*Table
            of Contents*





**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 m**


**THE
      SECURITIES EXCHANGE ACT OF 1934**





For
      the
      fiscal year ended December 31, 2007





o**TRANSITION
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES**


**EXCHANGE
      ACT OF 1934**





For
      the
      transition period from ____________ to ____________





*Commission
      file number 0-24277*





**CLARUS
      CORPORATION**


(Exact
      name of Registrant as specified in its Charter)





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





One
      Landmark Square


Stamford,
      Connecticut 06901


(Address
      of principal office, including zip code)





(203)
      428-2000


(Registrant's
      telephone number, including area code)





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





**SECURITIES
      REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common
      Stock,**


par
      value
      $.0001





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





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





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





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. x





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





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







*Table
        of Contents*




The
      aggregate market value of the voting stock and non-voting common equity held
      by
      non-affiliates of the Registrant at June 30, 2007 was approximately $133.1
      million based on $9.10 per share, the closing price of the common stock as
      quoted on the OTC Pink Sheets Electronic Quotation Service.





The
      number of shares of the Registrant's common stock outstanding at March 3, 2008
      was 17,366,747 shares.





**DOCUMENT
      INCORPORATED BY REFERENCE**


Portions
      of our Proxy Statement for the 2008 Annual Meeting of Stockholders to be filed
      with the Securities and Exchange Commission within 120 days of the Registrant's
      2007 fiscal year end are incorporated by reference into Part III of this report.




*Table
          of Contents*




**TABLE
      OF CONTENTS**





PAGE**PART
                I**ITEM
                1.
            BUSINESS
            1FORWARD-LOOKING
                STATEMENTS
            1OVERVIEW
            1BUSINESS
            1PRIOR
                BUSINESS
            2EMPLOYEES
            3AVAILABLE
                INFORMATION
            3ITEM
                1A.
            RISK
                FACTORS
            4ITEM
                1B.
            UNRESOLVED
                STAFF COMMENTS
            9ITEM
                2.
            PROPERTIES
            10ITEM
                3.
            LEGAL
                PROCEEDINGS
            10ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS
            10**PART
                II**ITEM
                5.
            MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND
                ISSUER PURCHASES OF EQUITY SECURITIES
            11ITEM
                6.
            SELECTED
                FINANCIAL DATA
            14ITEM
                7.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                AND RESULTS OF OPERATIONS
            15ITEM
                7A.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK
            23ITEM
                8.
            FINANCIAL
                STATEMENTS AND SUPPLEMENTAL
                DATA
            24ITEM
                9.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                AND FINANCIAL DISCLOSURE
            45ITEM
                9A.
            CONTROLS
                AND PROCEDURES
            45ITEM
                9B.
            OTHER
                INFORMATION
            46**PART
                III**ITEM
                10.
            DIRECTORS
                AND EXECUTIVE OFFICERS OF THE
                REGISTRANT
            46ITEM
                11.
            EXECUTIVE
                COMPENSATION
            46ITEM
                12.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT
            46ITEM
                13.
            CERTAIN
                RELATIONSHIPS AND RELATED
                TRANSACTIONS
            46ITEM
                14.
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            46**PART
                IV**ITEM
                15.
            EXHIBITS,
                FINANCIAL STATEMENT SCHEDULES
            47SIGNATURES
            50EXHIBIT
                INDEX
            53




*Table
          of Contents*




**PART
      I**





**ITEM
      1. BUSINESS**





**FORWARD-LOOKING
      STATEMENTS**





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





These
      and
      other statements, which are not historical facts, are based largely upon our
      current expectations and assumptions and are subject to a number of risks and
      uncertainties that could cause actual results to differ materially from those
      contemplated by such forward-looking statements. These risks and uncertainties
      include, among others, our planned effort to redeploy our assets and use our
      cash, cash equivalents and marketable securities 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
      "Risk Factors" of Part I, Item 1A of this report and described in "Management's
      Discussion and Analysis of Financial Condition and Results of Operations" of
      Part II of this report. We cannot assure you that we will be successful in
      our
      efforts to redeploy our assets or that any such redeployment will result in
      Clarus’ future profitability. Our failure to redeploy our assets could have a
      material adverse effect on the market price of our common stock and our
      business, financial condition and results of operations.





**OVERVIEW**





Clarus
      Corporation ("Clarus" or the "Company," which may be referred to as "we," "us,"
      or "our") was formerly a provider of e-commerce business solutions until the
      sale of substantially all of its operating assets in December 2002. We are
      currently seeking to redeploy our cash, cash equivalents and marketable
      securities 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 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,
      cash equivalents, marketable securities, 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 operating
      expenses, excluding transaction expenses, have remained relatively stable during
      the past three fiscal years, management currently believes that the Company's
      operating expenses, excluding potential unsuccessful transaction expenses,
      will
      exceed investment income during 2008 due to declines in interest rates and
      earnings on investments.





As
      part
      of our strategy to enhance stockholder value, on December 6, 2002, we
      consummated the sale of substantially all of the assets of our electronic
      commerce business, which represented substantially all of our revenue generating
      operations and related assets, to Epicor Software Corporation ("Epicor"), a
      Delaware corporation, for a purchase price of $1.0 million in cash (the "Asset
      Sale"). Epicor is traded on the NASDAQ National Market under the symbol "EPIC."
      The sale included licensing, support and maintenance activities from our
      eProcurement, Sourcing, View (for eProcurement), eTour (for eProcurement),
      ClarusNET, and Settlement software products, our customer lists, certain
      contracts and certain intellectual property rights related to the purchased
      assets, maintenance payments and certain furniture and equipment. Epicor agreed
      to assume certain of our liabilities, such as executory obligations
      arising




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under
      certain contracts, agreements and commitments related to the transferred assets.
      We remained responsible for all of our other liabilities, including liabilities
      under certain contracts, any violations of environmental laws and for our
      obligations related to any of our indebtedness and employee benefit plans
      or taxes that were due and payable in connection with the acquired assets on
      or
      before the closing date of the Asset Sale.





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. Mr.
      Ekern resigned December 31, 2006. Philip A. Baratelli assumed the role of Chief
      Financial Officer on February 1, 2007.





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 equivalents and marketable
      securities 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 operations and free
      cash flow, experienced management teams, and operations in markets offering
      substantial growth opportunities. Our investment criteria generally includes
      companies with a transaction value of between $200 million to over $500 million
      with levels of earnings before income tax, taxes, depreciation and amortization
      of approximately $25 million or greater so as to utilize our available net
      operating loss tax carryforwards (“NOLs”). 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 "Risk Factors" below.





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





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





On
      February 7, 2008, our Board of Directors approved a Rights Agreement (the
“Rights Agreement”) which provides for a dividend distribution of one preferred
      share purchase right (a “Right”) for each outstanding share of our common stock,
      payable to stockholders of record as of the close of business on February 12,
      2008. Each Right entitles the registered holder to purchase from the Company
      one
      one-hundredth of a share of our Series A Junior Participating Preferred Stock,
      par value $0.0001 per share, at a purchase price of $12.00. The Rights Agreement
      is designed to assist in limiting the number of 5% or more owners and thus
      reduce the risk of a possible “change of ownership” under Section 382 of the
      Internal Revenue Code of 1986 as amended. A significant penalty is imposed
      on
      any person or group that acquires 4.9% or more (but less than 50%) of our
      then-outstanding common stock without the prior approval of our Board of
      Directors. There is no guaranty that the objective of the Rights Agreement
      of
      preserving the NOLs will be achieved. There is a possibility that certain
      transactions may be completed by stockholders or prospective stockholders that
      could trigger an “ownership change.” The parties to the Rights Agreement, dated
      as of February 12, 2008 are Clarus and American Stock Transfer & Trust
      Company, as rights agent.





**PRIOR
      BUSINESS**





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




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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, 2007, we had
      a
      total of ten employees, all of which are located in our Stamford, Connecticut
      headquarters. Our employees devote as much of their time as is necessary to
      the
      affairs of the Company and also serve in various capacities with other public
      and private entities. None of our employees are represented by a labor union
      or
      are subject to a collective bargaining agreement. We have not experienced any
      work stoppages and consider our relationship with our employees to be good.





**Executive
      Officers of the Registrant**




Pursuant
      to General Instruction G(3), the information regarding our executive officers
      called for by Item 401(b) of Regulation S-K is hereby included in Part I of
      this Annual Report on Form 10-K.




The
      executive officers of our Company as of March 3, 2008 are as follows:




Warren
      B.
      Kanders, 50, has served as one of our directors since June 2002 and as Executive
      Chairman of our Board of Directors since December 2002. Since May 2007,
      Mr. Kanders has served as a director of Highlands Acquisition Corp., a
      publicly-held blank check company formed with a focus on acquiring a business
      in
      the healthcare industry. Since August 2007, Mr. Kanders has served as the
      Chairman of the Board and Chief Executive Officer of Kanders Acquisition
      Company, Inc., a blank check company formed with a focus on acquiring a business
      in no particular industry or geography. Mr. Kanders has served as the
      President of Kanders & Company since 1990. Prior to the completion of the
      acquisition of Armor Holdings, Inc., formerly a New York Stock Exchange-listed
      company and a manufacturer and supplier of military vehicles, armed vehicles
      and
      safety and survivability products and systems to the aerospace & defense,
      public safety, homeland security and commercial markets, by BAE Systems plc
      on
      July 31, 2007, he served as the Chairman of the Board of Armor
      Holdings, Inc. since January 1996 and as its Chief Executive Officer since
      April 2003. From April 2004 until October 2006, Mr. Kanders
      served as the Executive Chairman, and since October 2006, has served as the
      Non-Executive Chairman of the Board of Stamford Industrial Group, Inc., a
      publicly-held company that, through its subsidiary, Concord Steel, is a leading
      independent manufacturer of steel counterweights. Since November 2004,
      Mr. Kanders has served as the Chairman of the Board of Directors of Langer,
      Inc., a Nasdaq-listed provider of orthotic and skin-care products. From
      October 1992 to May 1996, Mr. Kanders served as Founder and Vice
      Chairman of the Board of Benson Eyecare Corporation, a distributor of eye care
      products and services.




Philip
      A.
      Baratelli, 40, has served as our Chief Financial Officer, Secretary and
      Treasurer since February 2007. Since
      February 2007, Mr. Baratelli has also served as Chief Financial
      Officer for Kanders & Company, Inc., a private investment firm principally
      owned and controlled by Mr. Warren B. Kanders that makes investments in and
      provides consulting services to public and private entities. Since
      April 2007, Mr. Baratelli has served as the Chief Financial Officer
      for Highlands Acquisition Corp., a publicly-held blank
      check company formed with a focus on acquiring a business in the healthcare
      industry. Since
      August 2007, Mr. Baratelli has served as the Chief
      Financial Officer of Kanders Acquisition Company, Inc. a blank check
      company formed with a focus on acquiring a business in no particular industry
      or
      geography. From
      June 2001 to February 2007, Mr. Baratelli was the Corporate
      Controller and Treasurer of Armor Holdings, Inc., a manufacturer and supplier
      of
      military vehicles, armored vehicles and safety and survivability products and
      systems serving aerospace & defense, public safety, homeland security and
      commercial markets. From February 1998 to February 2001,
      Mr. Baratelli was employed by PricewaterhouseCoopers LLP in various
      positions ranging from Associate to Senior Associate. From 1991 to 1997,
      Mr. Baratelli worked for Barnett Banks, Inc. in various finance and credit
      analysis positions. Mr.
      Baratelli received a Bachelor of Science in finance from Florida State
      University in 1989 and a Bachelor of Business Administration in accounting
      from
      the University of North Florida in 1995. Mr. Baratelli is a Certified Public
      Accountant.




**AVAILABLE
      INFORMATION**





Our
      Internet address is www.claruscorp.com. We make available free of charge on
      or
      through our Internet website our annual reports on Form 10-K, quarterly reports
      on Form 10-Q, current reports on Form 8-K, and amendments to those reports,
      and
      the proxy statement for our annual meeting of stockholders as soon as reasonably
      practicable after we electronically file such material with, or furnish it
      to,
      the Securities and Exchange Commission. Forms 3, 4 and 5 filed with respect
      to
      our equity securities under section 16(a) of the Securities Exchange Act of
      1934, as amended, are also available on our Internet website. All of the
      foregoing materials are located at the ‘‘SEC Filings’’ tab. The information
      found on our website shall not be deemed incorporated by reference by any
      general statement incorporating by reference this report into any filing under
      the Securities Act of 1933, as amended, or under the Securities Exchange Act
      of
      1934, as amended, and shall not otherwise be deemed filed under such
      Acts.




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We
      have
      adopted a Code of Ethics for Senior Executive Officers and Senior Financial
      Officers, a Code of Business Conduct and Ethics for directors, officers,
      employees, agents, representatives, subsidiaries and affiliates, an Audit
      Committee Charter, Complaint Procedures for Accounting and Auditing Matters,
      a
      Compensation Committee Charter, a Nominating/Corporate Governance Committee
      Charter, and Corporate Governance Guidelines, all of which are available at
      our
      Internet website at the tab ‘‘Investor Relations.’’ We will provide to any
      person without charge, upon request, a copy of the foregoing materials. We
      intend to disclose future amendments to the provisions of the foregoing
      documents, policies and guidelines and waivers therefrom, if any, on our
      Internet website and/or through the filing of Current Report on Form 8-K with
      the Securities and Exchange Commission.





Materials
      we file with the Securities and Exchange Commission may be read and copied
      at
      the Securities and Exchange Commission’s Public Reference Room at 100 F Street,
      N.E., Washington, D.C. 20549. You may obtain information on the operation of
      the
      Securities and Exchange Commission’s Public Reference Room by calling the
      Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
      Exchange Commission also maintains an Internet website that contains reports,
      proxy and information statements, and other information regarding issuers that
      file electronically with the Securities and Exchange Commission at www.sec.gov.
      In addition, you may request a copy of any such materials, without charge,
      by
      submitting a written request to: Clarus Corporation, c/o the Secretary, One
      Landmark Square, 22nd Floor, Stamford, Connecticut 06901.





Information
      on our Internet website does not constitute a part of this Annual Report on
      Form
      10-K.





**ITEM
      1A. RISK FACTORS**





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. As a result of the risk factors set forth
      below, actual results could differ materially from those projected in any
      forward-looking statements. Additional risks and uncertainties not presently
      known to us, or that we currently consider to be immaterial, may also impact
      our
      business, operating results, liquidity and financial condition. If any of the
      following risks occur, our business, operating results, liquidity and financial
      condition could be materially adversely affected. In such case, the trading
      price of our securities could decline, and you may lose all or part of your
      investment.




**RISKS
      RELATED TO CLARUS CORPORATION**





**WE
      CONTINUE TO INCUR OPERATING LOSSES.**





As
      a
      result of the sale of substantially all of our electronic commerce business,
      we
      will no longer generate revenue previously associated with the products and
      contracts comprising our electronic commerce business. We are not profitable
      and
      have incurred an accumulated deficit of $282.1 million from our inception
      through December 31, 2007. 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, cash equivalents and marketable securities
      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, cash equivalents and marketable securities 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 operations and free cash flow, experienced management
      teams, and operations in markets offering significant growth opportunities.
      In
      identifying, evaluating and selecting a target business for a potential
      acquisition, we expect to encounter intense competition from other entities
      having a business objective similar to ours including other blank check
      companies, private equity groups, venture capital funds, leveraged buyout funds,
      and operating businesses seeking strategic acquisitions. Many of these entities
      are well-established and have extensive experience identifying and effecting
      business combinations directly or through affiliates. Moreover, many of these
      competitors possess greater financial, technical, human and other resources
      than
      us which will give them a competitive advantage in pursuing the acquisition
      of
      certain target businesses. We may not be able to successfully identify such
      a
      business, obtain financing for such acquisition, or successfully operate any
      business that we identify. We have been working without success since December
      2002 to identify a suitable merger partner and consummate an acquisition.
      Failure to redeploy successfully will result in our inability to become
      profitable.




