UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K


FOR
ANNUAL AND TRANSITION REPORTS PURSUANT TO


SECTIONS
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





(Mark
One)


x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For the
fiscal year ended December 31, 2008





 ̈ 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  ̈  NOx





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
 ̈  NOx





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





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





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





The
aggregate market value of the voting stock and non-voting common equity held by
non-affiliates of the Registrant at June 30, 2008 was approximately $76.9
million based on $5.60 per share, the closing price of the common stock as
quoted on the OTC Pink Sheets Electronic Quotation Service.





The
number of shares of the Registrant's common stock outstanding at February 24,
2009 was 17,366,747 shares.





DOCUMENT
INCORPORATED BY REFERENCE





Portions
of our Proxy Statement for the 2009 Annual Meeting of Stockholders to be filed
with the Securities and Exchange Commission within 120 days of the Registrant's
2008 fiscal year end are incorporated by reference into Part III of this
report.








TABLE
OF CONTENTS




PAGEPART
      IITEM
      1.
                                                                                                    
                                                                                                    BUSINESS
                                                                                                    
                                                                                                    1FORWARD-LOOKING
      STATEMENTS
                                                                                                    
                                                                                                    1OVERVIEW
                                                                                                    
                                                                                                    1BUSINESS
                                                                                                    
                                                                                                    1PRIOR
      BUSINESS
                                                                                                    
                                                                                                    2EMPLOYEES
                                                                                                    
                                                                                                    3AVAILABLE
      INFORMATION
                                                                                                    
                                                                                                    3ITEM
      1A.
                                                                                                    
                                                                                                    RISK
      FACTORS
                                                                                                    
                                                                                                    4ITEM
      1B.
                                                                                                    
                                                                                                    UNRESOLVED
      STAFF COMMENTS
                                                                                                    
                                                                                                    10ITEM
      2.
                                                                                                    
                                                                                                    PROPERTIES
                                                                                                    
                                                                                                    10ITEM
      3.
                                                                                                    
                                                                                                    LEGAL
      PROCEEDINGS
                                                                                                    
                                                                                                    10ITEM
      4.
                                                                                                    
                                                                                                    SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                                                                                                    
                                                                                                    10PART
      IIITEM
      5.
                                                                                                    
                                                                                                    MARKET
      FOR REGISTRANT’S 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
                                                                                                    
                                                                                                    22ITEM
      8.
                                                                                                    
                                                                                                    FINANCIAL
      STATEMENTS AND SUPPLEMENTAL DATA
                                                                                                    
                                                                                                    23ITEM
      9.
                                                                                                    
                                                                                                    CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE
                                                                                                    
                                                                                                    44ITEM
      9A.
                                                                                                    
                                                                                                    CONTROLS
      AND PROCEDURES
                                                                                                    
                                                                                                    44ITEM
      9B
                                                                                                    
                                                                                                    OTHER
      INFORMATION
                                                                                                    
                                                                                                    44PART
      IIIITEM
      10.
                                                                                                    
                                                                                                    DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT
                                                                                                    
                                                                                                    45ITEM
      11.
                                                                                                    
                                                                                                    EXECUTIVE
      COMPENSATION
                                                                                                    
                                                                                                    45ITEM
      12.
                                                                                                    
                                                                                                    SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                                                                                                    
                                                                                                    45ITEM
      13.
                                                                                                    
                                                                                                    CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS
                                                                                                    
                                                                                                    45ITEM
      14.
                                                                                                    
                                                                                                    PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                                                                                                    
                                                                                                    45PART
      IVITEM
      15.
                                                                                                    
                                                                                                    EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES
                                                                                                    
                                                                                                    46SIGNATURES
                                                                                                    
                                                                                                    49EXHIBIT
      INDEX
                                                                                                    
                                                                                                    52





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 seeks to
reduce significantly our cash expenditure rate by targeting, to the extent
practicable, our overhead expenses excluding transaction expenses to the amount
of our investment income until the completion of an acquisition or
merger.  Management currently believes, however, that the Company's
operating expenses will exceed investment income during 2009 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 under
certain contracts, agreements and commitments related to the transferred assets.
We remained responsible for all of our other liabilities, liabilities under
certain contracts, including 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.


1





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
(“EBITDA”) 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.





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.





As of
December 31, 2008, our investment portfolio comprising our cash, cash
equivalents and marketable securities was valued at approximately $86 million
and consists primarily of United States government agency securities and money
market funds held in a custody account at JP Morgan Chase with a weighted
average maturity of 65 days as of January 31, 2009.  Any reduction in
the amount of our investment portfolio may limit our ability to redeploy our
assets and use our cash, cash equivalents and marketable securities to acquire
an operating business which could have a material adverse effect on the market
price of our common stock and our business, financial condition and results of
operations.





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.


2





EMPLOYEES





All of
our employees are based in the United States. As of December 31, 2008, we had a
total of eleven 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.





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 employees, including Mr. Kanders devote
as much of their time as is necessary to the affairs of the
Company.





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 1, 2009 are as
follows:




Warren B.
Kanders, 51, 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.  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, Mr. Kanders 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, he 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, 41, 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.  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 under the section
titled “Investor Relations”. 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.





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.


3





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 in
2002, we 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 $284.5 million from our inception
through December 31, 2008. 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 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.





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.


4





RECENT
TURMOIL ACROSS VARIOUS SECTORS OF THE FINANCIAL MARKETS MAY NEGATIVELY IMPACT
THE COMPANY’S BUSINESS, FINANCIAL CONDITION AND/OR OPERATING
RESULTS.





Recently,
the various sectors of the credit markets and the financial services industry
have been experiencing a period of unprecedented turmoil and upheaval
characterized by the disruption in credit markets and availability of credit and
other financing, the failure, bankruptcy, collapse or sale of various financial
institutions and an unprecedented level of intervention from the United States
federal government. While the ultimate outcome of these events cannot be
predicted, they may have a material adverse effect on our ability to obtain
financing necessary to effectively execute our redeployment strategy and on the
market value of our investment portfolio and otherwise on our ability to
redeploy our assets and use our cash, cash equivalents and marketable securities
to acquire an operating business, this 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.





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.


5





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.





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.  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.





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.





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.





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.


6





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;


7





· cultural and language
differences;





· employment
regulations;





· 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.





THE
COMPANY’S INVESTMENT PORTFOLIO CONSISTS OF SHORT-TERM, UNSECURED UNITED STATES
AGENCY DEBT AND MONEY MARKET FUNDS THAT ARE SUBJECT TO CREDIT RISK.





The
Company’s investment portfolio includes a significant amount of short-term,
unsecured debt issued by the Federal National Mortgage Association (“Fannie
Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) as well as
money market funds. Although these organizations have been chartered by the
United States Congress and are most commonly referred to as government-sponsored
enterprises, neither Fannie Mae nor Freddie Mac are backed or funded by the U.S.
government, nor do the securities they issue benefit from any explicit
government guarantee or protection. As a result of the subprime mortgage crisis
of late 2007 and 2008, Fannie Mae and Freddie Mac were adversely affected and in
July of 2008 the United States government took action to prevent the collapse of
both corporations.





