million during 2004.
The cash used was primarily attributable to the Company's net loss. Cash used in
operating  activities was approximately  $2.9 million during 2003. The cash used
was  primarily  attributable  to the  Company's  net  loss and to  decreases  in
accounts payable and accrued liabilities,  deferred revenue, accounts receivable
and  prepaid  and other  current  assets.  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.  While the Company's  expenses have been significantly
reduced, management currently believes that the Company's operating expense will
exceed its investment income in 2005.

Cash provided by investing  activities  was  approximately  $35.0 million during
2004.  The cash was  provided  by sale and  maturity  of  marketable  securities
partially offset by the purchase of investments and marketable securities.  Cash
used by investing  activities was  approximately  $21.0 million during 2003. The
cash was used for purchases of investment and marketable  securities,  partially
offset by the sale and maturity of marketable securities.

Cash  provided by financing  activities  during 2004 was  attributable  to stock
option exercises.  Cash provided by financing  activities was approximately $0.5
million  during 2004  compared to cash used by financing of $3.3 million  during
2003.  The cash  used by  financing  activities  in 2003 was  attributed  to the
repayment of the Company's outstanding  indebtedness of $5.0 million,  offset in
part by proceeds from the exercise of stock options.

For the  periods  ended  December  31,  2004 and 2003,  the Company had no trade
accounts receivables.

On December 6, 2002, the Company 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,  400,000 were issued with an exercise
price of $7.50 per share and  400,000  were  issued  with an  exercise  price of
$10.00 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 and will  result in  compensation
charges of $65,000  recognized  over the vesting  period.  Twenty percent of the
options vest annually over five years on the anniversary of the date of grant.

At December 31, 2004, the Company has net operating loss, capital loss, research
and experimentation  credit and alternative minimum tax credit carryforwards for
U.S. federal income tax purposes of approximately $226.7 million, $15.2 million,
$1.3  million  and  $53,000,  respectively,  which  expire  in  varying  amounts
beginning in the year 2009.  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  $212.8  million of the $226.7  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, 2004 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: (in thousands)

<TABLE>
<CAPTION>
Contractual Obligations                           Payment Due By Period
(in thousands)                                    ---------------------
                             Total      1 Year    2-3 Years   4-5 Years  After 5 Years
                            ------      ------      ------      ------      ------
<S>                         <C>         <C>         <C>         <C>         <C>
      Operating Leases      $3,731      $  475      $  815      $  845      $1,596
                            ------      ------      ------      ------      ------
                 Total      $3,731      $  475      $  815      $  845      $1,596
                            ======      ======      ======      ======      ======
</TABLE>

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 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  $18,275 a month,  pursuant to a
lease, which expires on March 31, 2019.


                                       15
<PAGE>

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 lease 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 expires in
February  2006.  This facility has been  sub-leased for  approximately  $5,000 a
month, pursuant to a sublease,  which expires 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.

NEW ACCOUNTING PRONOUNCEMENTS

In  January  2003  and  revised  in  December  2003,  the  FASB  issued  FIN 46,
"Consolidation  of Variable Interest  Entities,  an Interpretation of Accounting
Research Bulletin No. 51 and an amendment to FIN 46 entitled FASB Interpretation
No. 46 (revised  December 2003),  Consolidation  of Variable  Interest  Entities
("FIN  46R").  FIN  46R  requires  certain  variable  interest  entities  to  be
consolidated by the primary beneficiary of the entity if the equity investors in
the entity do not have the  characteristics of a controlling  financial interest
or do not  have  sufficient  equity  at  risk  for the  entity  to  finance  its
activities without additional subordinated financial support form other parties.
FIN 46R will be applied by us to those  entities  that are  considered  variable
interest  entities as of March 31,  2004.  We do not expect that the adoption of
FIN 46R will have a material effect on our consolidated financial statements.

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 measure 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 on 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  interim or annual  reporting  period that begins after June 15,
2005 (as of July 1, 2005 for the  Company).  The  Company  intends  to  continue
applying  APB  Opinion  No. 25 to  equity-based  compensation  awards  until the
effective  date of SFAS No. 123R.  At the effective  date of SFAS No. 123R,  the
Company expects to use 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 July 1,
2005. For all equity-based  compensation  awards that are unvested as of July 1,
2005,  compensation  cost will be  recognized  for the  unamortized  portion  of
compensation cost not previously included in the SFAS No. 123 pro forma footnote
disclosure.  The Company is currently evaluating the impact that adoption of the
SFAS No. 123R may have on its results of  operations  or financial  position and
expects that the adoption may have a material effect on the Company's results of
operations  depending on the level and form of future equity-based  compensation
awards issued.

QUARTERLY DATA

The  following  table sets forth  selected  quarterly  data for the years  ended
December 31, 2004 and 2003 (in thousands,  except per share data). The operating
results are not indicative of results for any future period.


                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                              2004
                                                              ----
                                      First           Second          Third           Fourth
                                     Quarter         Quarter         Quarter         Quarter
                                    ---------       ---------       ---------       ---------
<S>                                 <C>             <C>             <C>             <C>
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)

<CAPTION>
                                                               2003
                                                               ----
                                      First           Second          Third           Fourth
                                     Quarter         Quarter         Quarter         Quarter
                                    ---------       ---------       ---------       ---------
<S>                                 <C>             <C>             <C>             <C>
Revenues .....................      $      53       $      25       $      25       $      27
Operating loss ...............         (2,666)         (1,497)           (775)           (734)
Net loss .....................         (2,412)         (1,042)           (672)           (205)
Net loss per share:
    Basic ....................      $   (0.15)      $   (0.07)      $   (0.04)      $   (0.01)
    Diluted ..................      $   (0.15)      $   (0.07)      $   (0.04)      $   (0.01)
</TABLE>

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.


                                       17
<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...............    19

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting.......................................................................... .......................    20

Consolidated Balance Sheets--December 31, 2004 and 2003....................................................    21

Consolidated Statements of Operations--Years Ended December 31, 2004, 2003 and 2002........................    22

Consolidated Statements of Stockholders' Equity and Comprehensive Loss--Years Ended December 31, 2004, 2003
and 2002 ..................................................................................................    23

Consolidated Statements of Cash Flows--Years Ended December 31, 2004, 2003 and 2002........................    25

Notes to Consolidated Financial Statements.................................................................    26
</TABLE>


                                       18
<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, 2004 and 2003, 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, 2004. 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 misstatements. 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,  2004 and 2003,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended December 31, 2004, 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, 2004,  based on
criteria  established in Internal  Control - Integrated  Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission, and our report
dated  March  14,  2005,   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 14, 2005


                                       19
<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, 2004,  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, 2004,  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, 2004,  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, 2004 and 2003, 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, 2004,  and our report dated March 14, 2005  expressed
and unqualified opinion on those consolidated financial statements.