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





**OUR
      EFFORTS TO REDEPLOY OUR ASSETS COULD BE MATERIALLY ADVERSELY AFFECTED BY THE
      LOSS OF KEY MANAGEMENT OR THE DIVERSION OF OUR MANAGEMENT TO OUTSIDE
      INTERESTS.**





Our
      ability to successfully effect a redeployment of our assets and successfully
      run
      the Company following such a transaction is dependent upon the efforts of key
      management, including Warren B. Kanders, our Executive Chairman of the Board
      of
      the Directors. The loss of his services, or the inability of the Company to
      continue to retain his services on mutually satisfactory terms, could have
      a
      detrimental effect on the market price of our common stock and our future
      business, financial condition and results of operations.





Our
      executive employees devote as much of their time as is necessary to the affairs
      of the Company and also serve in various capacities with other public and
      private entities, including blank check companies and not-for-profit entities
      affiliated with Kanders & Company. While management believes these
      non-exclusive arrangements benefit the Company by availing itself of certain
      of
      the resources of Kanders & Company, the other business interests of these
      individuals could limit their ability to devote time to our affairs. It is
      noted, however, that the obligations of our executive management team to present
      business opportunities to the other business entities they are affiliated with
      is first subject to any pre-existing fiduciary or other obligations our
      executive management team may owe to Clarus.





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





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





**SINCE
      WE HAVE NOT YET SELECTED A PARTICULAR INDUSTRY OR TARGET BUSINESS WITH WHICH
      TO
      REDEPLOY OUR ASSETS, YOU WILL BE UNABLE TO CURRENTLY ASCERTAIN THE MERITS OR
      RISKS OF THE INDUSTRY OR BUSINESS IN WHICH WE MAY ULTIMATELY OPERATE.**




Because
      we may consummate a merger or acquisition with a company in any industry and
      are
      not limited to any particular type of business there is no current basis for
      you
      to evaluate the possible merits or risks of the particular industry in which
      we
      may ultimately operate or the target business which we may ultimately acquire.
      If we complete a merger or acquisition with an entity in an industry
      characterized by a high level of risk, we may be affected by the currently
      unascertainable risks of that industry. Although our management will endeavor
      to
      evaluate the risks inherent in a particular industry or target business, we
      cannot assure you that we will properly ascertain or assess all of the
      significant risk factors. Even if we properly assess those risks, some of them
      may be outside of our control or ability to affect. We also cannot assure you
      that an investment in our securities will not ultimately prove to be less
      favorable to our stockholders than a direct investment, if an opportunity were
      available, in a target business.





**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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          5 -
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**OUR
      ABILITY TO BE SUCCESSFUL AFTER A REDEPLOYMENT OF OUR ASSETS MAY BE DEPENDENT
      UPON THE CONTINUED EFFORTS OF OUR MANAGEMENT TEAM AND KEY PERSONNEL WHO MAY
      JOIN
      US FOLLOWING A REDEPLOYMENT OF OUR ASSETS.**




The
      role
      of our management team and key personnel from the target business we acquire
      cannot presently be ascertained. While we intend to closely scrutinize any
      individuals we engage after a redeployment of our assets, we cannot assure
      you
      that our assessment of these individuals will prove to be correct. These
      individuals may be unfamiliar with the requirements of operating a public
      company which could cause us to have to expend time and resources helping them
      become familiar with such requirements. This could be expensive and
      time-consuming and could lead to various regulatory issues which may adversely
      affect our operations.





**AS
      A RESULT OF AN ASSET REDEPLOYMENT WE MAY BE REQUIRED TO SUBSEQUENTLY TAKE
      WRITE-DOWNS OR WRITE-OFFS, RESTRUCTURING, AND IMPAIRMENT OR OTHER CHARGES THAT
      COULD HAVE A SIGNIFICANT NEGATIVE EFFECT ON OUR FINANCIAL CONDITION, RESULTS
      OF
      OPERATIONS AND OUR STOCK PRICE, WHICH COULD CAUSE YOU TO LOSE SOME OR ALL OF
      YOUR INVESTMENT.**




We
      must
      conduct a due diligence investigation of the target businesses we intend to
      acquire. Intensive due diligence is time consuming and expensive due to the
      operations, accounting, finance and legal professionals who must be involved
      in
      the due diligence process. Even if we conduct extensive due diligence on a
      target business with which we combine, we cannot assure you that this diligence
      will reveal all material issues that may affect a particular target business,
      or
      that factors outside the control of the target business and outside of our
      control will not later arise. If our diligence fails to identify issues specific
      to a target business, industry or the environment in which the target business
      operates, we may be forced to later write-down or write-off assets, restructure
      our operations, or incur impairment or other charges that could result in our
      reporting losses. Even though these charges may be non-cash items and not have
      an immediate impact on our liquidity, the fact that we report charges of this
      nature could contribute to negative market perceptions about us or our common
      stock. In addition, charges of this nature may cause us to violate net worth
      or
      other covenants to which we may be subject as a result of assuming pre-existing
      debt held by a target business or by virtue of our obtaining post-combination
      debt financing.





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





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





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





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




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




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




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          6 -
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Additionally,
      if we underwent an ownership change, the NOL carryforward limitations would
      impose an annual limit on the amount of the taxable income that may be offset
      by
      our NOL generated prior to the ownership change. If an ownership change were
      to
      occur, we may be unable to use a significant portion of our NOL to offset
      taxable income. In general, an ownership change occurs when, as of any testing
      date, the aggregate of the increase in percentage points of the total amount
      of
      a corporation's stock owned by "5-percent stockholders" within the meaning
      of
      the NOL carryforward limitations whose percentage ownership of the stock has
      increased as of such date over the lowest percentage of the stock owned by
      each
      such "5-percent stockholder" at any time during the three-year period preceding
      such date is more than 50 percentage points. In general, persons who own 5%
      or
      more of a corporation's stock are "5-percent stockholders," and all other
      persons who own less than 5% of a corporation's stock are treated together
      as a
      public group.





The
      amount of NOL and tax credit carryforwards that we have claimed has not been
      audited or otherwise validated by the U.S. Internal Revenue Service (the “IRS”).
      The IRS could challenge our calculation of the amount of our NOL or our
      determinations as to when a prior change in ownership occurred and other
      provisions of the Internal Revenue Code may limit our ability to carry forward
      our NOL to offset taxable income in future years. If the IRS was successful
      with
      respect to any such challenge, the potential tax benefit of the NOL
      carryforwards to us could be substantially reduced.





**CERTAIN
      PROTECTIVE MEASURES 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% stockholder." Additionally, on February 7, 2008, our Board of Directors
      approved a Rights Agreement which is designed to assist in limiting the number
      of 5% or more owners and thus reduce the risk of a possible “change of
      ownership” under Section 382 of the Internal Revenue Code of 1986 as amended.





Although
      the transfer restrictions imposed on our capital stock and the Rights Agreement
      are intended to reduce the likelihood of an impermissible ownership change,
      there is no guarantee that such protective measures would prevent all transfers
      that would result in an impermissible ownership change. These protective
      measures 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 protective
      measures implemented by us to preserve our NOL will have the effect of
      restricting a stockholder's ability to acquire our common stock, the liquidity
      and market value of our common stock might suffer.




**IF
      WE EFFECT AN ACQUISITION OR MERGER WITH A COMPANY LOCATED OUTSIDE OF THE UNITED
      STATES, WE WOULD BE SUBJECT TO A VARIETY OF ADDITIONAL RISKS THAT MAY NEGATIVELY
      IMPACT OUR OPERATIONS.**




We
      may
      effect an acquisition or merger with a company located outside of the United
      States. If we did, we would be subject to any special considerations or risks
      associated with companies operating in the target business’ home jurisdiction,
      including any of the following:




•
            rules
                and regulations or currency conversion or corporate withholding taxes
                on
                individuals;




•
            tariffs
                and trade barriers;




•
            regulations
                related to customs and import/export matters;




•
            longer
                payment cycles;




•
            tax
                issues, such as tax law changes and variations in tax laws as compared
                to
                the United States;




•
            currency
                fluctuations and exchange controls;




•
            challenges
                in collecting accounts receivable;




•
            cultural
                and language differences;




•
            employment
                regulations;




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          7 -
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•
            crime,
                strikes, riots, civil disturbances, terrorist attacks and wars; and




•
            deterioration
                of political relations with the United States.****




We
      cannot
      assure you that we would be able to adequately address these additional risks.
      If we were unable to do so, our operations might suffer.




**IF
      WE EFFECT AN ACQUISITION OR MERGER WITH A COMPANY LOCATED OUTSIDE OF THE UNITED
      STATES, THE LAWS APPLICABLE TO SUCH COMPANY WILL LIKELY GOVERN ALL OF OUR
      MATERIAL AGREEMENTS AND WE MAY NOT BE ABLE TO ENFORCE OUR LEGAL
      RIGHTS.**




If
      we
      effect an acquisition or merger with a company located outside of the United
      States, the laws of the country in which such company operates will govern
      almost all of the material agreements relating to its operations. We cannot
      assure you that the target business will be able to enforce any of its material
      agreements or that remedies will be available in this new jurisdiction. The
      system of laws and the enforcement of existing laws in such jurisdiction may
      not
      be as certain in implementation and interpretation as in the United States.
      The
      inability to enforce or obtain a remedy under any of our future agreements
      could
      result in a significant loss of business, business opportunities or capital.
      Additionally, if we acquire a company located outside of the United States,
      it
      is likely that substantially all of our assets would be located outside of
      the
      United States and some of our officers and directors might reside outside of
      the
      United States. As a result, it may not be possible for investors in the United
      States to enforce their legal rights, to effect service of process upon our
      directors or officers or to enforce judgments of United States courts predicated
      upon civil liabilities and criminal penalties of our directors and officers
      under Federal securities laws. ****




**COMPLIANCE
      WITH THE SARBANES-OXLEY ACT OF 2002 WILL REQUIRE SUBSTANTIAL FINANCIAL AND
      MANAGEMENT RESOURCES AND MAY INCREASE THE TIME AND COSTS OF COMPLETING AN
      ACQUISITION.**




Section
      404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and report
      on
      our system of internal controls and requires that we have such system of
      internal controls audited. If we fail to maintain the adequacy of our internal
      controls, we could be subject to regulatory scrutiny, civil or criminal
      penalties and/or stockholder litigation. Any inability to provide reliable
      financial reports could harm our business. Section 404 of the Sarbanes-Oxley
      Act
      also requires that our independent registered public accounting firm report
      on
      management’s evaluation of our system of internal controls. An acquisition
      target may not be in compliance with the provisions of the Sarbanes-Oxley Act
      regarding adequacy of their internal controls. The development of the internal
      controls of any such entity to achieve compliance with the Sarbanes-Oxley Act
      may increase the time and costs necessary to complete any such acquisition.
      Furthermore, any failure to implement required new or improved controls, or
      difficulties encountered in the implementation of adequate controls over our
      financial processes and reporting in the future, could harm our operating
      results or cause us to fail to meet our reporting obligations. Inferior internal
      controls could also cause investors to lose confidence in our reported financial
      information, which could have a negative effect on the trading price of our
      stock.




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




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




-
          8 -
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**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 Current
      Report on Form 8-K filed with the Securities and Exchange Commission on October
      4, 2004. The Company's common stock is now quoted on the OTC Pink Sheets
      Electronic Quotation Service under the symbol "CLRS.PK." As a result of the
      delisting, stockholders may find it more difficult to dispose of, or to obtain
      accurate quotations as to the price of, our common stock, the liquidity of
      our
      stock may be reduced, making it difficult for a stockholder to buy or sell
      our
      stock at competitive market prices or at all, we may lose support from
      institutional investors and/or market makers that currently buy and sell our
      stock and the price of our common stock could decline.





**WE
      ARE VULNERABLE TO VOLATILE MARKET CONDITIONS.**





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





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





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





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





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





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





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




**ITEM
      1B. UNRESOLVED STAFF COMMENTS**





None




-
          9 -
 *Table
          of Contents*




**ITEM
      2. PROPERTIES**





Our
      corporate headquarters is currently located in Stamford, Connecticut where
      we
      lease approximately 8,600 square feet for $25,156 per month, pursuant to a
      lease, which expires on March 31, 2019.




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





**ITEM
      3. LEGAL PROCEEDINGS**





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





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





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





No
      matters were submitted to a vote of security holders, through the solicitation
      of proxies or otherwise, during the quarter ended December 31, 2007.


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          10 -
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          of Contents*


**PART
      II**





**ITEM
      5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
      ISSUER PURCHASES OF EQUITY SECURITIES**





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 Current Report on Form 8-K filed with
      the Securities and Exchange Commission on October 4, 2004. The Company's common
      stock is now quoted on the OTC Pink Sheets Electronic Quotation Service under
      the symbol "CLRS.PK".





The
      following table sets forth, for the indicated periods, the range of high and
      low
      bids for our common stock as reported by the OTC Pink Sheets Electronic
      Quotation Service. The quotes listed below 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
              
              LowCalendar
                  Year 2008First
                  Quarter (through March 3, 2008)
              
              $
              6.40
              
              $
              5.60Year
                  ended December 31, 2007First
                  Quarter
              
              $
              8.20
              
              $
              7.05Second
                  Quarter
              
              $
              9.80
              
              $
              8.05Third
                  Quarter
              
              $
              9.85
              
              $
              6.75Fourth
                  Quarter
              
              $
              7.30
              
              $
              5.73Year
                  ended December 31, 2006First
                  Quarter
              
              $
              8.45
              
              $
              6.90Second
                  Quarter
              
              $
              7.19
              
              $
              6.30Third
                  Quarter
              
              $
              7.34
              
              $
              6.40Fourth
                  Quarter
              
              $
              7.50
              
              $
              6.70


**PERFORMANCE
      GRAPH**





Set
      forth
      below is a line graph comparing the yearly percentage change in the cumulative
      total stockholder return on our common stock to the cumulative total return
      of
      the NASDAQ National Market Composite and The Russell 2000 Index for the period
      commencing on December 31, 2002 and ending on December 31, 2007 (the “Measuring
      Period”). The graph assumes that the value of the investment in our common stock
      and each index was $100 on December 31, 2002. The yearly change in cumulative
      total return is measured by dividing (1) the sum of (i) the cumulative amount
      of
      dividends for the Measuring Period, assuming dividend reinvestment, and (ii)
      the
      change in share price between the beginning and end of the Measuring Period,
      by
      (2) the share price at the beginning of the Measuring Period.





The
      Company considered providing a comparison consisting of a group of peer
      companies in an industry or line-of-business similar to us, but could not
      reasonably identify a group of comparable peer companies that the Company
      believed would provide our stockholders with a meaningful comparison. The stock
      price performance on the following graph is not necessarily indicative of future
      stock price performance.




-
          11 -
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          of Contents*




**COMPARISON
      OF CUMULATIVE TOTAL RETURN***


**AMONG
      CLARUS, THE NASDAQ NATIONAL MARKET COMPOSITE AND**


**THE
      RUSSELL 2000 INDEX**


**12/31/02**
              
              **12/31/03**
              
              **12/31/04**
              
              **12/31/05**
              
              **12/31/06**
              
              **12/31/07****CLARUS
                  CORPORATION**
              
              **$100.00**
              
              **$129.89**
              
              **$160.14**
              
              **$148.58**
              
              **$125.44**
              
              **$104.98****NASDAQ
                  NATIONAL MARKET COMPOSITE**
              
              **$100.00**
              
              **$150.01**
              
              **$162.89**
              
              **$165.14**
              
              **$180.85**
              
              **$135.99****THE
                  RUSSELL 2000 INDEX**
              
              **$100.00**
              
              **$145.37**
              
              **$170.08**
              
              **$175.73**
              
              **$205.61**
              
              **$199.96**







***
      $100 INVESTED ON 12/31/02 IN STOCK OR INDEX -** **INCLUDING
      REINVESTMENT OF DIVIDENDS.**




-
          12 -
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          of Contents*




**STOCKHOLDERS**





On
      March
      3, 2008, the last reported sales price for our common stock was $6.40 per share.
      As of March 3, 2008, there were 141 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.