While the
Company continues to monitor the value of its investment portfolio and its
investment in government-sponsored enterprises, we cannot give any assurance
that we will not suffer any future losses to our investment portfolio as a
result of our ownership of government-sponsored enterprises. Any reduction in
the amount of our investment portfolio may limit our ability to redeploy our
assets and use our cash, cash equivalents and marketable securities to acquire
an operating business which could have a material adverse effect on the market
price of our common stock and our business, financial condition and results of
operations.


8





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.





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.


9





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





ITEM
2. PROPERTIES





Our
corporate headquarters is currently located in Stamford, Connecticut where we
lease approximately 8,600 square feet for $28,960 per month, pursuant to a
lease, which expires on March 31, 2019.





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.





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,
2008.


10


PART
II





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





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 2009First
      Quarter (through February 24, 2009)
                  
                  $
                  4.34
                  
                  
                  $
                  4.03Year
      ended December 31, 2008First
      Quarter
                  
                  $
                  6.47
                  
                  
                  $
                  5.60Second
      Quarter
                  
                  $
                  6.42
                  
                  
                  $
                  5.55Third
      Quarter
                  
                  $
                  5.85
                  
                  
                  $
                  5.01Fourth
      Quarter
                  
                  $
                  5.20
                  
                  
                  $
                  4.02Year
      ended December 31, 2007First
      Quarter
                  
                  $
                  8.20
                  
                  
                  $
                  7.05Second
      Quarter
                  
                  $
                  9.80
                  
                  
                  $
                  8.05Third
      Quarter
                  
                  $
                  9.85
                  
                  
                  $
                  6.75Fourth
      Quarter
                  
                  $
                  7.30
                  
                  
                  $
                  5.73





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, 2003 and ending on December 31, 2008 (the “Measuring
Period”).  The graph assumes that the value of the investment in our
common stock and each index was $100 on December 31, 2003.  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




COMPARISON
OF CUMULATIVE TOTAL RETURN*




AMONG
CLARUS, THE NASDAQ NATIONAL MARKET COMPOSITE AND


THE
RUSSELL 2000 INDEX





12/31/03
                        
                        
                        12/31/04
                        
                        
                        12/31/05
                        
                        
                        12/31/06
                        
                        
                        12/31/07
                        
                        
                        12/31/08CLARUS
      CORPORATION
                        
                        $
                        100.00
                        
                        
                        $
                        123.29
                        
                        
                        $
                        114.38
                        
                        
                        $
                        96.58
                        
                        
                        $
                        80.82
                        
                        
                        $
                        58.22NASDAQ
      NATIONALMARKET
      COMPOSITE
                        
                        $
                        100.00
                        
                        
                        $
                        108.59
                        
                        
                        $
                        110.09
                        
                        
                        $
                        120.56
                        
                        
                        $
                        132.39
                        
                        
                        $
                        78.72THE
      RUSSELL 2000 INDEX
                        
                        $
                        100.00
                        
                        
                        $
                        117.00
                        
                        
                        $
                        120.88
                        
                        
                        $
                        141.43
                        
                        
                        $
                        137.55
                        
                        
                        $
                        89.68










*
$100 INVESTED ON 12/31/03 IN STOCK OR INDEX -


INCLUDING
REINVESTMENT OF DIVIDENDS.


12





STOCKHOLDERS





On
February 24, 2009, the last reported sales price for our common stock was $4.05
per share. As of February 24, 2009, there were 132 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 2008.





SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS





The
following table sets forth certain information regarding our equity plans as of
December 31, 2008:





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))Equity
      compensation plans approved by security holders (1)
                    
                    
                    1,308,750
                    
                    
                    $
                    5.25
                    
                    
                    
                    4,406,517Equity
      compensation plans not approved by security holders (2) (3)
      (4)
                    
                    
                    1,100,000
                    
                    
                    $
                    7.83
                    
                    
                    
                    —Total
                    
                    
                    2,408,750
                    
                    
                    $
                    6.42
                    
                    
                    
                    4,406,517





(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
on December 20, 2003 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 on
December 20, 2003 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 on April 11, 2003, 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.


13





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 31,2008
                        
                        
                        2007
                        
                        
                        2006
                        
                        
                        2005
                        
                        
                        2004(in
      thousands, except per share data)Statement of Operations
    Data:Revenues:License
      fees
                        
                        $
                        —
                        
                        
                        $
                        —
                        
                        
                        $
                        —
                        
                        
                        $
                        —
                        
                        
                        $
                        1,106Total
      Revenues
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        1,106Operating
      expenses:General
      and administrative
                        
                        
                        4,517
                        
                        
                        
                        3,767
                        
                        
                        
                        3,530
                        
                        
                        
                        3,504
                        
                        
                        
                        3,395Transaction
      expense
                        
                        
                        —
                        
                        
                        
                        (13
                        )
                        
                        
                        1,431
                        
                        
                        
                        (59
                        )
                        
                        
                        1,636Depreciation
                        
                        
                        356
                        
                        
                        
                        359
                        
                        
                        
                        346
                        
                        
                        
                        334
                        
                        
                        
                        186Total
      Operating Expenses
                        
                        
                        4,873
                        
                        
                        
                        4,113
                        
                        
                        
                        5,307
                        
                        
                        
                        3,779
                        
                        
                        
                        5,217Operating
      Loss
                        
                        
                        (4,873
                        )
                        
                        
                        (4,113
                        )
                        
                        
                        (5,307
                        )
                        
                        
                        (3,779
                        )
                        
                        
                        (4,111
                        )Other
      (expense) income
                        
                        
                        (2
                        )
                        
                        
                        (6
                        )
                        
                        
                        —
                        
                        
                        
                        (2
                        )
                        
                        
                        19Interest
      income
                        
                        
                        2,473
                        
                        
                        
                        4,239
                        
                        
                        
                        4,016
                        
                        
                        
                        2,490
                        
                        
                        
                        1,203Net
      (Loss) Income Before Income Tax
                        
                        $
                        (2,402
                        )
                        
                        $
                        120
                        
                        
                        $
                        (1,291
                        )
                        
                        $
                        (1,291
                        )
                        
                        $
                        (2,889
                        )Income
      tax
                        
                        
                        —
                        
                        
                        
                        3
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Net
      (Loss) Income
                        
                        $
                        (2,402
                        )
                        
                        $
                        117
                        
                        
                        $
                        (1,291
                        )
                        
                        $
                        (1,291
                        )
                        
                        $
                        (2,889
                        )(Loss)
      Income Per ShareBasic
                        
                        $
                        (0.14
                        )
                        