/s/ KPMG LLP
---------------------
Stamford, Connecticut
March 14, 2005


                                       20
<PAGE>

                       CLARUS CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2004 and 2003
               (In Thousands, Except Share and Per Share Amounts)

<TABLE>
<CAPTION>
                                     ASSETS
                                                                                        2004            2003
                                                                                     ---------       ---------
<S>                                                                                  <C>             <C>
CURRENT ASSETS:
    Cash and cash equivalents .................................................      $  48,377       $  15,045
    Marketable securities .....................................................         35,119          73,685
    Interest receivable .......................................................            350             507
    Prepaids and other current assets .........................................            182             132
                                                                                     ---------       ---------

       Total current assets ...................................................         84,028          89,369
                                                                                     ---------       ---------

PROPERTY AND EQUIPMENT, NET ...................................................          2,367              38
                                                                                     ---------       ---------

OTHER ASSETS:

    Deposits and other long-term assets .......................................             42              38
                                                                                     ---------       ---------
       Total assets ...........................................................      $  86,437       $  89,445
                                                                                     =========       =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable and accrued liabilities ..................................      $   1,468       $   1,520
    Deferred revenue ..........................................................             --           1,106
                                                                                     ---------       ---------
       Total current liabilities ..............................................          1,468           2,626
                                                                                     ---------       ---------
    Deferred rent .............................................................            115              --

       Total liabilities ......................................................          1,583           2,626
                                                                                     ---------       ---------
COMMITMENTS AND CONTINGENCIES (Note 12)

STOCKHOLDERS' EQUITY:
    Preferred stock, $.0001 par value; 5,000,000 shares authorized; none issued             --              --
    Common stock, $.0001 par value; 100,000,000 shares authorized;
         16,734,947 and 16,649,048 shares issued and
         16,659,947 and 16,574,048 outstanding in 2004 and 2003, respectively .              2               2
    Additional paid-in capital ................................................        368,385         367,031
    Accumulated deficit .......................................................       (279,656)       (276,767)
    Less treasury stock, 75,000 shares at cost ................................             (2)             (2)
    Accumulated other comprehensive income (loss) .............................           (130)            (17)
    Deferred compensation .....................................................         (3,745)         (3,428)
                                                                                     ---------       ---------
       Total stockholders' equity .............................................         84,854          86,819
                                                                                     ---------       ---------
       Total liabilities and stockholders' equity .............................      $  86,437       $  89,445
                                                                                     =========       =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       21
<PAGE>

                       CLARUS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  Years Ended December 31, 2004, 2003 and 2002
                    (In Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                2004           2003          2002
                                                              --------       --------       --------
<S>                                                           <C>            <C>            <C>
REVENUES:
    License fees .......................................      $  1,106       $     --       $  2,808
    Services fees ......................................            --            130          6,226
                                                              --------       --------       --------
       Total revenues ..................................         1,106            130          9,034

COST OF REVENUES:
     License fees ......................................            --             --             26
     Services fees .....................................            --             --          5,498
                                                              --------       --------       --------
       Total cost of revenues ..........................            --             --          5,524

OPERATING EXPENSES:
    Research and development ...........................            --             --          7,263
    Sales and marketing ................................            --             --          7,938
    General and administrative .........................         3,395          4,986         12,574
    Provision/(credit) for doubtful accounts ...........            --             18           (560)
    Transaction expenses ...............................         1,636             --             --
    Loss on impairment of goodwill and intangible assets            --             --         10,360
    Loss on sale or disposal of assets .................            --             36          1,748
    Depreciation and amortization ......................           186            762          4,243
                                                              --------       --------       --------
       Total operating expenses ........................         5,217          5,802         43,566
                                                              --------       --------       --------
OPERATING LOSS .........................................        (4,111)        (5,672)       (40,056)

 OTHER INCOME ..........................................            19            169             27
 INTEREST INCOME .......................................         1,203          1,238          2,441
 INTEREST EXPENSE ......................................            --            (66)          (225)
                                                              --------       --------       --------
NET LOSS ...............................................      $ (2,889)      $ (4,331)      $(37,813)
                                                              ========       ========       ========


NET LOSS PER SHARE

    Basic                                                     $  (0.18)      $  (0.27)      $  (2.42)

    Diluted                                                   $  (0.18)      $  (0.27)      $  (2.42)


WEIGHTED AVERAGE COMMON SHARES OUTSTANDING


     Basic                                                      16,092         15,905         15,615

     Diluted                                                    16,092         15,905         15,615
</TABLE>

           See accompanying notes to consolidated financial statements


                                       22
<PAGE>

                       CLARUS CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
                               COMPREHENSIVE LOSS
                  Years Ended December 31, 2004, 2003 and 2002
                                 (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 31,2001 ..............      15,639    $       2   $ 360,670    $(234,623)         (75)   $      (2)   $     281
   Exercise of stock options ...........         113           --         400           --           --           --           --
   Issuance of shares under
      employee stock purchase plans ....          19           --         119           --           --           --           --
   Retirement of shares related
      to the termination of
      marketing agreement ..............          (8)          --         (39)          --           --           --           --
   Modification to stock options .......          --           --         500           --           --           --           --
   Issuance of stock options with
      exercise prices below fair
      market value .....................          --           --          65           --           --           --           --
   Net loss ............................          --           --          --      (37,813)          --           --           --
   Increase in foreign currency
      translation adjustment ...........          --           --          --           --           --           --           10
   Decrease in unrealized gain on
      marketable securities ............          --           --          --           --           --           --         (145)

------------------------------------------------------------------------------------------------------------------------------------
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)
====================================================================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       23
<PAGE>

                       CLARUS CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
                           COMPREHENSIVE LOSS (Cont.)
                  Years Ended December 31, 2004, 2003 and 2002
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                  Total
                                                 Deferred       Stockholders'    Comprehensive
                                               Compensation       Equity             Loss
                                               ------------     ------------    --------------
<S>                                           <C>               <C>                      <C>
BALANCES, December 31, 2001 ............      $      --         $ 126,328                $--
   Exercise of stock options ...........             --               400                 --
   Issuance of shares under
      employee stock purchase plans ....             --               119                 --
   Retirement of shares related
      to the termination of
      marketing agreement ..............             --               (39)                --
   Modification to stock options .......             --               500                 --
   Issuance of stock options with
      exercise prices below fair
      market value .....................            (65)               --                 --
   Net loss ............................             --           (37,813)           (37,813)
   Increase in foreign currency
      translation adjustment ...........             --                10                 10
   Decrease in unrealized gain on
      marketable securities ............             --              (145)              (145)
                                                                                   ---------
   Total comprehensive loss ............                                             (37,948)
-------------------------------------------------------------------------          =========
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
=========================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       24
<PAGE>