**RECENT
      SALES OF UNREGISTERED SECURITIES**





None.





**RECENT
      PURCHASES OF OUR REGISTERED EQUITY SECURITIES**





We
      did
      not purchase any shares of our common stock during the Company’s fourth quarter
      of 2007.





**SECURITIES
      AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS**





The
      following table sets forth certain information regarding our equity plans as
      of
      December 31, 2007:





Plan
                Category
            
            (A)
              Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            
            (B)
              Weighted-average
                exercise price of outstanding options, warrants and rights
            
            (C)
              Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (A))Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))Equity
                compensation plans approved by security holders (1)
            
            
            1,248,750
            
            $
            5.98
            
            
            3,771,847Equity
                compensation plans not approved by security holders (2) (3)
                (4)
            
            
            1,100,000
            
            $
            7.83
            
            
            —Total
            
            
            2,348,750
            
            $
            6.84
            
            
            3,771,847





(1)
            Consists
                of stock options and restricted stock awards issued under the Amended
                and
                Restated Stock Incentive Plan of Clarus Corporation (the “2000 Plan”).
                Also consists of stock options issued and issuable under the 2005
                Clarus
                Corporation Stock Incentive Plan (the “2005 Plan”).





(2)
            Includes
                options granted to the Company’s Executive Chairman, Warren B. Kanders to
                purchase 400,000 shares of common stock, having an exercise price
                of $7.50
                per share.





(3)
            Includes
                options granted to the Company’s Executive Chairman, Warren B. Kanders to
                purchase 400,000 shares of common stock, having an exercise price
                of
                $10.00 per share.





(4)
            Includes
                300,000 shares of restricted stock granted to the Company’s Executive
                Chairman, Warren B. Kanders, having voting, dividend, distribution
                and
                other rights, which shall vest and become nonforfeitable if Mr. Kanders
                is
                an employee and/or a director of the Company or a subsidiary or affiliate
                of the Company on the earlier of (i) the date the closing price of
                the
                Company’s common stock equals or exceeds $15.00 per share for each of the
                trading days during a ninety consecutive day period, or (ii) April
                11,
                2013, subject to acceleration in certain
                circumstances.


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          13 -
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**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.




Years
                ended December 31,2007
            
            2006
            
            2005
            
            2004
            
            2003(in
                thousands, except per share data)Statement
                of Operations Data:Revenues:License
                fees
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            1,106
            
            $
            —Service
                fees
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            130Total
                Revenues
            
            
            —
            
            
            —
            
            
            —
            
            
            1,106
            
            
            130Operating
                expenses:General
                and administrative
            
            
            3,767
            
            
            3,530
            
            
            3,504
            
            
            3,395
            
            
            4,986Provision
                for doubtful accounts
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            18Transaction
                expense
            
            
            (13
            )
            
            1,431
            
            
            (59
            )
            
            1,636
            
            
            —Loss
                on sale or disposal of assets
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            36Depreciation
            
            
            359
            
            
            346
            
            
            334
            
            
            186
            
            
            762Total
                Operating Expenses
            
            
            4,113
            
            
            5,307
            
            
            3,779
            
            
            5,217
            
            
            5,802Operating
                Loss
            
            
            (4,113
            )
            
            (5,307
            )
            
            (3,779
            )
            
            (4,111
            )
            
            (5,672
            )Other
                income (expense)
            
            
            (6
            )
            
            —
            
            
            (2
            )
            
            19
            
            
            169Interest
                income
            
            
            4,239
            
            
            4,016
            
            
            2,490
            
            
            1,203
            
            
            1,238Interest
                expense
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (66
            )Net
                Income (Loss) Before Income Tax
            
            $
            120
            
            $
            (1,291
            )
            $
            (1,291
            )
            $
            (2,889
            )
            $
            (4,331
            )Income
                tax
            
            
            3
            
            
            —
            
            
            —
            
            
            —
            
            
            —Net
                Income (Loss)
            
            $
            117
            
            $
            (1,291
            )
            $
            (1,291
            )
            $
            (2,889
            )
            $
            (4,331
            )Income
                (Loss) Per ShareBasic
            
            $
            0.01
            
            $
            (0.08
            )
            $
            (0.08
            )
            $
            (0.18
            )
            $
            (0.27
            )Diluted
            
            $
            0.01
            
            $
            (0.08
            )
            $
            (0.08
            )
            $
            (0.18
            )
            $
            (0.27
            )Weighted
                Average Common Shares OutstandingBasic
            
            
            16,658
            
            
            16,613
            
            
            16,329
            
            
            16,092
            
            
            15,905Diluted
            
            
            17,051
            
            
            16,613
            
            
            16,329
            
            
            16,092
            
            
            15,905





Balance
                Sheet Data:
            
            As
                of December 31,2007
            
            2006
            
            2005
            
            2004
            
            2003Cash
                and cash equivalents
            
            $
            41,886
            
            $
            1,731
            
            $
            23,270
            
            $
            48,377
            
            $
            15,045Marketable
                securities
            
            $
            45,223
            
            $
            82,634
            
            $
            61,601
            
            $
            35,119
            
            $
            73,685Total
                assets
            
            $
            88,680
            
            $
            86,673
            
            $
            88,278
            
            $
            86,437
            
            $
            89,445Total
                stockholders' equity
            
            $
            87,719
            
            $
            85,716
            
            $
            86,609
            
            $
            84,854
            
            $
            86,819






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            14 -
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            of Contents*




**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, cash equivalents and marketable securities 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 "Risk Factors" of Part I, Item 1A of this Report and described
      in
      "Management's Discussion and Analysis of Financial Condition and Results of
      Operations" of Part II of this Report. We cannot assure you that we will be
      successful in our efforts to redeploy our assets or that any such redeployment
      will result in Clarus’ future profitability. Our failure to redeploy our assets
      could have a material adverse effect on the market price of our common stock
      and
      our business, financial condition and results of operations.




**OVERVIEW**





**AS
      PART OF OUR PREVIOUSLY ANNOUNCED STRATEGY TO LIMIT OPERATING LOSSES AND ENABLE
      THE COMPANY TO REDEPLOY ITS ASSETS AND USE ITS SUBSTANTIAL CASH, CASH
      EQUIVALENTS AND MARKETABLE SECURITIES TO ENHANCE STOCKHOLDER VALUE, ON DECEMBER
      6, 2002, WE SOLD SUBSTANTIALLY ALL OF OUR ELECTRONIC COMMERCE BUSINESS, WHICH
      REPRESENTED SUBSTANTIALLY ALL OF OUR REVENUE GENERATING OPERATIONS AND RELATED
      ASSETS. THE INFORMATION APPEARING BELOW, WHICH RELATES TO PRIOR PERIODS, IS
      THEREFORE NOT INDICATIVE OF THE RESULTS THAT MAY BE EXPECTED FOR ANY SUBSEQUENT
      PERIODS. RESULTS FOR THE YEAR ENDED DECEMBER 31, 2007 AND ANY FUTURE PERIODS
      PRIOR TO A REDEPLOYMENT OF OUR ASSETS ARE EXPECTED PRIMARILY TO REFLECT GENERAL
      AND ADMINISTRATIVE EXPENSES AND TRANSACTION EXPENSES ASSOCIATED WITH THE
      CONTINUING ADMINISTRATION OF THE COMPANY AND ITS EFFORTS TO REDEPLOY ITS ASSETS.** **SUCCESSFUL
      REDEPLOYMENT OF OUR ASSETS IS DEPENDENT UPON THE EFFORTS OF OUR EXECUTIVE
      MANAGEMENT TEAM, IN PARTICULAR WARREN B. KANDERS, OUR EXECUTIVE CHAIRMAN OF
      THE
      BOARD OF DIRECTORS. WHILE MR. KANDERS RESIGNED EFFECTIVE JULY 31, 2007 AS
      CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF ARMOR HOLDINGS, INC. IN CONNECTION
      WITH
      ITS SALE, HE AND OUR OTHER EMPLOYEES ALSO SERVE IN VARIOUS CAPACITIES WITH
      OTHER
      PUBLIC AND PRIVATE ENTITIES, INCLUDING BLANK CHECK COMPANIES AND NOT-FOR-PROFIT
      ENTITIES. AS PREVIOUSLY DISCLOSED, OUR EXECUTIVE EMPLOYEES, INCLUDING MR.
      KANDERS DEVOTE AS MUCH OF THEIR TIME AS IS NECESSARY TO THE AFFAIRS OF THE
      COMPANY.**





**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, 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.




-
          15 -
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          of Contents*





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





-
            The
                Company accounts for its marketable securities under the provisions
                of
                Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting
                for Certain Investments in Debt and Equity Securities". Pursuant
                to the
                provisions of SFAS No. 115, the Company has classified its marketable
                securities as available-for-sale. Available-for-sale securities have
                been
                recorded at fair valueand
                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 accounts for income taxes pursuant to Statement of Financial
                Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
                109").
                Under the asset and liability method specified thereunder, deferred
                taxes
                are determined based on the difference between the financial reporting
                and
                tax bases of assets and liabilities. Deferred tax liabilities are
                offset
                by deferred tax assets relating to net operating loss carryforwards,
                tax
                credit carryforwards and deductible temporary differences. Recognition
                of
                deferred tax assets is based on management’s belief that it is more likely
                than not that the tax benefit associated with temporary differences
                and
                operating and capital loss carryforwards will be utilized. A valuation
                allowance is recorded for those deferred tax assets for which it
                is more
                likely than not that the realization will not
                occur.





-
            On
                January 1, 2006, the Company adopted Statement of Financial Accounting
                Standards No. 123 (revised 2004), “Share-Based Payments” (“SFAS 123R”),
                requiring recognition of expense related to the fair value of stock
                option
                awards. The Company recognizes the cost of the share-based awards
                on a
                straight-line basis over the requisite service period of the award.
                Prior
                to January 1, 2006, the Company accounted for stock option plans
                under the
                recognition and measurement provisions of Accounting Principles Board
                Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and
                related interpretations, as permitted by Statement of Financial Accounting
                Standard No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”).
                Under SFAS 123R, compensation cost recognized during 2007 and 2006
                would
                include: (a) compensation cost for all share-based payments granted
                prior
                to, but not yet vested as of January 1, 2006, based on the grant
                date fair
                value estimated in accordance with the original provisions of SFAS
                123,
                and (b) compensation cost for all share-based payments granted subsequent
                to January 1, 2006, based on the grant-date fair value estimated
                in
                accordance with the provisions of SFAS 123R.





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




**SOURCES
      OF REVENUE**





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





Until
      a
      redeployment of the Company's assets occurs, the Company's principal income
      will
      consist of interest, dividend and other investment income from cash, cash
      equivalents and marketable securities, which is reported as interest income
      in
      the Company's statement of operations.





**OPERATING
      EXPENSES**





General
      and administrative expense include salaries and employee benefits, rent,
      insurance, legal, accounting and other professional fees, state and local
      non-income based taxes, board of director fees as well as public company
      expenses such as transfer agent and listing fees and expenses.





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





**RESTRUCTURING
      AND RELATED COSTS**





During
      the years ended December 31, 2002 and 2001, the Company's management approved
      restructuring plans to reorganize and reduce operating costs. Restructuring
      and
      related charges of $12.8 million were expensed in the years ended December
      31,
      2002 and 2001 in an attempt to align the Company's cost structure with projected
      revenue.




-
          16 -
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During
      the year ended December 31, 2003, the Company determined that actual
      restructuring and related charges were in excess of the amounts provided for
      in
      the years ended December 31, 2002 and 2001 and recorded additional restructuring
      charges of $250,000. This amount was charged to general and administrative
      costs
      during the year ended December 31, 2003. The charges for the year ended December
      31, 2003 were comprised of $223,000 for employee separation costs and $27,000
      for facility closure and consolidation costs.





During
      the year ended December 31, 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.
      Expenditures for the year ended December 31, 2004 totaled $190,000 consisting
      of
      $125,000 for employee separation costs and $65,000 for facility closing
      costs.





During
      the years ended December 31, 2006 and 2005, expenditures for facility closing
      costs totaled $17,000 and $56,000 respectively. As of December 31, 2006 and
      after, the balance for restructuring and related costs was zero.





**COMPARISON
      OF RESULTS OF OPERATIONS BETWEEN THE YEARS ENDED DECEMBER 31, 2007 AND 2006**





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 cash, cash equivalents and marketable securities 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 for the years ended December 31, 2007 and 2006 were zero.





**GENERAL
      AND ADMINISTRATIVE EXPENSE**





General
      and administrative expenses increased $237,000 or 7%, to $3.8 million during
      the
      year ended December 31, 2007, compared to $3.5 million during the year ended
      December 31, 2006. The increase in general and administrative expense for the
      year ended December 31, 2007 compared to the year ended December 31, 2006 was
      primarily attributable to increases in employment compensation and benefits,
      non-cash stock option expense and rent offset by decreases in investment custody
      fees, accounting fees, stock administrative fees and other professional fees.
      This trend is consistent with management's stated strategy to limit our
      expenditure rate to the extent practicable, to levels of our investment income
      until the completion of an acquisition or merger. However, management believes
      we will incur a net loss in 2008 based on our current level of expenses due
      to
      lower projected investment yields on our portfolio. General and administrative
      expenses include salaries and employee benefits, rent, insurance, legal,
      accounting and other professional fees, state and local non income based taxes,
      board of director fees as well as public company expenses such as transfer
      agent
      and listing fees and expenses.




**TRANSACTION
      EXPENSE**





Transaction
      expense decreased $1.4 million or 101% to a credit balance of $13,000 during
      the
      year ended December 31, 2007, compared to $1.4 million during the same period
      in
      2006. During the year ended December 31, 2007, the Company incurred
      approximately $12,000 in expenses and credits of $25,000 related to acquisition
      negotiations and due diligence processes that terminated without the
      consummation of an acquisition. The Company incurred approximately $1.4 million
      of transaction expense during the year ended December 31, 2006, arising out
      of
      acquisition negotiations and due diligence processes that terminated without
      the
      consummation of the acquisitions.





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





**DEPRECIATION
      EXPENSE**





Depreciation
      expense increased $13,000 or 4%, to $359,000 for the year ended December 31,
      2007, compared to $346,000 in the year ended December 31, 2006. The increase
      is
      primarily attributable to the additional depreciation of office
      equipment.


-
          17 -
 *Table
          of Contents*




**OTHER
      INCOME (LOSS)**





For
      the
      year ended December 31, 2007, the Company recorded a loss of $6,000 from the
      disposal of equipment compared to the year ended December 31, 2006 when the
      Company recorded gains and losses that offset.




**INTEREST
      INCOME**





Interest
      income increased $223,000 or 6%, to $4.2 million for the year ended December
      31,
      2007 compared to $4.0 million for the year ended December 31, 2006. Interest
      income for the years ended December 31, 2007 and 2006, includes $3.6 million
      and
      $2.5 million in discount accretion and premium amortization, respectively.
      The
      increase in interest income was due primarily to higher rates of return on
      investments as well as higher levels of cash available for investment. The
      weighted average interest rate for our investments for the year ended December
      31, 2007 was 4.95% compared to 4.82% for the year ended December 31, 2006.
      The
      current earnings rate as of December 31, 2007 is 4.28%.





The
      current earnings rate as of January 31, 2008 is 3.98%. As of February 29, 2008,
      the current yield on the Company’s portfolio is 3.42% down 0.56% due to
      declining interest rates. On January 22, 2008, the Federal Reserve lowered
      the
      federal funds rate from 4.25% to 3.50%. We expect this interest rate reduction
      to negatively impact our reinvestment rate on cash, cash equivalents and
      marketable securities for the year ended December 31, 2008.