                        $
                        0.01
                        
                        
                        $
                        (0.08
                        )
                        
                        $
                        (0.08
                        )
                        
                        $
                        (0.18
                        )Diluted
                        
                        $
                        (0.14
                        )
                        
                        $
                        0.01
                        
                        
                        $
                        (0.08
                        )
                        
                        $
                        (0.08
                        )
                        
                        $
                        (0.18
                        )Weighted
      Average Common Shares OutstandingBasic
                        
                        
                        16,867
                        
                        
                        
                        16,658
                        
                        
                        
                        16,613
                        
                        
                        
                        16,329
                        
                        
                        
                        16,092Diluted
                        
                        
                        16,867
                        
                        
                        
                        17,051
                        
                        
                        
                        16,613
                        
                        
                        
                        16,329
                        
                        
                        
                        16,092





Balance Sheet Data:
                
                As of December 31,2008
                
                
                2007
                
                
                2006
                
                
                2005
                
                
                2004Cash
      and cash equivalents
                
                $
                19,342
                
                
                $
                41,886
                
                
                $
                1,731
                
                
                $
                23,270
                
                
                $
                48,377Marketable
      securities
                
                $
                66,670
                
                
                $
                45,223
                
                
                $
                82,634
                
                
                $
                61,601
                
                
                $
                35,119Total assets
                
                $
                87,177
                
                
                $
                88,680
                
                
                $
                86,673
                
                
                $
                88,278
                
                
                $
                86,437Total
      stockholders' equity
                
                $
                86,384
                
                
                $
                87,719
                
                
                $
                85,716
                
                
                $
                86,609
                
                
                $
                84,854


14





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, 2008 AND ANY FUTURE PERIODS
PRIOR TO A REDEPLOYMENT OF OUR ASSETS ARE EXPECTED PRIMARILY TO REFLECT GENERAL
AND ADMINISTRATIVE EXPENSES AND TRANSACTION EXPENSES ASSOCIATED WITH THE
CONTINUING ADMINISTRATION OF THE COMPANY AND ITS EFFORTS TO REDEPLOY ITS
ASSETS.





CRITICAL
ACCOUNTING POLICIES AND USE OF ESTIMATES





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





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





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


15





- 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.





SOURCES
OF REVENUE





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, non-cash
equity compensation, rent, insurance, legal, accounting, investment management
fees 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.





COMPARISON
OF RESULTS OF OPERATIONS BETWEEN THE YEARS ENDED DECEMBER 31, 2008 AND
2007





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, 2008 and 2007 were zero.





GENERAL
AND ADMINISTRATIVE EXPENSE





General
and administrative expenses increased $750,000 or 20%, to $4.5 million during
the year ended December 31, 2008, compared to $3.8 million during the year ended
December 31, 2007.  The increase in general and administrative expense
for the year ended December 31, 2008 compared to the year ended December 31,
2007 was primarily attributable to increases in non-cash equity compensation
expense, investment custody fees, employment compensation and benefits, and
consulting fees offset by decreases in state and local non income based taxes,
rent, and insurance expense.  Management expects that the Company will
incur a net loss in fiscal 2009 based on our current level of expenses and lower
projected investment yields on our investment portfolio.





General
and administrative expenses include salaries and employee benefits, non-cash
equity compensation, rent, insurance, legal, accounting, investment management
fees 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.


16





TRANSACTION
EXPENSE





Transaction
expenses for the year ended December 31, 2008 were zero compared to a credit
balance of $13,000 during the same period in 2007.  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.





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 decreased $3,000 or 1%, to $356,000 for the year ended December 31,
2008, compared to $359,000 in the year ended December 31,
2007.   The decrease is primarily attributable to the disposal of
computer equipment.





OTHER
INCOME (LOSS)





For the
year ended December 31, 2008, the Company recorded a loss of $2,000 from the
disposal of equipment compared to the year ended December 31, 2007 when the
Company recorded a loss of $6,000 from the disposal of equipment.





INTEREST
INCOME





Interest
income decreased $1.7 million or 42%, to $2.5 million for the year ended
December 31, 2008 compared to $4.2 million for the year ended December 31, 2007.
Interest income for the years ended December 31, 2008 and 2007, includes $1.9
million and $2.9 million in discount accretion and premium amortization,
respectively.  The decrease in interest income was due primarily to
lower rates of return on investments as well as lower levels of cash available
for investment.   The weighted average interest rate for our
investments for the year ended December 31, 2008 was 2.89% compared to 4.95% for
the year ended December 31, 2007.  The current earnings rate as of
December 31, 2008 is 2.58%.





The
current earnings rate as of January 31, 2009 is 2.08%.  As of February
12, 2009, the current yield on the Company’s portfolio is 2.01% down 0.07% from
January 31, 2009, due to declining interest rates.





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 year ended December
31, 2008 compared to the year ended December 31, 2007, when the Company recorded
a provision of $3,000 for income taxes.  The income tax provision in
2007 was a result of the federal alternative minimum tax
provisions.





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





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 equity compensation 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.  General and administrative expenses include salaries and
employee benefits, non-cash equity compensation, rent, insurance, legal,
accounting , investment management fees 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.


17





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.





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 $2.9 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 was 4.28%.





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.





LIQUIDITY AND CAPITAL RESOURCES





The
overall combined decrease of $1.1 million in cash, cash equivalents and
marketable securities from $87.1 million to $86.0 million is primarily due to
the decrease in interest income and an increase in operating expenses for the
twelve month period ended December 31, 2008.  The Company's cash and
cash equivalents decreased to $19.3 million at December 31, 2008 from $41.9
million at December 31, 2007 due to a shift in the composition of the investment
portfolio to marketable securities.  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 increased to $66.7 million at December
31, 2008 from $45.2 million at December 31, 2007.





Cash used
in operating activities was approximately $3.4 million during the year ended
December 31, 2008 compared to cash used by operating activities of approximately
$1.6 million in the year ended December 31, 2007.  The increase in
cash used by operations was primarily attributable to the Company’s net loss, a
decrease in accounts payable and accrued expenses and an increase in discount
amortization offset by a decrease in accrued interest receivable, prepaids and
other current assets and an increase in deferred rent and non-cash
items.  Management currently believes, however, that the Company's
operating expenses will exceed investment income during 2009, due to the
declining interest rate environment.





Cash used
by investing activities was approximately $19.1 million during the year ended
December 31, 2008.  The cash was used for the purchase of marketable
securities and additions to computer and office equipment partially offset by
the maturity of marketable securities.  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.





There was
no cash provided by financing activities during the year ended December 31,
2008.  There were no stock option exercises during the year ended
December 31, 2008.  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.





We
believe our working capital will continue to be sufficient to fund our
operations until such time we identify an appropriate acquisition opportunity as
part of our asset redeployment strategy.  However, we may need to
obtain financing to effectively execute our redeployment strategy and consummate
a merger or acquisition.  Additionally, following the redeployment of
our assets, if our cash on hand is insufficient, we may need to obtain
additional financing in order to meet such future working capital
obligations.