                       CLARUS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years Ended December 31, 2004, 2003 and 2002
                      (In Thousands, Except Share Amounts)

<TABLE>
<CAPTION>
                                                                                    2004            2003           2002
                                                                                 ---------       ---------       ---------
<S>                                                                              <C>             <C>             <C>
OPERATING ACTIVITIES:
Net loss ..................................................................      $  (2,889)      $  (4,331)      $ (37,813)
Adjustments to reconcile net loss to net cash used in operating activities:
  Depreciation and amortization of property and equipment .................            186             762           3,788
  Amortization of intangible assets .......................................             --              --             455
  Loss on impairment of intangible assets .................................             --              --          10,360
  Amortization of premium and discount on securities, net .................            982              --              --
  Gain on sale of marketable securities and other .........................            (17)             --             (15)
  Provision/(credit) for doubtful accounts ................................             --              18            (560)
  Noncash sales and marketing expense .....................................             --              --             450
  Noncash charge due to modification of stock options .....................             --              --             500
  Amortization of deferred employee compensation plans ....................            583             287              --
  Gain on sale of e-commerce assets to Epicor .............................             --              --            (514)
  Loss on sale or disposal of property and equipment ......................             --              36           2,262
  Changes in operating assets and liabilities:
    Accounts receivable ...................................................             --             449           2,618
    Interest receivable, prepaids and other current assets ................            107             623           1,203
    Assets held for sale ..................................................             --              48              --
    Deposits and other long-term assets ...................................             (4)             30             420
    Accounts payable and accrued liabilities ..............................            (52)           (416)         (4,539)
    Deferred revenue ......................................................         (1,106)           (142)         (5,738)
    Deferred rent .........................................................            115              --              --
    Liabilities to be assumed .............................................             --            (220)             --
    Other long-term liabilities ...........................................             --              --            (265)
                                                                                 ---------       ---------       ---------
     Net cash used in operating activities ................................         (2,095)         (2,856)        (27,388)
                                                                                 ---------       ---------       ---------
INVESTING ACTIVITIES:
  Purchase of marketable securities .......................................        (59,754)       (117,881)       (123,611)
  Proceeds from the sale and maturity of marketable securities ............         97,242          96,918         135,860
  Purchase of property and equipment ......................................         (2,515)            (38)           (182)
  Proceeds from sale of investment ........................................             --              --             200
  Proceeds from sale of operating assets ..................................             --              --           1,000
  Proceeds from sale of property and equipment ............................             --              11             189
                                                                                 ---------       ---------       ---------
     Net cash (used in) provided by investing activities ..................         34,973         (20,990)         13,456

FINANCING ACTIVITIES:
  Proceeds from the exercise of stock options .............................            454           1,656             400
  Proceeds from issuance of common stock related to employee stock
        purchase plans ....................................................             --              10             119
  Repayment of long-term debt .............................................             --          (5,000)             --
                                                                                 ---------       ---------       ---------
     Net cash (used in) provided by financing activities ..................            454          (3,334)            519
                                                                                 ---------       ---------       ---------

Effect of exchange rate change on cash ....................................             --              --              10
CHANGE IN CASH AND CASH EQUIVALENTS .......................................         33,332         (27,180)        (13,403)
CASH AND CASH EQUIVALENTS, beginning of year ..............................         15,045          42,225          55,628
                                                                                 ---------       ---------       ---------
CASH AND CASH EQUIVALENTS, end of year ....................................      $  48,377       $  15,045       $  42,225
                                                                                 =========       =========       =========

SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest ....................................................      $      --       $      --       $     225
                                                                                 =========       =========       =========

NONCASH TRANSACTIONS:
Retirement of 7,500 shares related to the termination of a sales and
  marketing agreement .....................................................      $      --       $      --       $      39

Grant of Restricted Stock .................................................      $      50       $   2,680       $      --
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       25
<PAGE>

                       CLARUS CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2004, 2003 and 2002

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 has 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 three,  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 Clarus International,  Inc.,
Clarus eMEA Ltd.,  Clarus CSA,  Inc.,  Clarus CSA, Inc.  (Ireland),  SAI America
Limited,  SAI  Recruitment  Limited,  i2Mobile.com  Limited,  SAI  America  LLC,
Software Architects International, LLC, and REDEO Technologies, Inc.

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,  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  $48.4  million  and $15.0  million  in cash and cash  equivalents
included in the  accompanying  consolidated  balance  sheets for the years ended
December 31, 2004 and 2003, respectively.

MARKETABLE SECURITIES

Marketable  securities  at December  31, 2004  consist of  government  notes and
bonds. For the period ended December 31, 2003,  marketable  securities consisted
of government  notes and bonds,  commercial  paper,  certificates of deposit and
corporate  debt. 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.


                                       26
<PAGE>

CREDIT AND CUSTOMER CONCENTRATIONS

As of December 31, 2004 and 2003, the Company had no trade accounts receivables.

During 2004 and 2003, no revenue was derived from international markets.  During
2002, 45.2% of the Company's revenue was derived from international markets, and
29.9% was derived from one customer in the United Kingdom.

PROPERTY AND EQUIPMENT

Property and equipment  consists of furniture and fixtures,  computers and other
office equipment,  purchased software 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.  During 2002,  the Company  abandoned  certain  assets
located at its  principal  facilities  in Suwanee,  Georgia,  and its offices in
Maidenhead,  England and  Limerick,  Ireland.  These fixed asset amounts and the
related  accumulated  depreciation were written off,  resulting in an impairment
charge of $2.1  million  that is  included  in the loss on sale or  disposal  of
assets in the  accompanying  consolidated  statement of operations  for the year
ended December 31, 2002.

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

<TABLE>
<CAPTION>
                                                                December 31,        Useful Life
                                                           ----------------------   -----------
                                                             2004          2003     (in years)
                                                             ----          ----     ----------
<S>                                                        <C>           <C>           <C>
      Computers and equipment .......................      $   190       $    52       1 - 5
      Furniture and fixtures ........................          488            35       1 - 7
      Leasehold improvements ........................        1,944            34           8
                                                           -------       -------
                                                             2,622           121
      Less: accumulated depreciation and amortization         (255)          (83)
                                                           -------       -------
          Property and equipment, net ...............      $ 2,367       $    38
                                                           =======       =======
</TABLE>

Depreciation and amortization  expense related to property and equipment totaled
$186,000, $762,000, and $3.8 million for the years ended December 31, 2004, 2003
and 2002, 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
2004,  2003 or 2002.  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, 2004 and 2003,
respectively.