**INCOME
      TAXES**





For
      the
      year ended December 31, 2007, the Company recorded a provision of $3,000 for
      income taxes. The income tax provision is a result of the federal Alternative
      Minimum tax provisions. As a result of the operating losses incurred since
      the
      Company's inception, no provision or benefit for income taxes was recorded
      in
      the years ended December 31, 2006 or 2005.




**COMPARISON
      OF RESULTS OF OPERATIONS BETWEEN THE YEARS ENDED DECEMBER 31, 2006 AND 2005**





**REVENUES**





Total
      revenues for the years ended December 31, 2006 and 2005 were zero.





**GENERAL
      AND ADMINISTRATIVE EXPENSE**





During
      the years ended December 31, 2006 and 2005, general and administrative expenses
      remained stable at $3.5 million. This trend is consistent with management's
      stated strategy to limit our expenditure rate to the extent practicable, to
      levels of our investment income until the completion of an acquisition or
      merger. General and administrative expenses include salaries and employee
      benefits, rent, insurance, legal, accounting and other professional fees, state
      and local non income based taxes, board of director fees as well as public
      company expenses such as transfer agent and listing fees and expenses. General
      and administrative expenses for the year ended December 31, 2006, also includes
      a one-time charge of $250,000 representing the severance payment related to
      Mr.
      Nigel P. Ekern’s resignation, effective December 31, 2006.




**TRANSACTION
      EXPENSE**





The
      Company incurred approximately $1.4 million of transaction expense during the
      year ended December 31, 2006, arising out of acquisition negotiations and due
      diligence processes that terminated without the consummation of the
      acquisitions. In the first quarter of 2005, the Company incurred $92,000 in
      expenses related to an acquisition negotiation and due diligence process and
      also recognized a credit of $151,000 in expenses from the final settlement
      of
      outstanding expenses arising out of an acquisition negotiation and due diligence
      process that terminated in September 2004 without the consummation of the
      acquisition.





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





**DEPRECIATION
      EXPENSE**





Depreciation
      expense for the year ended December 31, 2006 increased slightly to $0.35 million
      compared to $0.33 million for the year ended December 31, 2005. The increase
      is
      primarily attributable to the purchase of new equipment during the
      year.




-
          18 -
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          of Contents*




**INTEREST
      INCOME**





Interest
      income increased to $4.0 million for the year ended December 31, 2006 compared
      to $2.5 million for the year ended December
      31, 2005. Interest income for the years ended December 31, 2006 and 2005,
      includes $2.5 million and $1.5 million in discount accretion and premium
      amortization, respectively. The increase in interest income was due primarily
      to
      higher rates of return on
      investments. The weighted average interest rate for our investments for the
      year
      ended December 31, 2006 was 4.82% compared to 2.99% for the year ended December
      31, 2005. The current earnings rate as of December 31, 2006 was 5.18%.





**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 the years ended December
      31, 2006 or 2005.




**LIQUIDITY
      AND CAPITAL RESOURCES**





The
      Company's cash and cash equivalents increased to $41.9 million at December
      31,
      2007 from $1.7 million at December 31, 2006 due to a shift in the composition
      of
      the investment portfolio to cash and cash equivalents. Cash and cash equivalents
      are investments with a shorter duration, less than three months, under
      accounting principles generally accepted in the United States of America.
      Marketable securities decreased to $45.2 million at December 31, 2007 from
      $82.6
      million at December 31, 2006. The overall combined increase of $2.7 million
      in
      cash, cash equivalents and marketable securities is primarily due to an increase
      in net income, proceeds from the exercise of stock options partially offset
      by
      an increase in operating expenses for the period ended December 31, 2007.





Cash
      used
      in operating activities was approximately $1.6 million during the year ended
      December 31, 2007 compared to cash used by operating activities of approximately
      $3.0 million in the year ended December 31, 2006. The decrease in cash used
      by
      operations was primarily attributable to the Company’s higher net income, a
      decrease in accrued interest receivable, prepaids and other current assets,
      offset by an increase in discount amortization, deferred rent and non-cash
      items. The trend in cash used in operating activities is consistent with
      management's stated strategy, following the sale of substantially all of the
      Company's operating assets in December 2002, to reduce our cash expenditure
      rate
      by targeting, to the extent practicable, our overhead expenses to the amount
      of
      our investment income until the completion of an acquisition or merger. While
      the Company's operating expenses, excluding transaction expenses, have remained
      relatively stable during the past three fiscal years, management currently
      believes that the Company's operating expenses, excluding potential unsuccessful
      transaction expenses, will exceed investment income during 2008, due to the
      declining interest rate environment.





Cash
      provided by investing activities was approximately $40.3 million during the
      year
      ended December 31, 2007. The cash was provided by the maturity of marketable
      securities partially offset by the purchase of marketable securities. Cash
      used
      by investing activities was approximately $18.6 million during the year ended
      December 31, 2006. The cash was used for the purchase of marketable securities
      partially offset by the maturity of marketable securities.





Cash
      provided by financing activities during 2007 was attributable to stock option
      exercises. Cash provided by financing activities was $1.4 million for the year
      ended December 31, 2007. There was no cash provided by financing activities
      during the year ended December 31, 2006. There were no stock option exercises
      during the year ended December 31, 2006.





On
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      No. 123 (revised 2004), “Share-Based Payments” (“SFAS 123R”), requiring
      recognition of expense related to the fair value of stock option awards. The
      Company recognizes the cost of the share-based awards on a straight-line basis
      over the requisite service period of the award. Prior to January 1, 2006, the
      Company accounted for stock option plans under the recognition and measurement
      provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock
      Issued to Employees” (“APB 25”) and related interpretations, as permitted by
      Statement of Financial Accounting Standard No. 123, “Accounting for Stock-Based
      Compensation” (“SFAS 123”). Under SFAS 123R, compensation cost recognized during
      2007 and 2006 includes: (a) compensation cost for all share-based payments
      granted prior to, but not yet vested as of January 1, 2006, based on the grant
      date fair value estimated in accordance with the original provisions of SFAS
      123, and (b) compensation cost for all share-based payments granted subsequent
      to January 1, 2006, based on the grant-date fair value estimated in accordance
      with the provisions of SFAS 123R. The Company recorded total non-cash stock
      compensation expense of
      approximately $268,000 and $301,000, respectively related to unvested restricted
      stock under SFAS 123R for the years ended December 31, 2007 and 2006. For the
      year ended December 31, 2007, the Company incurred compensation expense of
      approximately $176,000 related to stock options. For the year ended December
      31,
      2006 the Company incurred no compensation expense related to options under
      SFAS
      123R.




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          19 -
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On
      December 13, 2007, the Company issued 430,000 stock options, under the Company’s
      2005 Stock Incentive Plan, to directors and employees of the Company. The
      vesting period for 150,000 options issued to directors was one year and four
      years for the remaining 280,000 options issued to employees. For computing
      the
      fair value of the stock-based awards, 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:




Options
                  Vesting Period
              
              1
                  year
              
              4
                  yearsDividend
                  Yield
              
              
              0.00
              %
              
              0.00
              %Expected
                  volatility
              
              
              31.8
              %
              
              40.9
              %Risk-free
                  interest rate
              
              
              3.54
              %
              
              3.80
              %Expected
                  life
              
              
              5.75
                  years
              
              
              6.25
                  yearsWeighted
                  average fair value
              
              $
              2.22
              
              $
              2.77


Using
      these assumptions, the fair value of the stock options granted during the year
      ended December 31, 2007 was approximately $1.1 million which will be amortized
      over the vesting period of the options. There were no options granted during
      the
      year ended December 31, 2006.





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





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





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





At
      December 31, 2007, the Company has net operating loss, research and
      experimentation credit and alternative minimum tax credit carryforwards for
      U.S.
      federal income tax purposes of approximately $228.4 million, $1.3 million and
      $56,000, respectively, which expire in varying amounts beginning in the year
      2009. The Company also has a capital loss carryforward of $1.6 million which
      expires in 2008. 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 $223.1 million of the $228.4 million of U.S. net operating loss
      carryforward is currently available to offset taxable income that the Company
      may recognize in the future. Of the approximately $223.1 million of net
      operating losses available to offset taxable income, approximately $206.4
      million does not begin to expire until 2020 or later, subject to compliance
      with
      Section 382 of the Internal Revenue Code as indicated by the following schedule:


-
          20 -
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**Net
      Operating Loss And Capital Loss Carryforward Expiration
      Dates***


**(Unaudited)**


**December
      31, 2007**




Net
                Operating Loss
            
            Capital
                LossExpiration
                Dates
              December
                31
            
            Amount
              (000’s)
            
            Amount
              (000’s)2007
            
            $
            —
            
            $
            02008
            
            
            —
            
            
            1,5992009
            
            
            1,9002010
            
            
            7,4172011
            
            
            7,5202012
            
            
            5,1572020
            
            
            29,5332021
            
            
            50,4302022
            
            
            115,0002023
            
            
            5,7122024
            
            
            3,5662025
            
            
            1,7072026
            
            
            476Total
            
            
            228,418
            
            
            1,599Section
                382 limitation
            
            
            (5,363
            )
            
            —After
                Limitations
            
            $
            223,055
            
            $
            1,599*Subject
                to compliance with Section 382 of the Internal Revenue
                Code.




**CONTRACTUAL
      OBLIGATIONS**





The
      following summarizes the Company's contractual obligations and commercial
      commitments at December 31, 2007 with initial or remaining terms of one or
      more
      years, and the effect such obligations are expected to have on our liquidity
      and
      cash flow in future periods:




Contractual
                    Obligations(in
                    thousands)
                
                Payment
                    Due By PeriodLess
                    Than
                
                
                
                
                
                More
                    ThanTotal
                
                1
                    Year
                
                1-3
                    Years
                
                3-5
                    Years
                
                5
                    YearsOperating
                    Leases
                
                $
                2,425
                
                $
                420
                
                $
                877
                
                $
                1,128
                
                $
                —Total
                
                $
                2,425
                
                $
                420
                
                $
                877
                
                $
                1,128
                
                $
                —


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





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





Our
      corporate headquarters is currently located in Stamford, Connecticut where
      we
      lease approximately 8,600 square feet for $25,156 a month during 2007, pursuant
      to a lease that includes annual rent escalations, which expires on March 31,
      2019.




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          21 -
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          of Contents*





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





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





**NEW
      ACCOUNTING PRONOUNCEMENTS**





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities -
      Including an Amendment of FASB No. 115,” (“SFAS 159”). SFAS 159 allows a company
      to irrevocably elect fair value as the initial and subsequent measurement
      attribute for certain financial assets and financial liabilities on a
      contract-by-contract basis, with changes in fair value recognized in earnings.
      SFAS No. 159 is effective for fiscal years beginning after November 15, 2007
      and
      will be applied prospectively. The Company is currently evaluating the effect
      of
      the adoption of SFAS 159 will have on its consolidated financial
      statements.





Effective
      January 1, 2007, we adopted the Financial Accounting Standards Board (FASB)
      Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes - an
      interpretation of FASB Statement No. 109,” or FIN 48, which clarifies the
      accounting for uncertainty  in  income  taxes recognized  in
      an enterprise’s financial statements  in accordance  with 
SFAS  No. 109, “Accounting for Income Taxes.”
FIN  48  prescribes  a recognition  threshold 
and  measurement  attribute  for  the  financial 
statement  recognition  and measurement of a tax position taken or
      expected to be taken in a tax return.  FIN 48 also provides guidance on
      derecognition, classification, interest and
      penalties, accounting in interim periods,
      disclosure and transition.    There  was 
no  change  to  the  net  amount  of 
assets  and  liabilities recognized in the statement of financial
      condition as a result of our adoption of FIN 48. At January 1, 2007, we had
      no
      unrecognized tax benefits.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      (“SFAS”) No. 157, “Fair Value Measurements”, which establishes a framework
      for reporting fair value and expands disclosures about fair value measurements.
      SFAS No. 157 was effective for the Company on January 1, 2008, with the
      exception that the applicability of SFAS No. 157’s fair value measurement
      requirements to nonfinancial assets and liabilities that are not required or
      permitted to be recognized or disclosed at fair value on a recurring basis
      has
      been delayed by the FASB for one year. The Company does not believe that the
      requirements of SFAS No. 157 which were effective for the Company on January
      1,
      2008 will have a material impact on the Company’s consolidated financial
      statements. The Company is currently evaluating the impact of the SFAS No.
      157
      requirements which will be effective for the Company on January 1, 2009 on
      the
      Company’s results of operations and financial position.





In
      December 2007, the FASB released SFAS No. 141(R), Business Combinations (revised
      2007) (“SFAS 142(R)”), which changes many well-established business combination
      accounting practices and significantly affects how acquisition transactions
      are
      reflected in the financial statements. Additionally, SFAS 141(R) will affect
      how
      companies negotiate and structure transactions, model financial projections
      of
      acquisitions and communicate to stakeholders. SFAS 141(R) must be applied
      prospectively to business combinations for which the acquisition date is on
      or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. The Company is currently evaluating the impact the adoption
      of this statement could have on its financial condition, results of operations
      and cash flows.





In
      December 2007, the FASB released SFAS No. 160, Noncontrolling Interests in
      Consolidated Financial Statements an amendment of ARB No. 51 (“SFAS 160”), which
      establishes accounting and reporting standards for the noncontrolling interests
      in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 requires
      consolidated net income to be reported at amounts that include the amounts
      attributable to both the parent and the noncontrolling interests and requires
      disclosure, on the face of the consolidated statement of income, of the amounts
      of consolidated net income attributable to the parent and to the noncontrolling
      interest. Previously, net income attributable to the noncontrolling interest
      was
      reported as an expense or other deduction in arriving at consolidated net
      income. SFAS 160 is effective for financial statements issued for fiscal years
      beginning after December 15, 2008. The Company believes the adoption of this
      statement will not have a material impact on its consolidated financial
      statements.




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          22 -
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          of Contents*




**QUARTERLY
      DATA**





The
      following table sets forth selected quarterly data for the years ended December
      31, 2007 and 2006 (in thousands, except per share data).
      The operating results are not indicative of results for any future
      period.




2007First
              
              Second
              
              Third
              
              FourthQuarter
              
              Quarter
              
              Quarter
              
              QuarterRevenues
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —Operating
                  loss
              
              $
              (
                  874
              )
              $
              (
                  998
              )
              $
              (1,050
              )
              $
              (1,191
              )Net
                  income (loss) before taxes
              
              $
              202
              
              $
              81
              
              $
              36
              
              $
              (199
              )Net
                  income (loss)
              
              $
              202
              
              $
              81
              
              $
              36
              
              $
              (202
              )Net
                  income (loss) per share:Basic
              
              $
              0.01
              
              $
              0.00
              
              $
              0.00
              
              $
              (0.01
              )Diluted
              
              $
              0.01
              
              $
              0.00
              
              $
              0.00
              
              $
              (0.01
              )
 
 2006First
              
              Second
              
              Third
              
              FourthQuarter
              
              Quarter
              
              Quarter
              
              QuarterRevenues
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —Operating
                  loss
              
              
              (2,249
              )
              
              (1,019
              )
              
              (961
              )
              
              (1,078
              )Net
                  income (loss)
              
              $
              (1,382
              )
              $
              (24
              )
              $
              99
              
              $
              16Net
                  income (loss) per share:Basic
              
              $
              (0.08
              )
              $
              (0.00
              )
              $
              0.01
              
              $
              0.00Diluted
              
              $
              (0.08
              )
              $
              (0.00
              )
              $
              0.01
              
              $
              0.00
  **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.