18


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 2008,
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, $268,000 and $301,000,
respectively related to unvested restricted stock under SFAS 123R for the years
ended December 31, 2008, 2007 and 2006.  For the years ended December
31, 2008 and 2007, the Company incurred compensation expense of approximately
$409,000 and $176,000 respectively, related to stock options.  For the
year ended December 31, 2006 the Company incurred no compensation expense
related to options under SFAS 123R.





On
September 24, 2008, the Company issued 60,000 stock options, under the Company’s
2005 Stock Incentive Plan (the “2005 Plan”), to directors of the
Company.  The stock options vest and become exercisable in four equal
consecutive quarterly tranches commencing on September 30, 2008.  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 yearDividend
      Yield
                                
                                
                                0.00
                                %Expected
      volatility
                                
                                
                                28.95
                                %Risk-free
      interest rate
                                
                                
                                2.98
                                %Expected
      life
                                
                                5.31 yearsWeighted
      average fair value
                                
                                $
                                1.61





The
expected life in years is based on the “simplified” calculation provided for in
SEC Staff Accounting Bulletin No. 107. The simplified method determines the
expected life in years based on the vesting period and contractual terms as set
forth when the award is made. The Company continues to use the simplified method
for awards of stock-based compensation after January 1, 2008 as permitted
by SEC Staff Accounting Bulletin 110 (“SAB No. 110”), since it does not
have the necessary historical exercise and forfeiture data to determine an
expected life for stock options. Originally, the use of the simplified method
was due to expire on December 31, 2007, but SAB No. 110 permits
continued use of the simplified method if the Company concludes that it is not
reasonable to base its estimate of expected term on its experience with
historical exercise patterns.  Using these assumptions, the fair value
of the stock options granted during the year ended December 31, 2008 was
approximately $96,750 which will be amortized over the vesting period of the
options.





On
December 13, 2007, the Company issued 430,000 stock options, under the Company’s
2005 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.





At
December 31, 2008, 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 $229.8 million, $1.3 million and
$56,000, respectively, which expire in varying amounts beginning in the year
2009. The Company also had a capital loss carryforward of $1.6 million which
expired 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 $225.4 million of the $229.8 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 $225.4 million of net operating losses available to offset taxable
income, approximately $207.8 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:


19





Net
Operating Loss And Capital Loss Carryforward Expiration Dates*


(Unaudited)


December
31, 2008





Net Operating
                    LossExpiration Dates
                    December 31
                  
                  Amount
                    (000’s)2009
                  
                  $
                  1,9002010
                  
                  
                  7,4172011
                  
                  
                  7,5202012
                  
                  
                  5,1572020
                  
                  
                  29,5332021
                  
                  
                  50,4302022
                  
                  
                  115,0002023
                  
                  
                  5,7122024
                  
                  
                  3,5662025
                  
                  
                  1,7072026
                  
                  
                  4762028
                  
                  
                  1,372Total
                  
                  
                  229,790Section
      382 limitation
                  
                  
                  (4,428
                  )After
      Limitations
                  
                  $
                  225,362





*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, 2008 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
      Lease Obligations
                      
                      $
                      2,005
                      
                      
                      $
                      426
                      
                      
                      $
                      1,579
                      
                      
                      $
                      —
                      
                      
                      $
                      —Total
                      
                      $
                      2,005
                      
                      
                      $
                      426
                      
                      
                      $
                      1,579
                      
                      
                      $
                      —
                      
                      
                      $
                      —





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.


20





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 $28,960 a month during 2008, pursuant
to a lease that includes annual rent escalations, which expires on March 31,
2019.





In
September 2003, the Company and Kanders & Company, an entity owned and
controlled by the Company's Executive Chairman, Warren B. Kanders, entered into
a 15-year lease with a five-year renewal option, as co-tenants to lease
approximately 11,500 square feet in Stamford, Connecticut. The Company and
Kanders & Company have initially agreed to allocate the total lease payments
of $24,438 per month on the basis of Kanders & Company renting 2,900 square
feet initially for $6,163 per month, and the Company renting 8,600 square feet
initially for $18,275 per month, which are subject to increase during the term
of the lease. Presently the Company pays $22,960 a month for its portion 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.





NEW
ACCOUNTING PRONOUNCEMENTS




In March
2008, the Financial Accounting Standards Board (“FASB”)  issued
Statement of Financial Accounting Standard (“SFAS”) No. 161, Disclosures about
Derivative Instruments and Hedging Activities (“SFAS 161”), which amends SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS
133”) and requires enhanced disclosures about how and why an entity uses
derivative instruments, how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations, and how derivative
instruments and related hedge items affect an entity’s financial position,
financial performance, and cash flows.  SFAS 161 also requires the
disclosure of the fair values of derivative instruments and their gains and
losses in a tabular format and requires cross-referencing within the footnote of
important information about derivative instruments.  SFAS 161 is effective
for financial statements issued for fiscal years beginning on or after November
15, 2008.  The Company does not believe SFAS 161 will change its current
practices and therefore believes it will not impact preparation of the
consolidated financial statements.




In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS 162”).  This standard identifies sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with U.S. generally accepted accounting
principles.  The Company does not believe SFAS 162 will change its current
practices and therefore believes it will not impact preparation of the
consolidated financial statements.




In
February 2007, the FASB issued SFAS 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 on November 15, 2007 and is being applied
prospectively.  The adoption of this pronouncement has had no impact
on the Company’s consolidated financial statements.





In
December 2007, the FASB released SFAS No. 141(R), Business Combinations (revised
2007) (“SFAS 141(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 adoption of this
pronouncement will have no impact on the Company’s consolidated financial
statements and is not anticipated to affect the Company until an acquisition is
completed.





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 adoption of this pronouncement will have no impact on the
Company’s consolidated financial statements.


21


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 partial adoption of this
pronouncement had no impact on the Company’s consolidated financial
statements.  Adopting the remainder of the provision is not expected
to have an impact on the Company’s consolidated financial
statements.  See more information in Note 1.





QUARTERLY
DATA





The
following table sets forth selected quarterly data for the years ended December
31, 2008 and 2007 (in thousands, except per share data).
The operating results are not indicative of results for any future
period.