GOODWILL AND OTHER INTANGIBLE ASSETS

In July 2001,  the FASB  issued  SFAS No. 142,  "Goodwill  and Other  Intangible
Assets".  SFAS 142 requires that goodwill and intangible  assets with indefinite
useful lives no longer be amortized,  but instead tested for impairment at least
annually.  SFAS 142 also requires that intangible  assets with estimable  useful
lives  be  amortized  over  their  respective  estimated  useful  lives to their
estimated  residual  values and reviewed for impairment in accordance  with SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets".

The Company  adopted SFAS 142  effective  January 1, 2002.  Upon  adoption,  the
Company  tested  goodwill  for  impairment  at January 1, 2002  according to the
provisions of SFAS 142, which resulted in no impairment required as a cumulative
effect of accounting change. As a result of a change in the Company's  strategic
direction  during the second quarter of 2002,  the Company  tested  goodwill and
intangible assets with definite lives for impairment according to the provisions
of SFAS 142 and SFAS 144, respectively,  which resulted in an impairment of $6.8
million of goodwill and $3.5 million of intangible  assets with definite  lives.
No balances for goodwill or intangible  assets  remained as of December 31, 2004
and 2003, respectively.

Prior  to  their  impairment,  intangible  assets  were  being  amortized  on  a
straight-line  basis over periods ranging from three to ten years.  Amortization
expense related to these  intangible  assets amounted to $0, $0 and $0.5 million
in 2004, 2003 and 2002, respectively.


                                       27
<PAGE>

LONG-LIVED ASSETS

On  January  1,  2002 the  Company  adopted  the  provisions  of SFAS  No.  144,
"Accounting  for the  Impairment  or Disposal of  Long-Lived  Assets".  SFAS 144
provides a single  accounting model for the impairment or disposal of long-lived
assets.  SFAS 144 also changes the criteria for classifying an asset as held for
sale;  and broadens the scope of  businesses  to be disposed of that qualify for
reporting  as  discontinued  operations  and changes  the timing of  recognizing
losses on such  operations.  The adoption of SFAS 144 did not have a significant
impact on the Company's consolidated financial statements.

In accordance with SFAS 144,  long-lived  assets,  such as property,  plant, and
equipment,  and purchased intangibles 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 are no  longer
depreciated.  The assets and liabilities of a disposed group  classified as held
for sale  are  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, 2004 and 2003 (in thousands):

                                                     2003        2004
                                                    ------      ------
Accounts payable .................................  $  218      $  432
Accrued compensation, benefits and commissions ...     172         187
Restructuring accruals ...........................      73         230
Accrued professional services ....................     595         336
Accrued franchise taxes ..........................     365         180
Other ............................................      45         155
                                                    ------      ------
                                                    $1,468      $1,520
                                                    ======      ======

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 market 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, 2004 and 2003.

REVENUE

The Company historically  recognized revenue from two primary sources,  software
licenses and  services.  Revenue from  software  licensing  and services fees is
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  recognizes
software license revenue when: (1) persuasive evidence of an arrangement exists;
(2)  delivery  has  occurred;  (3) the fee is  fixed  or  determinable;  and (4)
collectibility is probable.

SOP  No.  97-2  generally  requires  revenue  earned  on  software  arrangements
involving  multiple  elements  to be  allocated  to each  element  based  on the
relative fair values of the elements. The fair value of an element must be based
on evidence  that is specific to the vendor.  License fee revenue  allocated  to
software  products  generally  is  recognized  upon  delivery of the products or
deferred  and  recognized  in future  periods to the extent that an  arrangement
includes  one or more  elements to be  delivered  at a future date and for which
fair values have not been  established.  Revenue  allocated  to  maintenance  is
recognized  ratably over the maintenance  term, which is typically 12 months and
revenue  allocated to training and other  service  elements is recognized as the
services are performed.

Under SOP No. 98-9, if evidence of fair value does not exist for all elements of
a license agreement and  post-contract  customer support is the only undelivered
element, then all revenue for the license arrangement is recognized ratably over
the term of the agreement as license  revenue.  If evidence of fair value of all
undelivered  elements  exists  but  evidence  does  not  exist  for  one or more
delivered elements,  then revenue is recognized using the residual method. Under
the residual method, the fair value of the undelivered  elements is deferred and
the remaining  portion of the  arrangement  fee is  recognized  as revenue.  The
Company  uses the  residual  method since it does not have fair value of license
fees.  Revenue from hosted software  agreements are recognized  ratably over the
term of the hosting arrangements.  Revenue from sales to resellers is recognized
on a sell-through basis.


                                       28
<PAGE>

In November  2001, the Emerging  Issues Task Force  ("EITF")  issued EITF 01-14,
"Income   Statement    Characterization    of   Reimbursements    Received   for
`Out-of-Pocket'  Expenses Incurred",  stating that  reimbursements  received for
out-of-pocket  expenses should be characterized as revenue.  The Company adopted
this  consensus  effective  January 1, 2002.  Historically  the  Company has not
reflected  such  reimbursements  as revenue in its  consolidated  statements  of
operations.  Upon adoption of this consensus,  comparative  financial statements
for prior periods were  reclassified  to provide  consistent  presentation.  The
adoption of this  consensus did not have any impact on the  Company's  financial
position or results of operations,  however, the Company's services fees revenue
and cost of services  fees  revenue  increased by an equal amount as a result of
the gross-up of revenues and expenses for reimbursable  expenses. For the fiscal
year ended December 31, 2002 the Company recorded services fees revenue and cost
of services fees revenue from out-of-pocket expenses of approximately $206,000.

STOCK-BASED COMPENSATION PLAN

The Company has an employee stock option plan,  which is described more fully in
Note 10. 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.

The following  table shows what 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>
                                                                                2004            2003             2002
                                                                            ----------       ----------       ----------
<S>                                                                         <C>              <C>              <C>
Net loss, as reported ................................................      $   (2,889)      $   (4,331)      $  (37,813)
Add stock-based employee compensation expense included in reported
  net loss, ..........................................................             584              287              500
Deduct total stock-based employee compensation expense determined
  under fair-value based method for all awards .......................          (2,613)          (5,049)          (1,913)
                                                                            ----------       ----------       ----------
Pro forma net loss ...................................................      $   (4,918)      $   (9,093)      $  (39,226)
                                                                            ==========       ==========       ==========
Earnings per Share:

  Basic - as reported ................................................      $    (0.18)      $    (0.27)      $    (2.42)

  Basic - pro forma ..................................................      $    (0.31)      $    (0.57)      $    (2.51)


  Diluted - as reported ..............................................      $    (0.18)      $    (0.27)      $    (2.42)

  Diluted - pro forma ................................................      $    (0.31)      $    (0.57)      $    (2.51)
                                                                            ==========       ==========       ==========
</TABLE>

Refer to Note 10 to the consolidated  financial  statements for assumptions used
in the Black-Scholes option pricing model.