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          23 -
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          of Contents*




**ITEM
      8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA**




**CLARUS
      CORPORATION AND SUBSIDIARIES**




**Index
      to Financial Statements**




PageReport
                  of Independent Registered Public Accounting Firm on
                  Consolidated Financial Statements and Internal Control Over Financial
                  Reporting
              25Consolidated
                  Balance Sheets - December 31, 2007 and
                  2006
              26Consolidated
                  Statements of Operations - Years Ended December
                  31, 2007, 2006 and 2005
              27Consolidated
                  Statements of Stockholders' Equity and
                  Comprehensive Loss - Years Ended December 31, 2007, 2006 and
                  2005
              28Consolidated
                  Statements of Cash Flows - Years Ended December
                  31, 2007, 2006 and 2005
              30Notes
                  to Consolidated Financial
                  Statements
              31


-
          24 -
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          of Contents*




**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 (the “Company”) as of December 31, 2007 and 2006, 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, 2007. We also have audited the Company’s internal
      control over financial reporting as of December 31, 2007, based on criteria
      established in Internal Control—Integrated Framework issued by the Committee of
      Sponsoring Organizations of the Treadway Commission (COSO). The Company’s
      management is responsible for these consolidated financial statements, for
      maintaining effective internal control over financial reporting, and for its
      assessment of the effectiveness of internal control over financial reporting,
      included in the accompanying Management’s Report on Internal Control Over
      Financial Reporting. Our responsibility is to express an opinion on these
      consolidated financial statements and an opinion on the Company’s internal
      control over financial reporting based on our audits.




We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement and whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audits of the consolidated financial statements included
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, and evaluating the overall financial
      statement presentation. Our audit of internal control over financial reporting
      included obtaining an understanding of internal control over financial
      reporting, assessing the risk that a material weakness exists, and testing
      and
      evaluating the design and operating effectiveness of internal control based
      on
      the assessed risk. Our audits also included performing such other procedures
      as
      we considered necessary in the circumstances. We believe that our audits provide
      a reasonable basis for our opinions.




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, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of the Company as of
      December 31, 2007 and 2006, and the results of its operations and its cash
      flows for each of the years in the three-year period ended December 31,
      2007, in conformity with accounting principles generally accepted in the United
      States of America. Also in our opinion, the Company maintained, in all material
      respects, effective internal control over financial reporting as of
      December 31, 2007, based on criteria established in Internal
      Control—Integrated Framework issued by the Committee of Sponsoring Organizations
      of the Treadway Commission (COSO).




As
      discussed in Note 1 to the consolidated financial statements, in 2006, the
      Company adopted the provisions of Financial Accounting Standards Board
      No. 123(R), Share-Based Payment, as of January 1, 2006.






*/s/
      KPMG LLP*





*Stamford,
      Connecticut*


*March
      7, 2008*




-
            25 -
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            of Contents*




**CLARUS
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


**December
      31, 2007 and 2006**


(In
      Thousands, Except Share and Per Share Amounts)




ASSETS2007
              
              2006CURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              41,886
              
              $
              1,731Marketable
                  securities
              
              
              45,223
              
              
              82,634Interest
                  receivable
              
              
              15
              
              
              402Prepaids
                  and other current assets
              
              
              175
              
              
              207Total
                  current assets
              
              
              87,299
              
              
              84,974PROPERTY
                  AND EQUIPMENT, NET
              
              
              1,381
              
              
              1,699Total
                  assets
              
              $
              88,680
              
              $
              86,673LIABILITIES
                  AND STOCKHOLDERS' EQUITYCURRENT
                  LIABILITIES:Accounts
                  payable and accrued liabilities
              
              $
              618
              
              $
              680Total
                  current liabilities
              
              
              618
              
              
              680Deferred
                  rent
              
              
              343
              
              
              277Total
                  liabilities
              
              
              961
              
              
              957COMMITMENTS
                  AND CONTINGENCIES (Note 9)STOCKHOLDERS'
                  EQUITY:Preferred
                  stock, $.0001 par value; 5,000,000 shares authorized; none
                  issued
              
              
              —
              
              
              —Common
                  stock, $.0001 par value; 100,000,000 shares authorized; 17,441,747
                  and
                  17,188,622 shares issued;and
                  17,366,747 and 17,113,622 outstanding in 2007 and 2006,
                  respectively
              
              
              2
              
              
              2Additional
                  paid-in capital
              
              
              369,827
              
              
              367,945Accumulated
                  deficit
              
              
              (282,121
              )
              
              (282,238
              )Less
                  treasury stock, 75,000 shares at cost
              
              
              (2
              )
              
              (2
              )Accumulated
                  other comprehensive gain
              
              
              13
              
              
              9Total
                  stockholders' equity
              
              
              87,719
              
              
              85,716Total
                  liabilities and stockholders' equity
              
              $
              88,680
              
              $
              86,673


See
      accompanying notes to consolidated financial statements.




-
          26 -
 *Table
          of Contents*




**CLARUS
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**Years
      Ended December 31, 2007, 2006 and 2005**


(In
      Thousands, Except Per Share Amounts)




2007
              
              2006
              
              2005REVENUES:Total
                  revenues
              
              
              —
              
              
              —
              
              
              —OPERATING
                  EXPENSES:General
                  and administrative
              
              
              3,767
              
              
              3,530
              
              
              3,504Transaction
                  expense
              
              
              (13
              )
              
              1,431
              
              
              (59
              )Depreciation
              
              
              359
              
              
              346
              
              
              334Total
                  operating expenses
              
              
              4,113
              
              
              5,307
              
              
              3,779OPERATING
                  LOSS
              
              
              (4,113
              )
              
              (5,307
              )
              
              (3,779
              )OTHER
                  EXPENSE
              
              
              (6
              )
              
              —
              
              
              (2
              )INTEREST
                  INCOME
              
              
              4,239
              
              
              4,016
              
              
              2,490NET
                  INCOME (LOSS) BEFORE TAXES
              
              
              120
              
              
              (1,291
              )
              
              (1,291
              )INCOME
                  TAXES
              
              
              3
              
              
              —
              
              
              —NET
                  INCOME (LOSS)
              
              $
              117
              
              $
              (1,291
              )
              $
              (1,291
              )NET
                  INCOME (LOSS) PER SHAREBasic
              
              $
              0.01
              
              $
              (0.08
              )
              $
              (0.08
              )Diluted
              
              $
              0.01
              
              $
              (0.08
              )
              $
              (0.08
              )WEIGHTED
                  AVERAGE COMMON SHARES OUTSTANDINGBasic
              
              
              16,658
              
              
              16,613
              
              
              16,329Diluted
              
              
              17,051
              
              
              16,613
              
              
              16,329


See
      accompanying notes to consolidated financial statements.




-
          27 -
 *Table
          of Contents*




**CLARUS
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY
      AND**


**COMPREHENSIVE
      LOSS**


**Years
      Ended December 31, 2007, 2006 and 2005**


(In
      Thousands)




AccumulatedAdditional
              
              
              
              
              
              
              
              OtherCommon
                  Stock
              
              Paid-In
              
              Accumulated
              
              Treasury
                  Stock
              
              ComprehensiveShares
              
              Amount
              
              Capital
              
              Deficit
              
              Shares
              
              Amount
              
              Income
                  (loss)BALANCES,
                  December 31, 2004
              
              
              16,735
              
              
              2
              
              
              368,385
              
              
              (279,656
              )
              
              (75
              )
              
              (2
              )
              
              (130
              )Exercise
                  of stock options
              
              
              448
              
              
              —
              
              
              2,594
              
              
              —
              
              
              —
              
              
              —
              
              
              —Issuance
                  of restricted shares, net of amortization
              
              
              4
              
              
              —
              
              
              (275
              )
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              (1,291
              )
              
              —
              
              
              —
              
              
              —Increase
                  in unrealized gain on marketable securities
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              42BALANCES,
                  December 31, 2005
              
              
              17,187
              
              
              2
              
              
              370,704
              
              
              (280,947
              )
              
              (75
              )
              
              (2
              )
              
              (88
              )Exercise
                  of stock options
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Issuance
                  of restricted shares, net of amortization
              
              
              1
              
              
              —
              
              
              301
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              (1,291
              )
              
              —
              
              
              —
              
              
              —Reclassification
                  of deferred compensation upon adoption of SFAS No. 123R as of January
                  1,
                  2006
              
              
              —
              
              
              —
              
              
              (3,060
              )
              
              —
              
              
              —
              
              
              —
              
              
              —Increase
                  in unrealized gain on marketable securities
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              97BALANCES,
                  December 31, 2006
              
              
              17,188
              
              
              2
              
              
              367,945
              
              
              (282,238
              )
              
              (75
              )
              
              (2
              )
              
              9Exercise
                  of stock options
              
              
              247
              
              
              —
              
              
              1,438
              
              
              —
              
              
              —
              
              
              —
              
              
              —Issuance
                  of restricted shares, net of amortization
              
              
              7
              
              
              —
              
              
              444
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  income
              
              
              —
              
              
              —
              
              
              —
              
              
              117
              
              
              —
              
              
              —
              
              
              —Increase
                  in unrealized gain on marketable securities
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              4BALANCES,
                  December 31, 2007
              
              
              17,442
              
              $
              2
              
              $
              369,827
              
              $
              (282,121
              )
              
              (75
              )
              $
              (2
              )
              $
              13


See
      accompanying notes to consolidated financial statements.




-
          28 -
 *Table
          of Contents*




**CLARUS
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY AND**


**COMPREHENSIVE
      LOSS (Cont.)**


**Years
      Ended December 31, 2007, 2006 and 2005**


(In
      Thousands)




TotalDeferred
              
              Stockholders'
              
              ComprehensiveCompensation
              
              Equity
              
              LossBALANCES,
                  December 31, 2004
              
              
              (3,745
              )
              
              84,854
              
              
              —Exercise
                  of stock options
              
              
              —
              
              
              2,594
              
              
              —Issuance
                  of restricted shares, net of amortization
              
              
              685
              
              
              410
              
              
              —Net
                  loss
              
              
              —
              
              
              (1,291
              )
              
              (1,291
              )Increase
                  in unrealized gain on marketable securities
              
              
              —
              
              
              42
              
              
              42Total
                  comprehensive loss
              
              
              
              
              
              
              
              $
              (1,249
              )BALANCES,
                  December 31, 2005
              
              
              (3,060
              )
              
              86,609
              
              
              —Exercise
                  of stock options
              
              
              —
              
              
              —
              
              
              —Issuance
                  of restricted shares, net of amortization
              
              
              —
              
              
              301
              
              
              —Net
                  loss
              
              
              —
              
              
              (1,291
              )
              
              (1,291
              )Reclassification
                  of deferred compensation upon the adoption of SFAS No. 123R as
                  of January
                  1, 2006
              
              
              3,060
              
              
              —
              
              
              —Increase
                  in unrealized gain on marketable securities
              
              
              —
              
              
              97
              
              
              97Total
                  comprehensive loss
              
              
              
              
              
              
              
              $
              (1,194
              )BALANCES,
                  December 31, 2006
              
              
              —
              
              
              85,716
              
              
              —Exercise
                  of stock options
              
              
              —
              
              
              1,438
              
              
              —Issuance
                  of restricted shares, net of amortization
              
              
              —
              
              
              444
              
              
              —Net
                  income
              
              
              —
              
              
              117
              
              
              117Increase
                  in unrealized gain on marketable securities
              
              
              —
              
              
              4
              
              
              4Total
                  comprehensive loss
              
              
              
              
              
              
              
              $
              (1,073
              )BALANCES,
                  December 31, 2007
              
              $
              —
              
              $
              87,719


See
      accompanying notes to consolidated financial statements.




-
          29 -
 *Table
          of Contents*





**CLARUS
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**Years
      Ended December 31, 2007, 2006 and 2005**


(In
      Thousands, Except Share Amounts)






2007
              
              2006
              
              2005OPERATING
                  ACTIVITIES:Net
                  income (loss)
              
              $
              117
              
              $
              (1,291
              )
              $
              (1,291
              )Adjustments
                  to reconcile net income (loss) to net cash used in operating
                  activities:Depreciation
                  of property and equipment
              
              
              359
              
              
              346
              
              
              334Amortization
                  of (discount) and premium on securities, net
              
              
              (2,929
              )
              
              (2,405
              )
              
              (669
              )Amortization
                  of equity compensation plans
              
              
              444
              
              
              301
              
              
              410Changes
                  in operating assets and liabilities:Decrease/(increase)
                  in interest receivable, prepaids and other current assets
              
              
              419
              
              
              (154
              )
              
              77Decrease/(increase)
                  in deposits and other long-term assets
              
              
              —
              
              
              956
              
              
              (1
              )Decrease
                  in accounts payable and accrued liabilities
              
              
              (62
              )
              
              (781
              )
              
              (731
              )Increase
                  in deferred rent
              
              
              66
              
              
              69
              
              
              93Net
                  cash used in operating activities
              
              
              (1,586
              )
              
              (2,959
              )
              
              (1,778
              )INVESTING
                  ACTIVITIES:Purchase
                  of marketable securities
              
              
              (150,803
              )
              
              (161,004
              )
              
              (93,887
              )Proceeds
                  from the sale and maturity of marketable securities
              
              
              191,147
              
              
              142,473
              
              
              68,116Purchase
                  of property and equipment
              
              
              (48
              )
              
              (49
              )
              
              (17
              )Disposal
                  of equipment
              
              
              7
              
              
              —
              
              
              —Increase
                  in transaction expenses
              
              
              —
              
              
              —
              
              
              (135
              )Net
                  cash provided by (used in) investing activities
              
              
              40,303
              
              
              (18,580
              )
              
              (25,923
              )FINANCING
                  ACTIVITIES:Proceeds
                  from the exercise of stock options
              
              
              1,438
              
              
              —
              
              
              2,594Net
                  cash provided by financing activities
              
              
              1,438
              
              
              —
              
              
              2,594CHANGE
                  IN CASH AND CASH EQUIVALENTS
              
              
              40,155
              
              
              (21,539
              )
              
              (25,107
              )CASH
                  AND CASH EQUIVALENTS, beginning of year
              
              
              1,731
              
              
              23,270
              
              
              48,377CASH
                  AND CASH EQUIVALENTS, end of year
              
              $
              41,886
              
              $
              1,731
              
              $
              23,270SUPPLEMENTAL
                  DISCLOSURE:(Decrease)/increase
                  in transaction expenses included in accounts payable and accrued
                  liabilities
              
              $
              —
              
              $
              (778
              )
              $
              778(Decrease)/increase
                  in transaction expenses included in other assets
              
              $
              —
              
              $
              (913
              )
              $
              913Grant
                  of restricted stock
              
              $
              —
              
              $
              —
              
              $
              50Cash
                  paid for franchise and property taxes
              
              $
              456
              
              $
              540
              
              $
              684


See
      accompanying notes to consolidated financial statements.




-
          30 -
 *Table
          of Contents*




**CLARUS
      CORPORATION AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**December
      31, 2007, 2006 and 2005**






**1.
      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**ORGANIZATION**





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





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





Management
      now consists of four corporate executive officers and a support staff of six,
      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, cash equivalents and marketable securities
      to
      enhance stockholder value.





**BASIS
      OF PRESENTATION**





The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiaries. All intercompany transactions and balances have
      been
      eliminated. The Company's subsidiaries include or included Clarus CSA, Inc.,
      Clarus International, Inc., SAI Recruitment Limited, SAI (Ireland) Limited,
      Clarus eMEA Ltd., i2Mobile.com Limited, SAI America Limited, REDEO Technologies,
      Inc., Software Architects International, Limited and SAI America LLC. As of
      December 31, 2007 all of these subsidiaries have ceased operations and have
      been
      dissolved or are in the process of being dissolved.





**USE
      OF ESTIMATES**





The
      preparation of these financial statements requires management to make estimates
      and assumptions that affect the reported amounts of assets and liabilities
      and
      disclosure of contingent liabilities at the date of the financial statements.
      Estimates also affect the reported amounts of revenues and expenses during
      the
      reporting periods. The Company regularly evaluates its estimates and assumptions
      including those related to revenue recognition, 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 $41.9 million and $1.7 million in cash and cash equivalents
      included in the accompanying consolidated balance sheets for the years ended
      December 31, 2007 and 2006, respectively.