2008First
                  
                  
                  Second
                  
                  
                  Third
                  
                  
                  FourthQuarter
                  
                  
                  Quarter
                  
                  
                  Quarter
                  
                  
                  QuarterRevenues
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —Operating
      loss
                  
                  $
                  (1,239
                  )
                  
                  $
                  (1,342
                  )
                  
                  $
                  (1,249
                  )
                  
                  $
                  (1,043
                  )Net
      (loss) income before taxes
                  
                  $
                  (417
                  )
                  
                  $
                  (783
                  )
                  
                  $
                  (715
                  )
                  
                  $
                  (487
                  )Net
      (loss) income
                  
                  $
                  (417
                  )
                  
                  $
                  (783
                  )
                  
                  $
                  (715
                  )
                  
                  $
                  (487
                  )Net
      (loss) income per share:Basic
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.05
                  )
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.03
                  )Diluted
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.05
                  )
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.03
                  )





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
                  )





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.  Our investment portfolio consists primarily of United
States government agency securities and money market funds held in a custody
account at JP Morgan Chase with a weighted average maturity of 65 days as of
January 31, 2009.  The Company has continued to monitor its investment
in U.S. Government Agency securities and money market funds and has not incurred
any losses.  The Company’s investment portfolio includes a significant
amount of short-term, unsecured debt issued by the Federal National Mortgage
Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation
(“Freddie Mac”).  We believe investments in U.S. Government Agency
securities and money market funds are stable and provide an increased yield over
similar duration U.S. Treasury securities.  As a result of the
subprime mortgage crisis of late 2007 and 2008, on September 8, 2008, Fannie Mae
and Freddie Mac were placed into conservatorship by the U.S. Government which
gives the U.S. Government control and oversight over management of Fannie Mae
and Freddie Mac.


22


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
                          
                          24Consolidated
      Balance Sheets -December 31, 2008 and 2007
                          
                          25Consolidated
      Statements of Operations -Years Ended December 31, 2008, 2007 and
      2006
                          
                          26Consolidated
      Statements of Stockholders' Equity and Comprehensive Loss -Years Ended
      December 31, 2008, 2007 and 2006
                          
                          27Consolidated
      Statements of Cash Flows -Years Ended December 31, 2008, 2007 and
      2006
                          
                          29Notes
      to Consolidated Financial Statements
                          
                          30





23




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, 2008 and 2007, 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, 2008. We also have audited the Company’s internal
control over financial reporting as of December 31, 2008, 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, 2008 and 2007, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31,
2008, in conformity with U.S. generally accepted accounting principles. Also in
our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2008, 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, the Company
adopted the provisions of Financial Accounting Standards Board  No.
123(R), Share-Based Payments as of January 1, 2006.





/s/ KPMG LLPStamford,
      ConnecticutMarch
      3, 2009




24





CLARUS
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


December
31, 2008 and 2007


(In
Thousands, Except Share and Per Share Amounts)





2008
                        
                        
                        2007ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                        
                        $
                        19,342
                        
                        
                        $
                        41,886Marketable
      securities
                        
                        
                        66,670
                        
                        
                        
                        45,223Interest
      receivable
                        
                        
                        24
                        
                        
                        
                        15Prepaids
      and other current assets
                        
                        
                        109
                        
                        
                        
                        175Total
      current assets
                        
                        
                        86,145
                        
                        
                        
                        87,299PROPERTY
      AND EQUIPMENT, NET
                        
                        
                        1,032
                        
                        
                        
                        1,381Total
      assets
                        
                        $
                        87,177
                        
                        
                        $
                        88,680LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      payable and accrued liabilities
                        
                        $
                        383
                        
                        
                        $
                        618Total
      current liabilities
                        
                        
                        383
                        
                        
                        
                        618Deferred
      rent
                        
                        
                        410
                        
                        
                        
                        343Total
      liabilities
                        
                        
                        793
                        
                        
                        
                        961COMMITMENTS
      AND CONTINGENCIES (Note 7)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 17,441,747 shares issued; and 17,366,747 and
17,366,747outstanding
      in 2008 and 2007, respectively
                        
                        
                        2
                        
                        
                        
                        2Additional
      paid-in capital
                        
                        
                        370,504
                        
                        
                        
                        369,827Accumulated
      deficit
                        
                        
                        (284,523
                        )
                        
                        
                        (282,121
                        )Less
      treasury stock, 75,000 shares at cost
                        
                        
                        (2
                        )
                        
                        
                        (2
                        )Accumulated
      other comprehensive income
                        
                        
                        403
                        
                        
                        
                        13Total
      stockholders' equity
                        
                        
                        86,384
                        
                        
                        
                        87,719Total
      liabilities and stockholders' equity
                        
                        $
                        87,177
                        
                        
                        $
                        88,680





See
accompanying notes to consolidated financial statements.


25





CLARUS
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


Years
Ended December 31, 2008, 2007 and 2006


(In
Thousands, Except Per Share Amounts)





2008
                  
                  
                  2007
                  
                  
                  2006REVENUES:Total
      revenues
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  —OPERATING
      EXPENSES:General
      and administrative
                  
                  
                  4,517
                  
                  
                  
                  3,767
                  
                  
                  
                  3,530Transaction
      expense
                  
                  
                  —
                  
                  
                  
                  (13
                  )
                  
                  
                  1,431Depreciation
                  
                  
                  356
                  
                  
                  
                  359
                  
                  
                  
                  346Total
      operating expenses
                  
                  
                  4,873
                  
                  
                  
                  4,113
                  
                  
                  
                  5,307OPERATING
      LOSS
                  
                  
                  (4,873
                  )
                  
                  
                  (4,113
                  )
                  
                  
                  (5,307
                  )OTHER
      EXPENSE
                  
                  
                  (2
                  )
                  
                  
                  (6
                  )
                  
                  
                  —INTEREST
      INCOME
                  
                  
                  2,473
                  
                  
                  
                  4,239
                  
                  
                  
                  4,016NET
      (LOSS) INCOME BEFORE TAXES
                  
                  
                  (2,402
                  )
                  
                  
                  120
                  
                  
                  
                  (1,291
                  )INCOME
      TAXES
                  
                  
                  —
                  
                  
                  
                  3
                  
                  
                  
                  —NET
      (LOSS) INCOME
                  
                  $
                  (2,402
                  )
                  
                  $
                  117
                  
                  
                  $
                  (1,291
                  )NET
      (LOSS) INCOME PER SHAREBasic
                  
                  $
                  (0.14
                  )
                  
                  $
                  0.01
                  
                  
                  $
                  (0.08
                  )Diluted
                  
                  $
                  (0.14
                  )
                  
                  $
                  0.01
                  
                  
                  $
                  (0.08
                  )WEIGHTED
      AVERAGE COMMON SHARES OUTSTANDINGBasic
                  
                  
                  16,867
                  
                  
                  
                  16,658
                  
                  
                  
                  16,613Diluted
                  
                  
                  16,867
                  
                  
                  
                  17,051
                  
                  
                  
                  16,613





See
accompanying notes to consolidated financial statements.