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.


                                       29
<PAGE>

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,
2004, 2003 and 2002 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, 2004,  2003 and 2002. The potential  effects of
excluded incremental shares are as follows (in thousands):

<TABLE>
<CAPTION>
                                                              2004       2003       2002
                                                             -----      -----      -----
<S>                                                          <C>          <C>        <C>
      Effect of shares issuable under stock option plan        616        202        107
      Effect of shares issuable under
          Restricted stock awards                              504         28         --
                                                             -----      -----      -----
      Total effect of potential incremental shares           1,120        230        107
                                                             =====      =====      =====
</TABLE>

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.

At December  31,  2002,  326,034  options were  excluded in the  computation  of
diluted  earnings per share due to the net loss for the year ended  December 31,
2002 and 2,528,872  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),  foreign  currency
translation adjustments, and unrealized gains and losses from available-for-sale
marketable  securities  and is  presented  in  the  consolidated  statements  of
stockholders' equity as comprehensive income (loss).

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  2004,  2003,  and 2002 the Company  operated in one  principal  business
segment,  e-commerce  software  solutions,  across  domestic  and  international
markets.

Geographic  revenue and the carrying  value of property and  equipment as of and
for the years ended December 31, 2004, 2003 and 2002 were as follows:

      (in thousands)                2004        2003        2002
                                   ------      ------      ------
      Revenue:
      United States                $   --      $  130      $4,954
      England                          --          --       2,702
      Italy                            --          --         319
      Other international           1,106          --       1,059
                                   ------      ------      ------
      Total                        $1,106      $  130      $9,034
                                   ======      ======      ======


      Property and equipment:
      United States                $2,367      $   38      $  809
      International                    --          --          --
                                   ------      ------      ------
      Total                        $2,367      $   38      $  809
                                   ======      ======      ======

NEW ACCOUNTING PRONOUNCEMENTS

In December  2004,  the FASB issued SFAS No. 123  (revised  2004),  "Share-Based
Payment" ("SFAS No. 123R").  This statement  required that the compensation cost
relating to  share-based  payment  transactions  be  recognized in the financial
statements. Compensation cost is to be measure 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


                                       30
<PAGE>

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 on 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  interim or annual  reporting  period that begins after June 15,
2005 (as of July 1, 2005 for the  Company).  The  Company  intends  to  continue
applying  APB  Opinion  No. 25 to  equity-based  compensation  awards  until the
effective  date of SFAS No. 123R.  At the effective  date of SFAS No. 123R,  the
Company expects to use 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 July 1,
2005. For all equity-based  compensation  awards that are unvested as of July 1,
2005,  compensation  cost will be  recognized  for the  unamortized  portion  of
compensation cost not previously included in the SFAS No. 123 pro forma footnote
disclosure.  The Company is currently evaluating the impact that adoption of the
SFAS No. 123R may have on its results of  operations  or financial  position and
expects that the adoption may have a material effect on the Company's results of
operations  depending on the level and form of future equity-based  compensation
awards issued.

RECLASSIFICATIONS

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

2. MARKETABLE SECURITIES

As of December 31, 2004, and 2003, 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, 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.  The Company had no sales of marketable  securities  for the year
ended December 31, 2003.

The amortized cost, gross  unrealized  holding gains,  gross unrealized  holding
losses and fair value of these available-for-sale marketable securities by major
security  type and class of security  at  December  31, 2003 were as follows (in
thousands):

<TABLE>
<CAPTION>
                                                             Gross          Gross
                                          Amortized        Unrealized     Unrealized         Fair
                                             Cost        Holding Gains  Holding Losses       Value
                                          ----------      ----------      ----------       ----------
<S>                                       <C>             <C>             <C>              <C>
      Commercial paper .............      $    2,195      $       --      $       --       $    2,195
      Corporate notes and bonds ....          10,123               4             (28)          10,099
      Government notes and bonds ...          61,384               8              (1)          61,391
                                          ----------      ----------      ----------       ----------

                     Total .........      $   73,702      $       12      $      (29)      $   73,685
                                          ==========      ==========      ==========       ==========
</TABLE>

The Company had $15,000 of realized gains and had no realized  losses from sales
of marketable securities included in the accompanying consolidated statements of
operations  for  the  year  ended  December  31,  2002.  The  Company   received
approximately $15.0 million in proceeds from these sales.

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 and is included in cash and cash  equivalents  in the
accompanying consolidated balance sheet at December 31, 2003. The escrowed funds
were released in February 2004. The Company  recorded a gain in 2002 on the sale
of the business of approximately  $514,000. On January 1, 2003, the Company sold
its Cashbook  product to an employee  group in Limerick,  Ireland  recognizing a
gain of approximately $157,000 during the first quarter of 2003.


                                       31
<PAGE>

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.

During the year ended  December 31,  2004,  the Company  expensed  approximately
$31,000,  for payments 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, 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.

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  $43,000
during the year ended December 31, 2004.

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,  2004,  no
balance remained outstanding to Mr. Jeffery under these severance arrangements.

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.

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 $4.2
million were expensed in 2001 to align better the Company's  cost structure with
projected  revenue.  The charges  were  comprised  of $3.0  million for employee
separation  and related  costs for 181  employees  and $1.2 million for facility
closure and consolidation costs.

During the first quarter of 2002, the Company determined that amounts previously
charged  during  2001  of  approximately   $202,000  that  related  to  employee
separation  and  related  charges  were no longer  required  and this amount was
credited  to  sales  and  marketing  expense  in the  accompanying  consolidated
statement of operations during 2002.

Additional  restructuring  and related  charges of $8.6  million  were  expensed
during  2002.  The charges for 2002 were  comprised of $4.6 million for employee
separation  and related  costs for 183  employees  and $4.0 million for facility
closures and consolidation costs.

During  2003,  the  Company  determined  that actual  restructuring  and related
charges were in excess of amounts  provided for in 2002 and recorded  additional
restructuring  charges of  $250,000.  This  amount was  expensed  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.

The facility  closures and  consolidation  costs for 2001 and 2002 relate to the
abandonment of the Company's leased  facilities in Suwanee,  Georgia;  Limerick,
Ireland; Maidenhead,  England; and near Toronto, Canada. Total facility closures
and consolidation costs include remaining lease liabilities,  construction costs
and brokerage  fees to sublet the abandoned  space offset by estimated  sublease
income.  The estimated costs of abandoning  these leased  facilities,  including


                                       32
<PAGE>

estimated  costs to sublease,  were based on market  information  trend analysis
provided by a commercial real estate brokerage firm retained by the Company. The
Company  incurred  a charge  in the  fourth  quarter  2002 of $2.1  million  for
facility closures and consolidation  costs as a result of the termination of its
lease for its principal facility in Suwanee, Georgia.