**MARKETABLE
      SECURITIES**





Marketable
      securities for the periods ended December 31, 2007 and 2006, consist of
      government notes and bonds. The Company accounts for its marketable securities
      under the provisions of Statement of Financial Accounting Standards ("SFAS")
      No.
      115, "Accounting for Certain Investments in Debt and Equity Securities".
      Pursuant to the provisions of SFAS No. 115, the Company has classified its
      marketable securities as available-for-sale. Available-for-sale securities
      have
      been recorded at fair value and related unrealized gains and losses have been
      excluded from earnings and are reported as a separate component of accumulated
      other comprehensive income (loss) until realized.


-
          31 -
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          of Contents*




**PROPERTY
      AND EQUIPMENT**





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





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


December
                  31,
              
              Useful
                  Life2007
              
              2006
              
              (in
                  years)Computers
                  and equipment
              
              $
              263
              
              $
              249
              
              
              1
                  - 5Furniture
                  and fixtures
              
              
              488
              
              
              488
              
              
              7Leasehold
                  improvements
              
              
              1,893
              
              
              1,893
              
              
              82,644
              
              
              2,630Less:
                  accumulated depreciation
              
              
              (1,263
              )
              
              (931
              )Property
                  and equipment, net
              
              $
              1,381
              
              $
              1,699


Depreciation
      expense related to property and equipment totaled $359,000, $346,000 and
      $334,000 for the years ended December 31, 2007, 2006 and 2005, 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 income from these companies during 2007, 2006
      or
      2005. 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, 2007 and 2006,
      respectively.





**LONG-LIVED
      ASSETS**





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





**ACCOUNTS
      PAYABLE AND ACCRUED LIABILITIES**





Accounts
      payable and accrued liabilities include the following as of December 31, 2007
      and 2006 (in thousands):




2007
              
              2006Accounts
                  payable
              
              $
              17
              
              $
              335Accrued
                  bonuses
              
              
              220
              
              
              30Accrued
                  professional services
              
              
              205
              
              
              201Accrued
                  taxes
              
              
              120
              
              
              98Other
              
              
              56
              
              
              16$
              618
              
              $
              680




-
          32 -
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          of Contents*




**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 and accounts payable approximates
      fair value. Marketable securities are carried at fair value. The fair value
      of
      the Company's investments in privately held companies is not readily available.
      The Company believes the fair values of these investments in privately held
      companies approximated their respective carrying values of zero at December
      31,
      2007 and 2006.





**STOCK-BASED
      COMPENSATION PLAN**





The
      Company adopted the 2005 Stock Incentive Plan (the "2005 Plan"), which was
      approved by stockholders at the Company’s annual meeting in June 2005. Under the
      2005 Plan, the Board of Directors has flexibility to determine the type and
      amount of awards to be granted to eligible participants, who must be employees
      of the Company or its subsidiaries, directors, officers or consultants to the
      Company. The 2005 Plan provides for grants of incentive stock options,
      nonqualified stock options, restricted stock awards, stock appreciation rights,
      and restricted units. As of December 31, 2007, the number of shares authorized
      and reserved for issuance under the 2005 Plan is 3.8 million, subject to an
      automatic annual increase equal to 4% of the total number of shares of Clarus’
common stock outstanding. The aggregate number of shares of common stock that
      may be granted through awards under the 2005 Plan to any employee in any
      calendar year may not exceed 500,000 shares. The 2005 Plan will continue in
      effect until June 2015 unless terminated sooner. As of December 31, 2007,
      565,000 stock options have been awarded under the plan of which 355,000 are
      unvested and 210,000 are vested and eligible for exercise. The Company also
      had
      two employee stock purchase plans which were terminated in December 2007, as
      described more fully in Note 7.





On
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      No. 123 (revised 2004), “Share-Based Payments” (“SFAS 123R”), requiring
      recognition of expense related to the fair value of stock option awards. The
      Company recognizes the cost of the share-based awards on a straight-line basis
      over the requisite service period of the award. Prior to January 1, 2006, the
      Company accounted for stock option plans under the recognition and measurement
      provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock
      Issued to Employees” (“APB 25”) and related interpretations, as permitted by
      Statement of Financial Accounting Standard No. 123, “Accounting for Stock-Based
      Compensation” (“SFAS 123”). Under SFAS 123R, compensation cost recognized during
      2007 and 2006 includes: (a) compensation cost for all share-based payments
      granted prior to, but not yet vested as of January 1, 2006, based on the grant
      date fair value estimated in accordance with the original provisions of SFAS
      123, and (b) compensation cost for all share-based payments granted subsequent
      to January 1, 2006, based on the grant-date fair value estimated in accordance
      with the provisions of SFAS 123R. The Company recorded total non-cash stock
      compensation expense of approximately $268,000 and $301,000, respectively
      related to unvested restricted stock under SFAS 123R for fiscal 2007 and 2006.
      For fiscal 2007, the Company incurred compensation expense of approximately
      $176,000 related to stock options. For fiscal 2006 the Company incurred no
      compensation expense related to options under SFAS 123R.





On
      December 13, 2007, the Company issued 430,000 stock options to directors and
      employees of the Company. The vesting period for 150,000 options issued to
      directors was one year and four years for the remaining 280,000 options issued
      to employees. For computing the fair value of the stock-based awards, 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:




Options
                    Vesting Period
                
                1
                    year
                
                4
                    yearsDividend
                    Yield
                
                
                0.00
                %
                
                0.00
                %Expected
                    volatility
                
                
                31.8
                %
                
                40.9
                %Risk-free
                    interest rate
                
                
                3.54
                %
                
                3.80
                %Expected
                    life
                
                
                5.75
                    years
                
                
                6.25
                    yearsWeighted
                    average fair value
                
                $
                2.22
                
                $
                2.77


Using
      these assumptions, the fair value of the stock options granted during fiscal
      2007 was approximately $1.1 million which will be amortized over the vesting
      period of the options. There were no options granted during fiscal 2006.





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





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




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





The
      following table shows the effect on net loss and earnings per share if the
      fair
      value method of accounting had been applied to options issued prior to the
      adoption of SFAS 123R on January 1, 2006. 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):




2005Net
                  loss, as reported
              
              $
              (1,291
              )Add
                  stock-based employee compensation expense included in reported
                  net loss
              
              
              410Deduct
                  total stock-based employee compensation expense determined under
                  fair-value based method for all awards
              
              
              (3,467
              )Pro
                  forma net loss
              
              $
              (4,348
              )Earnings
                  per Share:Basic
                  - as reported
              
              $
              (0.08
              )Basic
                  - pro forma
              
              $
              (0.27
              )Diluted
                  - as reported
              
              $
              (0.08
              )Diluted
                  - pro forma
              
              $
              (0.27
              )


For
      SFAS
      No. 123 purposes, the fair value of each option granted in 2005 has been
      estimated as of the date of grant using the Black-Scholes option-pricing model
      with the following assumptions:




2005Dividend
                  yield
              
              
              0
              %Expected
                  volatility
              
              
              57
              %Risk-free
                  interest rate
              
              
              4.31
              %Expected
                  life
              
              
              Four
                  years


Using
      these assumptions, the fair value of the stock options granted during the year
      ended December 31, 2005 was approximately $692,000, 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 year ended December 31, 2005
      was
      $3.95. There were no options issued during 2006.





**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. We continually assess the need for a tax valuation allowance based on
      all
      available information. As of December 31, 2007, and as a result of this
      assessment, we do not believe that our deferred tax assets are more likely
      than
      not to be realized. In addition, we continuously evaluate our tax contingencies
      in accordance with Financial Accounting Standards Board (FASB) Interpretation
      No. (FIN) 48, “Accounting for Uncertainty in Income Taxes - an interpretation of
      FASB Statement No. 109,” or FIN 48.




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**NET
      INCOME (LOSS) PER SHARE**





Basic
      and
      diluted net income (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 income (loss) per share for the years ended
      December 31, 2006 and 2005 excludes incremental shares calculated using the
      treasury stock method, assumed from the conversion of stock options and
      restricted stock due to the net loss for the years ended December 31, 2006
      and
      2005. The potential effects of the incremental shares are as follows (in
      thousands):




2007
                
                2006
                
                2005Weighted
                    average common shares - basic
                
                
                16,658
                
                
                16,613
                
                
                16,329Effect
                    of dilutive stock options
                
                
                148
                
                
                112
                
                
                316Effect
                    of dilutive restricted stock
                
                
                245
                
                
                205
                
                
                502Total
                    effect of potential incremental shares
                
                
                393
                
                
                317
                
                
                818Weighted
                    average common shares - diluted
                
                
                17,051
                
                
                16,930
                
                
                17,147Net
                    income (loss) per share:Basic
                
                $
                0.01
                
                $
                (0.08
                )
                $
                (0.08
                )Diluted
                
                $
                0.01
                
                $
                (0.08
                )
                $
                (0.08
                )


For
      fiscal 2007, diluted net income per share attributable to common stockholders
      included the dilutive effect of options to purchase 1,298,750 shares of the
      Company’s common stock and 500,000 shares of restricted stock as these
      securities were potentially dilutive in computing net income per share. Diluted
      net income per share for fiscal 2007 excluded the anti-dilutive effect of
      options to purchase 550,000 shares of the Company’s common stock whose exercise
      prices were higher than the average market price of the Company’s common stock.





Options
      to purchase 663,750 shares of common stock at $5.35 to $6.06 per share were
      outstanding as of December 31, 2006, but were not included in the computation
      of
      diluted EPS because the options were anti-dilutive due to the net loss for
      the
      year ended December 31,
      2006.
      Options to purchase 1,010,000 shares of common stock at $7.30 to $10.00 were
      outstanding as of December 31, 2006, but were
      not
      included in the computation of diluted EPS because the options were
      anti-dilutive as their market price was greater than the average market price
      of
      the common shares of $7.03 for the year ended December 31, 2006.





Options
      to purchase 1,111,250 shares of common stock at $5.35 to $7.50 per share were
      outstanding as of December 31, 2005, but were not included in the computation
      of
      diluted EPS because the options were anti-dilutive due to the net loss for
      the
      year ended December 31, 2005. Options to purchase 570,000 shares of common
      stock
      at $8.35 to $10.00 were outstanding as of December 31, 2005, but were not
      included in the computation of diluted EPS because the options were
      anti-dilutive as their market price was greater than the average market price
      of
      the common shares of $8.07 for the year ended December 31, 2005.




**COMPREHENSIVE
      INCOME (LOSS)**




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





**SEGMENT
      AND GEOGRAPHIC INFORMATION**




In
      accordance with the provisions of SFAS No. 131, "Disclosures about Segments
      of
      an Enterprise and Related Information", the Company has determined that during
      2007, 2006 and 2005 the Company operated in one principal business segment.
      Due
      to the sale of our operating assets as discussed in “Prior Business”, the
      Company is a holding company.


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Geographic
      revenue and the carrying value of property and equipment, net as of and for
      the
      years ended December 31, 2007, 2006 and 2005 were as follows:




(in
                  thousands)
              
              2007
              
              2006
              
              2005Revenue:United
                  States
              
              $
              —
              
              $
              —
              
              $
              —International
              
              
              —
              
              
              —
              
              
              —Total
              
              $
              —
              
              $
              —
              
              $
              —Property
                  and equipment, net:United
                  States
              
              $
              1,381
              
              $
              1,699
              
              $
              1,996Total
              
              $
              1,381
              
              $
              1,699
              
              $
              1,996


**NEW
      ACCOUNTING PRONOUNCEMENTS**




In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities -
      Including an Amendment of FASB No. 115,” (“SFAS 159”). SFAS 159 allows a company
      to irrevocably elect fair value as the initial and subsequent measurement
      attribute for certain financial assets and financial liabilities on a
      contract-by-contract basis, with changes in fair value recognized in earnings.
      SFAS No. 159 is effective for fiscal years beginning after November 15, 2007
      and
      will be applied prospectively. The Company is currently evaluating the effect
      of
      the adoption of SFAS 159 will have on its consolidated financial
      statements.





Effective
      January 1, 2007, we adopted the Financial Accounting Standards Board (FASB)
      Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes - an
      interpretation of FASB Statement No. 109,” or FIN 48, which clarifies the
      accounting for uncertainty  in  income  taxes recognized  in
      an enterprise’s financial statements  in accordance  with 
SFAS  No. 109, “Accounting for Income Taxes.”
FIN  48  prescribes  a recognition  threshold 
and  measurement  attribute  for  the  financial 
statement  recognition  and measurement of a tax position taken or
      expected to be taken in a tax return.  FIN 48 also provides guidance on
      derecognition, classification, interest and
      penalties, accounting in interim periods,
      disclosure and transition.    There  was 
no  change  to  the  net  amount  of 
assets  and  liabilities recognized in the statement of financial
      condition as a result of our adoption of FIN 48. At January 1, 2007, we had
      no
      unrecognized tax benefits.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      (“SFAS”) No. 157, “Fair Value Measurements”, which establishes a framework
      for reporting fair value and expands disclosures about fair value measurements.
      SFAS No. 157 was effective for the Company on January 1, 2008, with the
      exception that the applicability of SFAS No. 157’s fair value measurement
      requirements to nonfinancial assets and liabilities that are not required or
      permitted to be recognized or disclosed at fair value on a recurring basis
      has
      been delayed by the FASB for one year. The Company does not believe that the
      requirements of SFAS No. 157 which were effective for the Company on January
      1,
      2008 will have a material impact on the Company’s consolidated financial
      statements. The Company is currently evaluating the impact of the SFAS No.
      157
      requirements which will be effective for the Company on January 1, 2009 on
      the
      Company’s results of operations and financial position.





In
      December 2007, the FASB released SFAS No. 141(R), Business Combinations (revised
      2007) (“SFAS 142(R)”), which changes many well-established business combination
      accounting practices and significantly affects how acquisition transactions
      are
      reflected in the financial statements. Additionally, SFAS 141(R) will affect
      how
      companies negotiate and structure transactions, model financial projections
      of
      acquisitions and communicate to stakeholders. SFAS 141(R) must be applied
      prospectively to business combinations for which the acquisition date is on
      or
      after the beginning of the first annual reporting period beginning on or after
      December 15, 2008. The Company is currently evaluating the impact the adoption
      of this statement could have on its financial condition, results of operations
      and cash flows.





In
      December 2007, the FASB released SFAS No. 160, Noncontrolling Interests in
      Consolidated Financial Statements an amendment of ARB No. 51 (“SFAS 160”), which
      establishes accounting and reporting standards for the noncontrolling interests
      in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 requires
      consolidated net income to be reported at amounts that include the amounts
      attributable to both the parent and the noncontrolling interests and requires
      disclosure, on the face of the consolidated statement of income, of the amounts
      of consolidated net income attributable to the parent and to the noncontrolling
      interest. Previously, net income attributable to the noncontrolling interest
      was
      reported as an expense or other deduction in arriving at consolidated net
      income. SFAS 160 is effective for financial statements issued for fiscal years
      beginning after December 15, 2008. The Company believes the adoption of this
      statement will not have a material impact on its consolidated financial
      statements.




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**2.
      MARKETABLE SECURITIES**





As
      of
      December 31, 2007, and 2006, 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, 2007, marketable securities consisted of government and government
      agency notes and bonds with a fair market value of $45.2 million. The amortized
      cost of marketable securities at December 31, 2007 was $45.2 million with an
      unrealized gain of $7,000. The maturities of all securities are less than 12
      months at December 31, 2007.





At
      December 31, 2006, marketable securities consisted of government notes and
      bonds
      with a fair market value of $82.6 million. The amortized cost of marketable
      securities at December 31, 2006 was $82.6 million with an unrealized gain of
      $12,000 and an unrealized loss of $3,000. The maturities of all securities
      are
      less than 12 months at December 31, 2006.