26


CLARUS CORPORATION AND
SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY AND


COMPREHENSIVE
LOSS


Years
Ended December 31, 2008, 2007 and 2006


(In
Thousands)





AccumulatedAdditional
                        
                        
                        
                        
                        
                        Treasury
                        
                        
                        OtherCommon Stock
                        
                        
                        Paid-In
                        
                        
                        Accumulated
                        
                        
                        Stock
                        
                        
                        ComprehensiveShares
                        
                        
                        Amount
                        
                        
                        Capital
                        
                        
                        Deficit
                        
                        
                        Shares
                        
                        
                        Amount
                        
                        
                        Income (loss)BALANCES,
      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
                        )
                        
                        
                        13Exercise
      of stock options
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Equity
      compensation
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        677
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Net
      loss
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (2,402
                        )
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Increase
      in unrealized gain on marketable securities
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        390BALANCES,
      December 31, 2008
                        
                        
                        17,442
                        
                        
                        $
                        2
                        
                        
                        $
                        370,504
                        
                        
                        $
                        (284,523
                        )
                        
                        
                        (75
                        )
                        
                        $
                        (2
                        )
                        
                        $
                        403





See
accompanying notes to consolidated financial statements.


27


CLARUS
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY AND


COMPREHENSIVE
LOSS (Cont.)


Years
Ended December 31, 2008, 2007 and 2006


(In
Thousands)





Deferred
                          
                          
                          Total
                            Stockholders'
                          
                          
                          ComprehensiveCompensation
                          
                          
                          Equity
                          
                          
                          LossBALANCES,
      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
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          121BALANCES,
      December 31, 2007
                          
                          
                          —
                          
                          
                          
                          87,719
                          
                          
                          
                          —Exercise
      of stock options
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —Equity
      compensation
                          
                          
                          —
                          
                          
                          
                          677
                          
                          
                          
                          —Net
      loss.
                          
                          
                          —
                          
                          
                          
                          (2,402
                          )
                          
                          
                          (2,402
                          )Increase
      in unrealized gain on marketable securities
                          
                          
                          —
                          
                          
                          
                          390
                          
                          
                          
                          390Total
      comprehensive loss
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          (2,012
                          )BALANCES,
      December 31, 2008
                          
                          $
                          —
                          
                          
                          $
                          86,384





See
accompanying notes to consolidated financial statements.


28





CLARUS
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


Years
Ended December 31, 2008, 2007 and 2006


(In
Thousands, Except Share Amounts)





2008
                  
                  
                  2007
                  
                  
                  2006OPERATING
      ACTIVITIES:Net
      (loss) income
                  
                  $
                  (2,402
                  )
                  
                  $
                  117
                  
                  
                  $
                  (1,291
                  )Adjustments
      to reconcile net (loss) income to net cash used in operating
      activities:Depreciation
      of property and equipment
                  
                  
                  356
                  
                  
                  
                  359
                  
                  
                  
                  346Amortization
      of (discount) and premium on securities, net
                  
                  
                  (1,945
                  )
                  
                  
                  (2,929
                  )
                  
                  
                  (2,405
                  )Equity
      compensation
                  
                  
                  677
                  
                  
                  
                  444
                  
                  
                  
                  301Changes
      in operating assets and liabilities:Decrease/(increase)
      in interest receivable, prepaids and other current assets
                  
                  
                  57
                  
                  
                  
                  419
                  
                  
                  
                  (154
                  )Decrease
      in deposits and other long-term assets
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  956Decrease
      in accounts payable and accrued liabilities
                  
                  
                  (235
                  )
                  
                  
                  (62
                  )
                  
                  
                  (781
                  )Increase
      in deferred rent
                  
                  
                  67
                  
                  
                  
                  66
                  
                  
                  
                  69Net
      cash used in operating activities
                  
                  
                  (3,425
                  )
                  
                  
                  (1,586
                  )
                  
                  
                  (2,959
                  )INVESTING
      ACTIVITIES:Purchase
      of marketable securities
                  
                  
                  (110,105
                  )
                  
                  
                  (150,803
                  )
                  
                  
                  (161,004
                  )Proceeds
      from the sale and maturity of marketable securities
                  
                  
                  90,993
                  
                  
                  
                  191,147
                  
                  
                  
                  142,473Purchase
      of property and equipment
                  
                  
                  (7
                  )
                  
                  
                  (48
                  )
                  
                  
                  (49
                  )Disposal
      of property and equipment
                  
                  
                  —
                  
                  
                  
                  7
                  
                  
                  
                  —Net
      cash (used in) provided by investing activities
                  
                  
                  (19,119
                  )
                  
                  
                  40,303
                  
                  
                  
                  (18,580
                  )FINANCING
      ACTIVITIES:Proceeds
      from the exercise of stock options
                  
                  
                  —
                  
                  
                  
                  1,438
                  
                  
                  
                  —Net
      cash provided by financing activities
                  
                  
                  —
                  
                  
                  
                  1,438
                  
                  
                  
                  —CHANGE
      IN CASH AND CASH EQUIVALENTS
                  
                  
                  (22,544
                  )
                  
                  
                  40,155
                  
                  
                  
                  (21,539
                  )CASH
      AND CASH EQUIVALENTS, beginning of year
                  
                  
                  41,886
                  
                  
                  
                  1,731
                  
                  
                  
                  23,270CASH
      AND CASH EQUIVALENTS, end of year
                  
                  $
                  19,342
                  
                  
                  $
                  41,886
                  
                  
                  $
                  1,731SUPPLEMENTAL
      DISCLOSURE:Decrease
      in transaction expenses included in accounts payable and accrued
      liabilities .
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  (778
                  )Decrease
      in transaction expenses included in other assets
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  (913
                  )Cash
      paid for franchise and property taxes
                  
                  $
                  458
                  
                  
                  $
                  456
                  
                  
                  $
                  540





See
accompanying notes to consolidated financial statements.


29





CLARUS
CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


December
31, 2008, 2007 and 2006





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 officers and a support staff of seven, 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, 2008 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,
the fair value and 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 $19.3 million in cash and cash equivalents included in the
accompanying consolidated balance sheet for the year ended December 31, 2008 of
which zero represents cash equivalents.  For the period ended December
31, 2007 in the accompanying consolidated balance sheet, the Company had $41.9
million in cash and cash equivalents of which $25.2 million represented cash
equivalents.





MARKETABLE
SECURITIES





Marketable
securities for the periods ended December 31, 2008 and 2007, 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.





30




FAIR
VALUE OF FINANCIAL INSTRUMENTS





On
January 1, 2008, the Company adopted the provisions Financial Accounting
Standards Board (“FASB”) Statement No. 157, Fair Value Measurements, for fair
value measurements of financial assets and financial liabilities and for fair
value measurements of nonfinancial items that are recognized or disclosed at
fair value in the financial statements on a recurring
basis.  Statement 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement
date.  Statement 157 also establishes a framework for measuring fair
value and expands disclosures about fair value measurements.  The
valuation techniques required by SFAS 157 are based upon observable and
unobservable inputs.  Observable inputs reflect market data obtained
from independent sources, while unobservable inputs reflect our market
assumptions.  These two types of inputs create the following fair
value hierarchy:





Level
      1 -
            Quoted
      prices identical instruments in active marketsLevel
      2 -
            Quoted
      prices for similar instruments in active markets; quoted prices for
      identical or similar instruments in markets that are not active; and
      model-derived valuations whose inputs are observable or whose significant
      value drivers are observable.Level
      3 -
            Significant
      inputs to the valuation model are
unobservable.