The  following  is a  reconciliation  of  the  components  of  the  accrual  for
restructuring  and related costs, the amounts charged against the accrual during
2004,  2003 and 2002 and the balance of the accrual as of December  31, 2004 (in
thousands):


<PAGE>

<TABLE>
<CAPTION>
                                         Employee       Facility
                                        Separation       Closing       Total Restructuring
                                           Costs          Costs          and Related Costs
                                        ---------       ---------      -------------------
<S>                                     <C>             <C>                 <C>
      Balance at December 31, 2001      $      680      $    1,209          $    1,889

      Accruals during 2002                   4,645           3,905               8,550

      Expenditures during 2002               4,196           4,977               9,173

      Credits in 2002                          202              --                 202
                                        ----------      ----------          ----------
      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
                                        ==========      ==========          ==========
</TABLE>

For the years ended  December 31, 2004,  2003 and 2002,  the  restructuring  and
related  costs were  classified  in the  Company's  consolidated  statements  of
operations as follows (in thousands):

                                                    YEAR ENDED
                                                    DECEMBER 31,
                                     -------------------------------------------
                                        2004            2003             2002
                                       ------          ------          ------
Cost of revenues - services fees       $   --          $   --          $  858
Research and development                   --              --           1,291
Sales and marketing                        --              --           1,242
General and administrative                 33             250           5,159
                                       ------          ------          ------
    Total                              $   33          $  250          $8,550
                                       ======          ======          ======

6. INCOME TAXES

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

                                                    YEAR ENDED
                                                   DECEMBER 31,
                                     -------------------------------------------
                                         2004            2003            2002
                                       -------         -------          -------
Pre-Tax Loss:
     United States                     $ (2,889)       $ (4,331)      $(25,770)
     Foreign                                 --              --        (12,043)
                                       -------         --------       --------
                                       $ (2,889)       $ (4,331)      $(37,813)
                                       ========        ========       ========

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,  2004 are as follows  (in
thousands):


                                       33
<PAGE>

<TABLE>
<CAPTION>
                                                                         YEAR ENDED
                                                                         DECEMBER 31,
                                                        ----------------------------------------------
                                                          2004             2003              2002
                                                        --------           --------           --------
<S>                                                     <C>                <C>                <C>
Current:
    Federal                                             $     --           $     --           $     --
    State                                                     --                 --                 --
    Foreign                                                   --                 --                 --
                                                        --------           --------           --------
                                                              --                 --                 --
                                                        --------           --------           --------
Deferred:
    Federal                                              (30,455)            (3,492)               579
    State                                                 (7,251)              (513)               164
    Foreign                                                  441              5,962             (2,026)
                                                        --------           --------           --------
                                                         (37,265)             1,957             (1,283)
Increase/(Decrease) in valuation allowance for
deferred income taxes                                     37,265             (1,957)             1,283
                                                        --------           --------           --------

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

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, 2004, 2003 and 2002:

<TABLE>
<CAPTION>
                                                                                    YEAR ENDED
                                                                                   DECEMBER 31,
                                                                  -------------------------------------------
                                                                    2004               2003             2002
                                                                  -------            -------          -------
<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                  (5.0)              (7.7)             0.3
    Benefit of prior year NOL adjustments                        (1,265.9)             (54.2)              --
    Nondeductible goodwill                                             --                 --              9.6
    Income tax effect attributable to foreign operations             15.3              135.6              2.6
    Nondeductible expired/cancelled warrants and options               --                3.3             16.8
    Increase in valuation allowance and other items               1,289.6              (43.0)             4.7
                                                                  -------            -------          -------
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, 2004 and 2003 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                          YEAR ENDED
                                                                          DECEMBER 31,
                                                                   ---------------------------
                                                                     2004              2003
                                                                   --------           --------
<S>                                                                <C>                <C>
Deferred income tax assets:
    Net operating loss, capital loss and research &                $ 94,943           $ 57,454
       experimentation credit carryforwards
    Depreciation and amortization                                      (446)                 3
    Non-cash compensation                                               339                112
    Accrued liabilities                                                  42                 44
    Reserves for investments                                          1,728              1,728
                                                                   --------           --------
Net deferred income tax assets before valuation allowance            96,606             59,341
Valuation allowance for deferred income tax assets                  (96,606)           (59,341)
                                                                   --------           --------
Net deferred income tax assets                                     $     --           $     --
                                                                   ========           ========
</TABLE>

Net operating loss  carryforwards  at December 31, 2004 increased  significantly
due to the write off for tax  purposes  of  significant  investments  in foreign
subsidiaries in Ireland and the United Kingdom, whose losses had previously been
reflected in our financial statements for prior periods.


                                       34
<PAGE>

The net change in the  valuation  allowance  for deferred  income tax assets for
2004 was an increase of $37.3  million as compared to a decrease of $2.0 million
in 2003 and an increase in 2002 of $1.3 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, 2004,
because the ultimate  realization of those benefits and assets does not meet the
more likely than not criteria.

At December 31, 2004, the Company has net operating loss, capital loss, research
and experimentation  credit and alternative minimum tax credit carryforwards for
U.S. federal income tax purposes of approximately $226.7 million, $15.2 million,
$1.3  million  and  $53,000,  respectively,  which  expire  in  varying  amounts
beginning in the year 2009.

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  $212.8
million of the  $226.7  million  of U.S.  net  operating  loss  carryforward  is
available  currently to offset  taxable income that the Company may recognize in
the future.

7. DEBT

As of December 31, 2004 and 2003, the Company has no debt outstanding.

8. ROYALTY AGREEMENTS

The  Company was  previously  a party to royalty  and other  original  equipment
manufacturer agreements for certain of its applications.  The Company incurred a
total of  approximately  $0, $0 and  $24,000,  in royalty  expense for the years
ended  December  31,  2004,  2003,  and 2002,  respectively,  pursuant  to these
agreements.  The royalty fees paid are included in cost of revenues-license fees
in the accompanying  consolidated  statements of operations.  Epicor Corporation
assumed all  outstanding  royalty  agreements in connection with the sale of the
Company's e-commerce software business on December 6, 2002.

9. 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, $2,000 and $55,000
in 2004, 2003 and 2002, 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, 2004,  2003 and 2002,
zero, 2,349 and 18,548 shares were purchased for the benefit of the participants
under  the  Plans,  respectively.  As  of  December  31,  2004,  there  were  no
participants in either the U.S. or Global Plans.

10. 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 plan  terminated  in November  2002,  but 107,867 stock
options  awarded  under the plan are  vested and  eligible  to be  exercised  at
December 31, 2004.

The Company  adopted the 1998 Stock  Incentive  Plan (the "1998  Plan") in 1998.
Under the 1998 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 or consultants to the Company.  The
1998 Plan provides 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


                                       35
<PAGE>

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
will continue in effect until February 2008 unless terminated sooner.