**3.
      ACQUISITIONS AND DISPOSITIONS**





**SALE
      OF OPERATING ASSETS**





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




**4.
      RELATED-PARTY TRANSACTIONS**





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





The
      Company provides certain telecommunication, administrative and other office
      services as well as accounting and bookkeeping services to Kanders & Company
      that are reimbursed by Kanders & Company. Such services aggregated $304,600
      during the year ended December 31, 2007 and $123,000 during the year ended
      December 31, 2006.





As
      of
      December 31, 2007, the Company had a net receivable of $46,000 from Kanders
      & Company. The amount due to and from Kanders & Company is included in
      prepaids and other current assets and accounts payable and accrued liabilities
      in the accompanying consolidated balance sheet. The outstanding amount was
      paid
      and received in the first quarter of 2008. As of December 31, 2006, the Company
      had a receivable of $76,000 from Kanders & Company. The amount due from
      Kanders & Company is included in prepaids and other current assets. The
      outstanding amount was paid in the first quarter of 2007.





The
      Company provides certain telecommunication, administrative and other office
      services to Stamford Industrial Group, Inc., formerly known as Net Perceptions,
      Inc. (“SIG”) that are reimbursed by SIG .
      Warren
      B. Kanders, our Executive Chairman, also serves as the Non-Executive Chairman
      of
      SIG. **** Such
      services aggregated $79,000 during the year ended December 31, 2007 and $63,000
      during the year ended December 31, 2006.




As
      of
      December 31, 2007, the Company had an outstanding receivable of $10,000 from
      SIG. The amount due from SIG is included in prepaids and other current assets
      in
      the accompanying consolidated balance sheet. The outstanding amount was paid
      in
      March 2008. As of December 31, 2006, the Company had an outstanding receivable
      of $44,000 from SIG. The amount due from SIG is included in prepaids and other
      current assets in the accompanying consolidated balance sheet. The outstanding
      amount was paid by SIG in March 2007.





During
      the year ended December 31, 2007, the Company incurred no charges related 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, pursuant to the Transportation Services
      Agreement, dated December 18, 2003 between the Company and Kanders Aviation
      LLC.
      For the same period ended December 31, 2006, the Company incurred charges of
      approximately $64,000 for payments to Kanders Aviation LLC.




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          37 -
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          of Contents*




As
      of
      December 31, 2007 and 2006, the Company had no outstanding receivables from
      or
      payables to Kanders Aviation.





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
      $12.8 million were expensed in 2001 and 2002 in an attempt to align the
      Company's cost structure with projected revenue.





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





During
      2004, the Company recorded an additional restructuring charge of $33,000 for
      facility closure costs which is classified in the Company’s consolidated
      statements of operations under general and administrative expenses. The increase
      was the result of significant fluctuations in exchange rates and increased
      rent
      expense. Expenditures for 2004 totaled $190,000 consisting of $125,000 for
      employee separation costs and $65,000 for facility closing costs.





During
      2005 and 2006, respectively, expenditures for facility closing costs totaled
      $56,000 and $17,000 respectively. As of December 31, 2006, the balance for
      restructuring and related costs was zero.




**6.
      INCOME TAXES**





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




YEARS
                  ENDEDDECEMBER
                  31,2007
              
              2006
              
              2005Pre-Tax
                  Income (loss):Domestic
              
              $
              120
              
              $
              (1,291
              )
              $
              (1,291
              )Foreign
              
              
              —
              
              
              —
              
              
              —$
              120
              
              $
              (1,291
              )
              $
              (1,291
              )


The
      components of the income tax expense for each of the years in the three-year
      period ended December 31, 2007 is as follows (in thousands):




YEARS
                  ENDEDDECEMBER
                  31,2007
              
              2006
              
              2005Current:Federal
              
              $
              3
              
              $
              —
              
              $
              —State
              
              
              —
              
              
              —
              
              
              —Foreign
              
              
              —
              
              
              —
              
              
              —Total
                  current income for provision
              
              $
              3
              
              $
              —
              
              $
              —







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            38 -
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YEARS
                  ENDEDDECEMBER
                  31,2007
              
              2006
              
              2005Deferred:Federal
              
              
              3,850
              
              
              (168
              )
              
              (3,122
              )State
              
              
              1,218
              
              
              350
              
              
              7,057Foreign
              
              
              —
              
              
              —
              
              
              —5,068
              
              
              182
              
              
              3,935Increase
                  (decrease) in valuation allowance for deferred income
                  taxes
              
              
              (5,068
              )
              
              (182
              )
              
              (3,935
              )Total
                  deferred income tax for provision
              
              
              —
              
              
              —
              
              
              —Total
                  income tax provision
              
              $
              3
              
              $
              —
              
              $
              —


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





2007
            
            2006
            
            2005Income
                (loss) from operations
            
            $
            (5,068
            )
            $
            (182
            )
            $
            (3,935
            )Stockholders’
                equity
            
            
            (1
            )
            
            (38
            )
            
            34Total
            
            $
            (5,069
            )
            $
            (220
            )
            $
            (3,901
            )





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





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, 2007, 2006 and 2005:




YEARS
                  ENDEDDECEMBER
                  31,2007
              
              2006
              
              2005Computed
                  "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
              
              
              514.4
              
              
              (0.5
              )
              
              (7.4
              )NOL
                  adjustments
              
              
              152.3
              
              
              18.3
              
              
              376.6Capital
                  loss carryforward adjustment
              
              
              3,506.2
              
              
              30.3
              
              
              —Non-cash
                  stock compensation
              
              
              (9.5
              )
              
              —
              
              
              (29.5
              )Income
                  tax effect attributable to foreign operations
              
              
              —
              
              
              —
              
              
              —Other
              
              
              8.2
              
              
              —
              
              
              —(Decrease)
                  increase in valuation allowance and other items
              
              
              (4,202.8
              )
              
              (14.1
              )
              
              (305.7
              )Income
                  tax expense (benefit)
              
              
              2.8
              %
              
              —
              %
              
              —
              %




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          39 -
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          of Contents*




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, 2007 and 2006
      are
      as follows (in thousands):




YEARS
                    ENDEDDECEMBER
                    31,2007
                
                2006Deferred
                    income tax assets:Net
                    operating loss, capital loss amount and research & experimentation
                    credit carryforwards
                
                $
                84,970
                
                $
                90,209Charitable
                    contribution carryforward
                
                
                4
                
                
                4Depreciation
                
                
                (139
                )
                
                (241
                )Unrealized
                    loss
                
                
                (5
                )
                
                (4
                )Non-cash
                    compensation
                
                
                724
                
                
                608Accrued
                    liabilities
                
                
                134
                
                
                181Reserves
                    for investments
                
                
                1,728
                
                
                1,728Net
                    deferred income tax assets before valuation allowance
                
                
                87,416
                
                
                92,485Valuation
                    allowance for deferred income tax assets
                
                
                (87,416
                )
                
                (92,485
                )Net
                    deferred income tax assets
                
                $
                —
                
                $
                —


The
      net
      change in the valuation allowance for deferred income tax assets for 2007 was
      a
      decrease of $5.1 million as compared to a decrease of $0.2 million in 2006
      and a
      decrease in 2005 of $3.9 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 net deferred income tax assets at December 31,
      2007,
      because the ultimate realization of those benefits and assets does not meet
      the
      more likely than not criteria.





At
      December 31, 2007, the Company has net operating loss, research and
      experimentation credit and alternative minimum tax credit carryforwards for
      U.S.
      federal income tax purposes of approximately $228.4 million, $1.3 million and
      $56,000, respectively, which expire in varying amounts beginning in the year
      2009. The Company also has a capital loss carryforward of $1.6 million which
      expire in 2008. 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 $223.1 million of the $228.4 million of U.S. net operating loss
      carryforward is currently available to offset taxable income that the Company
      may recognize in the future. Of the approximately $223.1 million of net
      operating losses available to offset taxable income, approximately $206.4
      million does not begin to expire until 2020 or later, subject to compliance
      with
      Section 382 of the Internal Revenue Code as indicated by the following
      schedule:




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          of Contents*




**Net
      Operating Loss And Capital Loss Carryforward Expiration
      Dates***


**(Unaudited)**


**December
      31, 2007**








Net
                Operating Loss
            
            Capital
                LossExpiration
                Dates
              December
                31
            
            Amount
              (000’s)
            
            Amount
              (000’s)2007
            
            $
            —
            
            $
            02008
            
            
            —
            
            
            1,5992009
            
            
            1,9002010
            
            
            7,4172011
            
            
            7,5202012
            
            
            5,1572020
            
            
            29,5332021
            
            
            50,4302022
            
            
            115,0002023
            
            
            5,7122024
            
            
            3,5662025
            
            
            1,7072026
            
            
            476Total
            
            
            228,418
            
            
            1,599Section
                382 limitation
            
            
            (5,363
            )
            
            —After
                Limitations
            
            $
            223,055
            
            $
            1,599*
                Subject to compliance with Section 382 of the Internal Revenue
                Code.




**7.
      EMPLOYEE BENEFIT PLANS**





The
      Company sponsors a 401(k) Plan (the "Plan"), a defined contribution plan
      covering substantially all employees of the Company. Under the Plan's deferred
      compensation arrangement, eligible employees who elect to participate in the
      Plan may contribute between 2% and 20% of eligible compensation, as defined,
      to
      the Plan. The Company, at its discretion, may elect to provide for either a
      matching contribution or discretionary profit-sharing contribution or both.
      The
      Company made matching contributions of approximately $31,000, $29,000 and $6,000
      during the years ended December 31, 2007, 2006 and 2005, 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 offered 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, were eligible to participate after 90 days of
      employment. Employees could contribute up to 15% of their annual salary toward
      the Purchase Plan. A maximum of 1,000,000 shares of common stock could have
      been
      purchased under the Plans. Common stock was purchased directly from the Company
      on behalf of the participants. During the years ended December 31, 2007, 2006
      and 2005, no shares were purchased for the benefit of the participants under
      the
      Plans.





Effective
      December 13, 2007, the Company terminated the Employee Stock Purchase Plan
      and
      the Global Employee Stock Purchase Plan (the “Plans”). We determined to
      discontinue the Plans because, at the time of termination, there were no
      employees participating in the Plans and the Plans were no longer a meaningful
      part of the Company’s equity incentive program.





**8.
      STOCK INCENTIVE PLANS**





The
      Company adopted the 1998 Stock Incentive Plan (the "1998 Plan") in 1998. Under
      the 1998 Plan, the Board of Directors had the flexibility to determine the
      type
      and amount of awards to be granted to eligible participants, who must be
      employees of the Company or its subsidiaries or consultants to the Company.
      The
      1998 Plan provided for grants of incentive stock options, nonqualified stock
      options, restricted stock awards, stock appreciation rights, and restricted
      units. During 2000, the Board of Directors and stockholders adopted an
      amendment, which increased the number of shares authorized and reserved for
      issuance from 1.5 million shares to 3.0 million shares. The aggregate number
      of
      shares of common stock that could be granted through awards under the 1998
      Plan
      to any employee in any calendar year could not exceed 200,000 shares. The 1998
      Plan was terminated in June 2005, but 683,750 stock options awarded under the
      plan are vested and remained eligible to be exercised at December 31,
      2007.




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The
      Company adopted the 2005 Stock Incentive Plan (the "2005 Plan"), which was
      approved by stockholders at the Company’s annual meeting in June 2005. Under the
      2005 Plan, the Board of Directors has the flexibility to determine the type
      and
      amount of awards to be granted to eligible participants, who must be employees
      of the Company or its subsidiaries, directors, officers or consultants to the
      Company. The 2005 Plan provides for grants of incentive stock options,
      nonqualified stock options, restricted stock awards, stock appreciation rights,
      and restricted units. The number of shares authorized and reserved for issuance
      under the 2005 Plan is 3.8 million, subject to an automatic annual increase
      equal to 4% of the total number of shares of Clarus’ common stock outstanding.
      The aggregate number of shares of common stock that may be granted through
      awards under the 2005 Plan to any employee in any calendar year may not exceed
      500,000 shares. The 2005 Plan will continue in effect until June 2015 unless
      terminated sooner. As of December 31, 2007, 565,000 stock options have been
      awarded under the plan of which 355,000 are unvested and 210,000 are vested
      and
      eligible for exercise.




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




In
      April
      2003, the Company granted 500,000 shares of restricted stock to Warren B.
      Kanders, the Executive Chairman of the Board. The shares vest in ten years
      or
      earlier upon satisfaction of various conditions including performance based
      conditions relating to the price of the Company's common stock. Deferred
      compensation of $2.7 million was recorded at the date of grant representing
      the
      fair value of the shares and adjusted as of December 31, 2005 to $4.2 million
      to
      account for the increase in fair market value from grant date through December
      31, 2005. With the implementation of SFAS 123R on January 1, 2006, the remaining
      compensation expense of $2.0 million of this award was expensed on a straight
      line basis over the remaining time period of 7.5 years. During the years ended
      December 31, 2007 and 2006, $268,000 was amortized to compensation expense
      for
      this award. At December 31, 2007, 245,000 of these shares were included in
      the
      computation of diluted earnings per share due to the net income for the year
      ended December 31, 2007.




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




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




On
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      No. 123 (revised 2004), “Share-Based Payments” (“SFAS 123R”), requiring
      recognition of expense related to the fair value of stock option awards. The
      Company recognizes the cost of the share-based awards on a straight-line basis
      over the requisite service period of the award. Prior to January 1, 2006, the
      Company accounted for stock option plans under the recognition and measurement
      provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock
      Issued to Employees” (“APB 25”) and related interpretations, as permitted by
      Statement of Financial Accountant Standard No. 123, “Accounting for Stock-Based
      Compensation” (“SFAS 123”). Under SFAS 123R, compensation cost recognized during
      2007 and 2006 includes: (a) compensation cost for all share-based payments
      granted prior to, but not yet vested as of January 1, 2006, based on the grant
      date fair value estimated in accordance with the original provisions of SFAS
      123, and (b) compensation cost for all share-based payments granted subsequent
      to January 1, 2006, based on the grant-date fair value estimated in accordance
      with the provisions of SFAS 123R. The Company recorded total non-cash stock
      compensation expense of
      approximately $268,000 and $301,000, respectively related to unvested restricted
      stock under SFAS 123R for fiscal 2007 and 2006. For fiscal 2007, the Company
      incurred compensation expense of approximately $176,000 related to stock
      options. For fiscal 2006 the Company incurred no compensation expense related
      to
      options under SFAS 123R.




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On
      December 13, 2007, the Company issued 430,000 stock options to directors and
      employees of the Company. The vesting period for 150,000 options issued to
      directors was one year and four years for the remaining 280,000 options issued
      to employees. For computing the fair value of the stock-based awards, 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:




Options
                    Vesting Period
                
                1
                    year
                
                4
                    yearsDividend
                    Yield
                
                
                0.00
                %
                
                0.00
                %Expected
                    volatility
                
                
                31.8
                %
                
                40.9
                %Risk-free
                    interest rate
                
                
                3.54
                %
                
                3.80
                %Expected
                    life
                
                
                5.75
                    years
                
                
                6.25
                    yearsWeighted
                    average fair value
                
                $
                2.22
                
                $
                2.77


Using
      these assumptions, the fair value of the stock options granted during fiscal
      2007 was approximately $1.1 million which will be amortized over the vesting
      period of the options. There were no options granted during fiscal 2006. For
      the
      year ended December 31, 2005, the Company granted 175,000 options.





The
      Company recorded total non-cash stock compensation expense of approximately
      $0.3
      million, $0.3 million and $0.4 million for the years ended December 31, 2007,
      2006 and 2005, respectively for 508,786 shares of restricted stock. Total
      non-cash stock compensation expense related to stock options was $176,000 for
      the year ended December 31, 2007. There was no stock compensation expense
      incurred by the Company related to stock options for the years ended December
      31, 2006 and 2005.