All of
the Company’s marketable securities are Level 1 type assets.





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 Level 1 type assets and carried at fair
value as determined by an observable market value. The fair value of the
Company's investments in privately held companies is not readily available. The
Company believes the fair values of these investments in privately held
companies approximated their respective carrying values of zero at December 31,
2008 and 2007.





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 Life2008
                              
                              
                              2007
                              
                              
                              (in years)Computers
      and equipment
                              
                              $
                              265
                              
                              
                              $
                              263
                              
                              
                              
                              1 -
      5Furniture
      and fixtures
                              
                              
                              488
                              
                              
                              
                              488
                              
                              
                              
                              7Leasehold
      improvements
                              
                              
                              1,893
                              
                              
                              
                              1,893
                              
                              
                              
                              82,646
                              
                              
                              
                              2,644Less:
      accumulated depreciation
                              
                              
                              (1,614
                              )
                              
                              
                              (1,263
                              )Property
      and equipment, net
                              
                              $
                              1,032
                              
                              
                              $
                              1,381





Depreciation
expense related to property and equipment totaled $356,000, $359,000 and
$346,000 for the years ended December 31, 2008, 2007 and 2006,
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 2008, 2007 or
2006. 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, 2008 and 2007,
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.


31





ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES





Accounts
payable and accrued liabilities include the following as of December 31, 2008
and 2007 (in thousands):





2008
                    
                    
                    2007Accounts
      payable
                    
                    $
                    20
                    
                    
                    $
                    17Accrued
      bonuses
                    
                    
                    125
                    
                    
                    
                    220Accrued
      professional services
                    
                    
                    156
                    
                    
                    
                    205Accrued
      taxes
                    
                    
                    69
                    
                    
                    
                    120Other
                    
                    
                    13
                    
                    
                    
                    56$
                    383
                    
                    
                    $
                    618





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, 2008, the number of shares
authorized and reserved for issuance under the 2005 Plan is 4.4 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, 2008, 625,000 stock options have been
awarded under the plan of which 240,000 are unvested and 385,000 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 2008,
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, $268,000 and $301,000,
respectively related to unvested restricted stock under SFAS 123R for fiscal
2008, 2007 and 2006.  For fiscal 2008 the Company incurred
compensation expense of approximately $409,000 related to stock
options.  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 stock options under SFAS
123R.





On
September 24, 2008, the Company issued 60,000 stock options, under the Company’s
2005 Plan, to directors of the Company.  The stock options vest and
become exercisable in four equal consecutive quarterly tranches commencing on
September 30, 2008.  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:


32





Options Vesting Period
                    
                    1 yearDividend
      Yield
                    
                    
                    0.00
                    %Expected
      volatility
                    
                    
                    28.95
                    %Risk-free
      interest rate
                    
                    
                    2.98
                    %Expected
      life
                    
                    5.31 yearsWeighted
      average fair value
                    
                    $
                    1.61





The
expected life in years is based on the “simplified” calculation provided for in
SEC Staff Accounting Bulletin No. 107. The simplified method determines the
expected life in years based on the vesting period and contractual terms as set
forth when the award is made. The Company continues to use the simplified method
for awards of stock-based compensation after January 1, 2008 as permitted
by SEC Staff Accounting Bulletin 110 (“SAB No. 110”), since it does not
have the necessary historical exercise and forfeiture data to determine an
expected life for stock options. Originally, the use of the simplified method
was due to expire on December 31, 2007, but SAB No. 110 permits
continued use of the simplified method if the Company concludes that it is not
reasonable to base its estimate of expected term on its experience with
historical exercise patterns.  Using these assumptions, the fair value
of the stock options granted during the year ended December 31, 2008 was
approximately $96,750 which will be amortized over the vesting period of the
options.





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 reduced 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.





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,
2008, 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.


33





NET (LOSS) INCOME 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, 2008 and 2006 excludes incremental shares calculated using the
treasury stock method, assumed from the conversion of stock options and 500,000
shares of restricted stock due to the net loss for the years ended December 31,
2008 and 2006. The effects of the incremental shares are as follows (in
thousands):





2008
                  
                  
                  2007
                  
                  
                  2006Weighted
      average common shares – basic
                  
                  
                  16,867
                  
                  
                  
                  16,658
                  
                  
                  
                  16,613Effect
      of dilutive stock options
                  
                  
                  —
                  
                  
                  
                  148
                  
                  
                  
                  —Effect
      of dilutive restricted stock
                  
                  
                  —
                  
                  
                  
                  245
                  
                  
                  
                  —Total
      effect of potential incremental shares
                  
                  
                  —
                  
                  
                  
                  393
                  
                  
                  
                  —Weighted
      average common shares – diluted
                  
                  
                  16,867
                  
                  
                  
                  17,051
                  
                  
                  
                  16,613Net
      income (loss) per share:Basic
                  
                  $
                  (0.14
                  )
                  
                  $
                  0.01
                  
                  
                  $
                  (0.08
                  )Diluted
                  
                  $
                  (0.14
                  )
                  
                  $
                  0.01
                  
                  
                  $
                  (0.08
                  )





Options
to purchase 450,000 shares of common stock at $5.01 to $5.50 per share were
outstanding as of December 31, 2008, 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,
2008.  Options to purchase 1,458,750 shares of common stock at $5.98
to $10.00 were outstanding as of December 31, 2008, 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 $5.52 for the year ended December 31, 2008.





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.





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 and comprehensive loss.





SEGMENT
AND GEOGRAPHIC INFORMATION





In
accordance with the provisions of SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", the Company has determined that during
2008, 2007 and 2006 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.


34


Geographic
property and equipment as of December 31, 2008, 2007 and 2006 were all located
in the United States.  The carrying value of property and equipment
net, as of and for the years ended December 31, 2008 and 2007, respectively,
were $1.0 million and $1.4 million, respectively.





NEW
ACCOUNTING PRONOUNCEMENTS




In March
2008, the Financial Accounting Standards Board (“FASB”)  issued
Statement of Financial Accounting Standard (“SFAS”) No. 161, Disclosures about
Derivative Instruments and Hedging Activities (“SFAS 161”), which amends SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS
133”) and requires enhanced disclosures about how and why an entity uses
derivative instruments, how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations, and how derivative
instruments and related hedge items affect an entity’s financial position,
financial performance, and cash flows.  SFAS 161 also requires the
disclosure of the fair values of derivative instruments and their gains and
losses in a tabular format and requires cross-referencing within the footnote of
important information about derivative instruments.  SFAS 161 is effective
for financial statements issued for fiscal years beginning on or after November
15, 2008.  The Company does not believe SFAS 161 will change its current
practices and therefore believes it will not impact preparation of the
consolidated financial statements.