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.

On April 9, 2001,  the  Company  announced  a voluntary  stock  option  exchange
program  for  its  employees.  Under  the  program,  employees  were  given  the
opportunity to cancel outstanding stock options previously granted to them on or
after  November  1, 1999 in  exchange  for an equal  number of new options to be
granted at a future date. The exercise price of the new options was equal to the
fair market value of the Company's common stock on the date of grant. During the
first phase of the program,  366,174  options with a weighted  average  exercise
price of $30.55 per share were  canceled  and new  options to  purchase  263,920
shares  with an  exercise  price of $3.49 per share were  issued on  November 9,
2001.  During the second phase of the program,  273,188  options with a weighted
average  exercise  price of $43.87 per share were  canceled  and new  options to
purchase 198,052 shares with an exercise price of $4.10 per share were issued on
February 11, 2002.  Employees who  participated  in the first  exchange were not
eligible for the second  exchange.  The exchange  program was designed to comply
with  Financial  Accounting  Standards  Board  ("FASB")  Interpretation  No.  44
"Accounting for Certain  Transactions  Involving Stock Compensation" and did not
result in any additional compensation charges or variable accounting. Members of
the Company's Board of Directors and its executive officers were not eligible to
participate in the exchange program.

In December 2002, the Company  granted  options to purchase a total of 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,  400,000  were issued with an
exercise price of $7.50 per share and 400,000 were issued with an exercise price
of $10.00 per share.  A portion  of the  options  issued at $5.35 per share were
issued at less than the fair  market  value on the date of  grant.  The  Company
recorded  deferred  compensation  of $65,000 to be  recognized  over the vesting
period of five years.

In  December  2002,  the  Company  made an  election  to  accelerate  vesting of
substantially all of the Company's  outstanding stock options in connection with
the acquisition by Epicor Software  Corporation of the e-commerce  assets of the
Company.  This resulted in a non-cash stock compensation charge of approximately
$500,000 during 2002.

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, 2004 to $3.6 million to
account for the increase in fair market  value from grant date through  December
31,  2004.  During the years  ended  December  31, 2004 and 2003,  $513,750  and
$274,000,  respectively,  were amortized to compensation expense for this award.
At December 31, 2004, these shares were excluded from the computation of diluted
earnings per share due to the net loss for the year ended December 31, 2004.

The Company recorded total non-cash stock compensation  expense of approximately
$0.6  million,  $0.3 million and $0.5  million for the years ended  December 31,
2004, 2003 and 2002, respectively.

Total  options  available for grant under all plans as of December 31, 2004 were
842,116.


                                       36
<PAGE>

A summary  of changes  in  outstanding  options  during  the three  years  ended
December 31, 2004 is as follows:

<TABLE>
<CAPTION>
                                                                                                                   Weighted
                                                                                                  Range of          Average
                                                                                                  Exercise         Exercise
                                                                                Shares              Prices            Price
                                                                           -----------        ------------     ------------
<S>            <C> <C>                                                       <C>              <C>                 <C>
      December 31, 2001...........................................           3,241,126        $1.00-$128.13       $12.06

           Granted................................................           2,238,882        $3.76-$ 10.00       $ 6.40
           Canceled...............................................         (2,512,447)        $1.00-$128.13       $12.13
           Exercised..............................................           (112,655)        $1.00-$  5.17       $ 3.51
                                                                          -----------
      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
                                                                          ===========

      Vested and exercisable at December 31, 2004.................           1,117,754                            $ 6.55
                                                                          ===========

      Vested and exercisable at December 31, 2003.................             864,392                            $ 6.22
                                                                          ===========

      Vested and exercisable at December 31, 2002.................           1,158,508                            $ 8.56
                                                                          ===========
</TABLE>

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:

                                               2004       2003         2002
                                               ----       ----         ----
Dividend yield...........................         0%         0%           0%
Expected volatility......................        57%        62%          76%
Risk-free interest rate..................      2.55%      2.86%      2.63%-4.43%
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, 2004,  2003,  and 2002,  were  approximately  $40,000,
$18,000  and $6.4  million,  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, 2004,  2003 and
2002, were $4.22, $3.50 and $2.86, 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, 2004:

<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, 2004         Price      Life (Years)           December 31, 2004          Price
     ------             -----------------       --------    -------------           -----------------           -------
<C>                        <C>                  <C>               <C>                     <C>                   <C>
$ 4.83  - $ 9.00           1,561,617            $ 6.14            6.2                     957,754               $ 5.97
$10.00 -  $10.00             400,000            $10.00            8.0                     160,000               $10.00
                          ----------                                                    ---------
                           1,961,617             $6.93            6.6                   1,117,754               $ 6.55
                          ==========                                                    =========
</TABLE>


                                       37
<PAGE>

11. STOCKHOLDERS' EQUITY

COMMON STOCK

The sales  and  marketing  agreement  signed  with one  strategic  partner  also
required  cash payments of $300,000 in each of the last two years of the related
agreement.  The  Company  recorded  the fair value of the  common  stock and the
expected cash payments as deferred sales and marketing costs during 2000. During
2001,  the  Company  terminated  the sales  and  marketing  agreement  with this
strategic partner  resulting in a write-off of the remaining  deferred sales and
marketing  costs of $1.4  million.  Also,  as a result of the  termination,  the
Company is no longer required to make cash payments of $300,000 for the last two
years of the agreement.

The  Company  recorded  non-cash  sales and  marketing  expense,  including  the
write-off  discussed  above,  of  approximately  $0, $0, and $0.4 million during
2004, 2003 and 2002, respectively, related to these agreements.

WARRANTS

During  1999,  the Company  issued  warrants to purchase  225,000  shares of the
Company's  common  stock at exercise  prices  ranging  from $10.00 to $53.75 per
share,  which expired in December  2002.  These  warrants were issued to certain
strategic partners, who were also customers, in exchange for the agreement to be
party to a sales and marketing  agreement  between the Company and the strategic
partner to provide various sales and marketing efforts on behalf of the Company.
The total fair market  value of the warrants was  approximately  $11.9  million,
which  was  recorded  as  additional  paid-in  capital  and  deferred  sales and
marketing costs at the date of issuance. The Company recorded non-cash sales and
marketing  expense of  approximately  $4.3 million  related to these  agreements
during the year ended December 31, 2001.  These warrants were fully amortized as
of December 31, 2001 and expired in December 2002. The Company did not recognize
any revenue from these customers during 2004, 2003 or 2002.

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.