Total
      options available for grant under all plans as of December 31, 2007 were 3.8
      million. A summary of changes in outstanding options during the three years
      ended December 31, 2007 is as follows:




WeightedRange
                  of
              
              AverageExercise
              
              ExerciseShares
              
              Prices
              
              PriceDecember
                  31, 2004
              
              
              1,961,617
              
              
              $4.83
                  - $10.00
              
              $
              6.93Granted
              
              
              175,000
              
              
              $7.40
                  - $ 8.50
              
              $
              8.16Forfeited
              
              
              —Expired
              
              
              (7,500
              )
              
              $7.63
              
              $
              7.63Exercised
              
              
              (447,867
              )
              
              $4.83
                  - $7.00
              
              $
              5.79December
                  31, 2005
              
              
              1,681,250
              
              
              $5.35
                  - $10.00
              
              $
              7.36Granted
              
              
              —Forfeited
              
              
              —Expired
              
              
              (7,500
              )
              
              $5.41
              
              $
              5.41Exercised
              
              
              —December
                  31, 2006
              
              
              1,673,750
              
              
              $5.35
                  - $10.00
              
              $
              7.36Granted
              
              
              430,000
              
              
              $5.98
              
              $
              5.98Forfeited
              
              
              (7,757
              )
              
              $7.40
                  - $8.60
              
              $
              8.17Expired
              
              
              —Exercised
              
              
              (247,243
              )
              
              $5.35
                  - $8.60
              
              $
              5.81December
                  31, 2007
              
              
              1,848,750
              
              
              $5.35
                  - $10.00
              
              $
              7.24Vested
                  and exercisable at December 31, 2007
              
              
              1,493,750
              
              
              
              
              $
              7.54Vested
                  and exercisable at December 31, 2006
              
              
              1,673,750
              
              
              
              
              $
              7.36Vested
                  and exercisable at December 31, 2005
              
              
              1,681,250
              
              
              
              
              $
              7.36







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          43 -
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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, 2007




Outstanding
              
              ExercisableWeightedNumber
              
              Weighted
              
              Average
              
              Number
              
              WeightedExercise
              
              of
                  Shares
              
              Average
              
              Remaining
              
              of
                  Shares
              
              AveragePrice
              
              Outstanding
                  at
              
              Exercise
              
              Contractual
              
              Exercisable
                  at
              
              ExerciseRange
              
              December
                  31, 2007
              
              Price
              
              Life
                  (Years)
              
              December
                  31, 2007
              
              Price$
                  5.35 - $ 7.81
              
              
              1,298,750
              
              $
              6.27
              
              
              6.4
              
              
              943,750
              
              $
              6.37$
                  7.82 - $10.00
              
              
              550,000
              
              $
              9.55
              
              
              5.8
              
              
              550,000
              
              $
              9.551,848,750
              
              $
              7.24
              
              
              6.2
              
              
              1,493,750
              
              $
              7.54


**9.** **COMMITMENTS
      AND CONTINGENCIES**




**LEASES**





The
      Company rents certain office space, under non-cancelable operating leases.
      Rents
      charged to expense were approximately $400,000 in each of the years ended
      December 31, 2007, 2006, and 2005, respectively. Future minimum lease payments
      for the next five years and thereafter under non-cancelable operating leases
      with remaining terms greater than one year as of December 31, 2007, are as
      follows (in thousands):




Gross
                    Rental
                
                Sub-LeaseObligations
                
                IncomeYear
                    ending December 31,2008
                
                
                420
                
                
                1052009
                
                
                426
                
                
                1062010
                
                
                451
                
                
                1132011
                
                
                1,128
                
                
                2822012
                
                
                —
                
                
                —Thereafter
                
                
                —
                
                
                —Total
                
                $
                2,425
                
                $
                606


Our
      corporate headquarters is currently located in Stamford, Connecticut where
      we
      lease approximately 8,600 square feet for $25,156 a month during 2007, pursuant
      to a lease that includes annual rent escalations, which expires on March 31,
      2019.




**LITIGATION**





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





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




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**10.
      SUBSEQUENT EVENTS**




On
      February 7, 2008, our Board of Directors approved a Rights Agreement (the
“Rights Agreement”) which provides for a dividend distribution of one preferred
      share purchase right (a “Right”) for each outstanding share of our common stock,
      payable to stockholders of record as of the close of business on February 12,
      2008. Each Right entitles the registered holder to purchase from the Company
      one
      one-hundredth of a share of our Series A Junior Participating Preferred Stock,
      par value $0.0001 per share, at a purchase price of $12.00. The Rights Agreement
      is designed to assist in limiting the number of 5% or more owners and thus
      reduce the risk of a possible “change of ownership” under Section 382 of the
      Internal Revenue Code of 1986 as amended. A significant penalty is imposed
      on
      any person or group that acquires 4.9% or more (but less than 50%) of our
      then-outstanding common stock without the prior approval of our Board of
      Directors. There is no guaranty that the objective of the Rights Agreement
      of
      preserving the NOLs will be achieved. There is a possibility that certain
      transactions may be completed by stockholders or prospective stockholders that
      could trigger an “ownership change.” The parties to the Rights Agreement, dated
      as of February 12, 2008 are Clarus and American Stock Transfer & Trust
      Company, as rights agent.





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





There
      have been no changes in or disagreements with accountants on accounting or
      financial disclosure matters during the periods covered by this Annual Report
      on
      Form 10-K.





**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 Executive Chairman of the Board of Directors
      and Chief Financial Officer, its principal executive officer and principal
      financial officer, respectively of the effectiveness of the design and operation
      of the Company's disclosure controls and procedures (as such term is defined
      in
      Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2007,
      pursuant to Exchange Act Rule 13a-15. Such disclosure controls and procedures
      are designed to ensure that information required to be disclosed by the Company
      is accumulated and communicated to the appropriate management on a basis that
      permits timely decisions regarding disclosure. Based upon that evaluation,
      the
      Company's Executive Chairman of the Board of Directors and Chief Financial
      Officer concluded that the Company's disclosure controls and procedures as
      of
      December 31, 2007 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:





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





·
            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





·
            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.





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, 2007. 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, 2007.





KPMG
      LLP,
      an independent registered public accounting firm, has audited the consolidated
      financial statements included in this report and as part of their audit, has
      issued their report, included herein in Item 8, on the effectiveness of our
      internal control over financial reporting.




-
          45 -
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          of Contents*




**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, 2007 that
      have materially affected, or are reasonably likely to materially affect the
      Company's internal control over financial reporting (as defined in Rules
      13a-15(f) and 15d-15(f) under the Exchange Act.)





**ITEM
      9B. OTHER INFORMATION**





Not
      applicable.




**PART
      III**





**ITEM
      10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**





Information
      regarding executive officers is included in Part I of this Form 10-K as
      permitted by General Instruction G(3).





The
      Company has adopted a code of ethics that applies to 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 2008 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 2008 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 "Security Ownership of Certain
      Beneficial Owners and Management" in our Proxy Statement used in connection
      with
      our 2008 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 2008 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 2008 Annual Meeting of
      Stockholders, is incorporated herein by reference.


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          46 -
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**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:




PageReport
                  of Independent Registered Public Accounting Firm on
                  Consolidated Financial Statements and Internal Control over Financial
                  Reporting
              25Consolidated
                  Balance Sheets - December 31, 2007 and
                  2006
              26Consolidated
                  Statements of Operations - Years Ended December
                  31, 2007, 2006 and 2005
              27Consolidated
                  Statements of Stockholders' Equity and
                  Comprehensive Loss -Years Ended December 31, 2007, 2006 and
                  2005
              28Consolidated
                  Statements of Cash Flows - Years Ended December
                  31, 2007, 2006 and 2005
              30Notes
                  to Consolidated Financial
                  Statements
              31




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




Schedule
                  II Valuation and Qualifying
                  Accounts
              52


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




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





3.2
            Amendment
                to Amended and Restated Certificate of Incorporation (incorporated
                herein
                by reference to Exhibit 4.1 of theCompany's
                10-Q filed with the Securities and Exchange Commission on August
                14,
                2000).





3.3
            Amended
                and Restated Certificate of Incorporation of the Company (incorporated
                herein by reference to Appendix C of the Company’s Definitive Proxy
                Statement filed with the Securities and Exchange Commission on November
                6,
                2002).





3.4
            Amendment
                to Amended and Restated Certificate of Incorporation of the Company
                (incorporated herein by reference toExhibit
                3.1 of the Company's Current Report on Form 8-K, filed with the Securities
                and Exchange Commission on July 31,2003).





3.5
            Amended
                and Restated Bylaws of the Company (incorporated herein by reference
                to
                Appendix D of the Company's Definitive Proxy Statement filed with
                the
                Securities and Exchange Commission on November 6, 2002).





3.6
            Amendment
                No. 1 to the Amended and Restated Bylaws of the Company. (incorporated
                herein by reference to Exhibit 3.4 ofthe
                Company's Annual Report on Form 10-K, filed with the Securities and
                Exchange Commission on March 31, 2003).





3.7
            Form
                of Certificate of Designation of Series A Junior Participating Preferred
                Stock (incorporated herein by reference to Exhibit 3.1 of the Company's
                Form 8-K, filed with the Securities and Exchange Commission on February
                13, 2008).





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 Amendedand
                Restated Bylaws of the Company defining rights of the holders of
                Common
                Stock of the Company.





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




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




4.4
            Rights
                Agreement, dated as of February 12, 2008, by and between Clarus
                Corporation and American Stock Transfer & Trust Company (incorporated
                herein by reference to Exhibit 4.2 of the Company’s Form 8-K filed with
                the Securities and Exchange Commission on February 13,
                2008).




4.5
            Form
                of Rights Certificate (incorporated herein by reference to Exhibit
                4.1 of
                the Company’s Form 8-K filed with the Securities and Exchange Commission
                on February 13, 2008).





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





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





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





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





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





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





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





10.8
            Employment
                Agreement, dated as of December 6, 2002, between the Company and
                Warren B.
                Kanders (incorporated hereinby
                reference to Exhibit 10.2 of the Company's Form 8-K filed with the
                Securities and Exchange Commission on December23,
                2002).*





10.9
            Amended
                and Restated Stock Incentive Plan (incorporated herein by reference
                to
                Exhibit 10.2 of the Company's Form 10-Qfiled
                with the Securities and Exchange Commission on August 14, 2000).
                *





10.10
            Form
                of Nonqualified Stock Option Agreement (incorporated herein by reference
                to Exhibit 10.5 of the Company's Form 10-Q
                filed with the Securities and Exchange Commission on August 14, 2000).
                *





10.11
            Lease,
                dated as of September 23, 2003, between Reckson Operating Partnership,
                L.P., the Company and Kanders & Company, Inc. (incorporated herein by
                reference to Exhibit 10.1 of the Company's 10-Q filed with the Securities
                and Exchange Commission on November 12, 2003).





10.12
            Transportation
                Services Agreement, dated as of December 18, 2003, between Kanders
                Aviation, LLC and the Company (incorporated herein by reference to
                Exhibit
                10.23 of the Company's 10-K filed with the Securities and Exchange
                Commission on March 11, 2004).





10.13
            Clarus
                Corporation 2005 Stock Incentive Plan (incorporated herein by reference
                to
                Appendix A of the Company's Definitive Proxy Statement filed with
                the
                Securities and Exchange Commission on May 2, 2005).
                *





10.14
            Form
                of Stock Option Agreement for the Clarus Corporation 2005 Stock Incentive
                Plan (incorporated herein by reference toExhibit
                10.1 of the Company's Form 10-Q filed with the Securities and Exchange
                Commission on November 11, 2005). *




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10.15
            Amendment
                to the form of Stock Option Agreement for the Clarus Corporation
                2005
                Stock Incentive Plan (incorporatedherein
                by reference to Exhibit 10.1 of the Company's Form 8-K filed with
                the
                Securities and Exchange Commission onJanuary
                6, 2006). *





10.16
            Stock
                Option Agreement, dated December 23, 2002, between the Company and
                Warren
                B. Kanders (incorporated herein by reference to Exhibit 4.6 of the
                Company's Registration Statement Form S-8 filed with the Securities
                and
                Exchange Commission on August 18, 2005).
                *





10.17
            Extension
                Agreement, dated as of May 1, 2006, to the Employment Agreement,
                dated as
                of December 6, 2002, between the Company and Warren B. Kanders
                (incorporated herein by reference to Exhibit 10.2 of the Company’s Form
                8-K filed with the Securities and Exchange Commission on May 4,
                2006).*





10.18
            Resignation
                and Severance Agreement and General Release, dated as of December
                11,
                2006, between the Company and Nigel P. Ekern (incorporated herein
                by
                reference to Exhibit 10.1 of the Company’s Form 8-K filed with the
                Securities and Exchange Commission on December 12,
                2006).*





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.


**
            Filed
                herewith.


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**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 7, 2008*


*By: 
      /s/ Philip A. Baratelli*


*Philip
      A. Baratelli*


*Chief
      Financial Officer*




Signature
              
              Title
              
              Date*/s/
                  Warren B. Kanders*
              
              Executive
                  Chairman of the Board of Directors
              
              March
                  7, 2008Warren
                  B. Kanders
              
              (principal
                  executive officer)*/s/
                  Philip A. Baratelli*
              
              Chief
                  Financial Officer
              
              March
                  7, 2008Philip
                  A. Baratelli
              
              (principal
                  financial officer)*/s/
                  Donald L. House*
              
              Director
              
              March
                  7, 2008Donald
                  L. House*/s/
                  Burtt R. Ehrlich*
              
              Director
              
              March
                  7, 2008Burtt
                  R. Ehrlich*/s/
                  Nicholas Sokolow*
              
              Director
              
              March
                  7, 2008Nicholas
                  Sokolow


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            of Contents*




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





The
      Board
      of Directors and Stockholders


of
      Clarus
      Corporation:





Under
      date of March 7, 2008, we reported on the consolidated balance sheets of Clarus
      Corporation and subsidiaries as of December 31, 2007 and 2006, 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, 2007, which are included in the Clarus Corporation 2007 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. This financial statement schedule is the responsibility
      of
      Clarus Corporation's management. Our responsibility is to express an opinion
      on
      this financial statement schedule based on our audits.





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






*/s/
      KPMG LLP*


*KPMG
        LLP*
 *Stamford,
        Connecticut*
 *March
        7, 2008*
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              51 -
 *Table
              of Contents*
  **Schedule
        II**





Valuation
      and Qualifying Accounts


Clarus
      Corporation and Subsidiaries


For
      the
      years ended December 31, 2007, 2006 and 2005


Valuation
      Allowance for Deferred Income Tax Assets and Restructuring and Related
      Charges




ChargedBalance
                  at
              
              (Credited)
                  to
              
              
              
              Balance
                  atBeginning
                  of
              
              Costs
                  and
              
              
              
              End
                  ofPeriod
              
              Expenses
              
              Deductions
                  (a)
              
              PeriodValuation
                  Allowance for Deferred Income Tax Assets2005
              
              $
              96,606,000
              
              $
              (3,901,000
              )
              $
              —
              
              $
              92,705,0002006
              
              
              92,705,000
              
              
              (220,000
              )
              
              —
              
              
              92,485,0002007
              
              $
              92,485,000
              
              $
              (5,069,000
              )
              $
              —
              
              $
              87,416,000Restructuring
                  Accruals2005
              
              $
              73,000
              
              
              —
              
              $
              56,000
              
              $
              17,0002006
              
              $
              17,000
              
              
              —
              
              $
              17,000
              
              
              —


(a)
            Deductions
                related to restructuring and related accruals represent cash payments.





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**EXHIBIT
      INDEX**






Number
            Exhibit  23.1
            Consent
                of Independent Registered Public Accounting
                Firm.




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





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





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





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





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