During  2000,  the Company  awarded  33,334  warrants to a third party  software
developer in exchange for services.  The exercise  price of the 33,334  warrants
was $56.78 per share and the warrants expired on March 31, 2003. The fair market
value of the  warrants  on the date of grant was  $424,000  and was  recorded as
additional paid-in capital and non-cash research and development  expense during
2000.

12. COMMITMENTS AND CONTINGENCIES

LEASES

The Company rents certain office space,  under  noncancelable  operating leases.
Rents charged to expense were approximately $0.3 million,  $0.2 million and $1.2
million for the years ended  December 31, 2004,  2003,  and 2002,  respectively.
Future  minimum  lease  payments  for the next five years and  thereafter  under
noncancelable  operating leases with remaining terms greater than one year as of
December 31, 2004, are as follows (in thousands):

                               Gross Rental        Sub-Lease
                               Obligations           Income
                               -----------           ------
Year ending December 31,
      2005                          474                140
      2006                          413                104
      2007                          403                101
      2008                          420                105
      2009                          425                106
      Thereafter                  1,596                399
                                 ------               ----
      Total                      $3,731               $955
                                =======              =====

Our corporate  headquarters is currently located in Stamford,  Connecticut where
we lease  approximately  8,600  square feet for  $18,275 a month,  pursuant to a
lease, which expires on March 31, 2019.


                                       38
<PAGE>

We also lease 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 expires in
February  2006.  This facility has been  sub-leased for  approximately  $5,000 a
month, pursuant to a sublease,  which expires on January 30, 2006. The cost, net
of the estimated sublease income has been included in general and administrative
expense in the accompanying consolidated statement of operations in 2002.

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  alleges 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 Securities  Exchange Act of 1934 (the "Exchange Act") as
of December  31, 2004,  pursuant to Exchange  Act Rule  13a-15.  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, 2004
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.


                                       39
<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, 2004. 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, 2004.

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, 2004.

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, 2004
evaluation 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 2005 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 2005 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 2005 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 2005 Annual Meeting of Stockholders,
is incorporated herein by reference.

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 2005 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 2005 Annual Meeting
of Stockholders, is incorporated herein by reference.


                                       40
<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................     19
      Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting........     20
      Consolidated Balance Sheets--December 31, 2004 and 2003.....................................................     21
      Consolidated Statements of Operations--Years Ended December 31, 2004, 2003 and 2002.........................     22
      Consolidated Statements of Stockholders' Equity and Comprehensive Loss--Years Ended December 31, 2004,
      2003 and 2002...............................................................................................     23
      Consolidated Statements of Cash Flows--Years Ended December 31, 2004, 2003 and 2002.........................     25
      Notes to Consolidated Financial Statements..................................................................     26

            (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...............................................................    46

            (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  by reference from Exhibit 3.3 to the Company's Form
              S-1 Registration Statement (File No. 333- 46685)).

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

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

      3.4     Amended  and  Restated  Bylaws  of the  Company  (incorporated  by
              reference from Exhibit 3.2 to the Company's Registration Statement
              on Form S-4 (File No. 333-63535)).

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

      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 by reference from Exhibit
              9.1 to  Company's  Registration  Statement  on Form S-1  (File No.
              333-46685)).

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


                                       41
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

      10.12   Employee  Stock  Purchase  Plan  (incorporated  by reference  from
              Exhibit 10.3 to the Company's Form 10-Q filed on August 14, 2000).
              *

      10.13   Global  Employee  Stock Purchase Plan  (incorporated  by reference
              from Exhibit 10.4 to the  Company's  Form 10-Q filed on August 14,
              2000). *


                                       42
<PAGE>

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

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

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

      10.17   1992 Stock Option Plan,  effective November 22, 1992 (incorporated
              by reference from Exhibit 10.2 to Company's  Registration  on Form
              S-1 (File No. 333-46685)). *

      10.18   Amendment  to 1992 Stock  Option Plan  (incorporated  by reference
              from  Exhibit 10.2 to the  Company's  Form 10-K filed on March 30,
              2000). *

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

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

      21.1    List of Subsidiaries.

      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.


                                       43
<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 15, 2005
                                               By:  /s/ Nigel P. Ekern
                                                    ----------------------------
                                                    Nigel P. Ekern
                                                    Chief Administrative Officer

<TABLE>
<CAPTION>
           Signature                      Title                           Date
           ---------                      -----                           ----
<S>                           <C>                                    <C>
/s/ Nigel P. Ekern                                                   March 15, 2005
----------------------------- Chief Administrative Officer           --------------------
Nigel P. Ekern                (principal executive officer)


 /s/ Susan Luckfield                                                 March 15, 2005
----------------------------- Controller                             --------------------
Susan Luckfield               (principal financial officer)


 /s/ Warren B. Kanders        Executive Chairman of the Board of     March 15, 2005
----------------------------- Directors                              --------------------
Warren B. Kanders


 /s/ Stephen P. Jeffery       Director                               March 15, 2005
-----------------------------                                        --------------------
Stephen P. Jeffery


 /s/ Donald L. House          Director                               March 15, 2005
-----------------------------                                        --------------------
Donald L. House


 /s/ Burtt R. Ehrlich         Director                               March 15, 2005
-----------------------------                                        --------------------
Burtt R. Ehrlich


 /s/ Nicholas Sokolow         Director                               March 15, 2005
-----------------------------                                        --------------------
Nicholas Sokolow
</TABLE>


                                       44
<PAGE>

                  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Clarus Corporation:

Under date of March 14, 2005, we reported on the consolidated  balance sheets of
Clarus  Corporation  and  subsidiaries as of December 31, 2004 and 2003, 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,  2004,  which are included in the Clarus  Corporation
2004  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

Stamford, Connecticut
March 14, 2005


                                       45
<PAGE>

                                   Schedule II

                        Valuation and Qualifying Accounts
                       Clarus Corporation and Subsidiaries
                     For the years ended December 31, 2004,
                      2003 and 2002 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
                                                           ------------      -------------  --------------     ----------
<S>                                                        <C>               <C>              <C>              <C>
Allowance for Doubtful Accounts
     2002                                                     $636,000        $(560,000)       $(510,000)         $586,000
     2003                                                      586,000           18,000          604,000                --
     2004                                                           --               --               --                --

Valuation Allowance for Deferred Income Tax Assets
     2002                                                  $60,015,000       $1,283,000          $    --       $61,298,000
     2003                                                   61,298,000       (1,957,000)              --        59,341,000
     2004                                                   59,341,000       37,265,000               --        96,606,000

Restructuring Accruals
     2002                                                   $1,889,000       $8,550,000       $9,375,000        $1,064,000
     2003                                                    1,064,000          250,000        1,084,000           230,000
     2004                                                      230,000           33,000          190,000            73,000


</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.


                                       46
<PAGE>

                                  EXHIBIT INDEX

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

      21.1     List of Subsidiaries.

      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


                                       47