In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS 162”).  This standard identifies sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with U.S. generally accepted accounting
principles.  The Company does not believe SFAS 162 will change its current
practices and therefore believes it will not impact preparation of the
consolidated financial statements.




In
February 2007, the FASB issued SFAS 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 on November 15, 2007 and is being applied
prospectively.  The adoption of this pronouncement has had no impact
on the Company’s consolidated financial statements.





In
December 2007, the FASB released SFAS No. 141(R), Business Combinations (revised
2007) (“SFAS 141(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 adoption of this
pronouncement will have no impact on the Company’s consolidated financial
statements and is not anticipated to affect the Company until an acquisition is
completed.





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 adoption of this pronouncement will have no impact on the
Company’s consolidated financial statements.





In
September 2006, the FASB issued 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
partial adoption of this pronouncement had no impact on the Company’s
consolidated financial statements.  Adopting the remainder of the
provision is not expected to have an impact on the Company’s consolidated
financial statements as all our marketable securities are determined by an
observable market value.  See more information in Note 1.





2. MARKETABLE
SECURITIES





As of
December 31, 2008, and 2007, 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, 2008, marketable securities consisted of government and government
agency notes and bonds with a fair market value of $66.7 million. The amortized
cost of marketable securities at December 31, 2008 was $66.3 million with an
unrealized gain of $403,000.  The maturities of all securities are
less than 12 months at December 31, 2008.


35


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.





3.
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.  Presently the Company pays $22,960 a month for its
portion 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 $181,600 during the year ended December 31, 2008 and $304,600 during
the year ended December 31, 2007.





As of
December 31, 2008, the Company had a net receivable of $21,000 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
2009.  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.





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 $35,400 during the year ended December 31, 2008 and $79,000 during
the year ended December 31, 2007.





As of
December 31, 2008, the Company had an outstanding receivable of $8,300 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 January 2009.  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 by SIG in March 2008.





During
the year ended December 31, 2008, the Company incurred charges of approximately
$14,000 for payments to Kanders Aviation LLC (“Kanders Aviation”), an affiliate
of the Company’s Executive Chairman, Warren B. Kanders, relating to aircraft
travel by officers of the Company for potential redeployment transactions,
pursuant to the Transportation Services Agreement, dated December 18, 2003
between the Company and Kanders Aviation.  During the year ended
December 31, 2007, the Company incurred no charges related to Kanders
Aviation.





As of
December 31, 2008 and 2007, 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.





36




4.
INCOME TAXES




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




YEARS
      ENDEDDECEMBER 31,2008
                            
                            
                            2007
                            
                            
                            2006Pre-Tax
      Income (loss):Domestic
                            
                            $
                            (2,402
                            )
                            
                            $
                            120
                            
                            
                            $
                            (1,291
                            )Foreign
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —$
                            (2,402
                            )
                            
                            $
                            120
                            
                            
                            $
                            (1,291
                            )


The
components of the income tax expense for each of the years in the three-year
period ended December 31, 2008 is as follows (in thousands):





YEARS
      ENDEDDECEMBER 31,2008
                      
                      
                      2007
                      
                      
                      2006Current:Federal
                      
                      $
                      —
                      
                      
                      $
                      3
                      
                      
                      $
                      —State
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Foreign
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Total
      current income for provision
                      
                      $
                      —
                      
                      
                      $
                      3
                      
                      
                      $
                      —





YEARS ENDEDDECEMBER 31,2008
                            
                            
                            2007
                            
                            
                            2006Deferred:Federal
                            
                            
                            (273
                            )
                            
                            
                            3,850
                            
                            
                            
                            (168
                            )State
                            
                            
                            16
                            
                            
                            
                            1,218
                            
                            
                            
                            350Foreign
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —(256
                            )
                            
                            
                            5,068
                            
                            
                            
                            182Increase
      (decrease) in valuation allowance fordeferred income
      taxes
                            
                            
                            256
                            
                            
                            
                            (5,068
                            )
                            
                            
                            (182
                            )Total
      deferred income tax for provision
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —Total
      income tax provision
                            
                            $
                            —
                            
                            
                            $
                            3
                            
                            
                            $
                            —




37


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





2008
                  
                  
                  2007
                  
                  
                  2006Income
      (loss) from operations
                  
                  $
                  256
                  
                  
                  $
                  (5,068
                  )
                  
                  $
                  (182
                  )Stockholders’
      equity
                  
                  
                  (152
                  )
                  
                  
                  (1
                  )
                  
                  
                  (38
                  )Total
                  
                  $
                  104
                  
                  
                  $
                  (5,069
                  )
                  
                  $
                  (220
                  )





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, 2008, 2007 and 2006:





YEARS ENDED
                    DECEMBER 31,2008
                  
                  
                  2007
                  
                  
                  2006Computed
      "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
                  
                  
                  (1.6
                  )
                  
                  
                  514.4
                  
                  
                  
                  (0.5
                  )NOL
      adjustments
                  
                  
                  2.1
                  
                  
                  
                  152.3
                  
                  
                  
                  18.3Capital
      loss carryforward adjustment
                  
                  
                  22.7
                  
                  
                  
                  3,506.2
                  
                  
                  
                  30.3Non-cash
      stock compensation
                  
                  
                  —
                  
                  
                  
                  (9.5
                  )
                  
                  
                  —Other
                  
                  
                  0.2
                  
                  
                  
                  8.2
                  
                  
                  
                  —(Decrease)
      increase in valuation allowance and other items
                  
                  
                  10.6
                  
                  
                  
                  (4,202.8
                  )
                  
                  
                  (14.1
                  )Income
      tax expense (benefit)
                  
                  
                  —
                  %
                  
                  
                  2.8
                  %
                  
                  
                  —
                  %





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, 2008 and 2007 are as follows (in
thousands):




YEARS ENDED
                      DECEMBER 31,2008
                    
                    
                    2007Deferred
      income tax assets (liabilities):Net
      operating loss, capital loss amount and research &experimentation
      credit carryforwards
                    
                    $
                    84,830
                    
                    
                    $
                    84,970Charitable
      contribution carryforward
                    
                    
                    5
                    
                    
                    
                    4Depreciation
                    
                    
                    (33
                    )
                    
                    
                    (139
                    )Unrealized
      gain on marketable securities
                    
                    
                    (157
                    )
                    
                    
                    (5
                    )Non-cash
      compensation
                    
                    
                    988
                    
                    
                    
                    724Accrued
      liabilities
                    
                    
                    159
                    
                    
                    
                    134Reserves
      for investments
                    
                    
                    1,728
                    
                    
                    
                    1,728Net
      deferred income tax assets before valuation allowance
                    
                    
                    87,520
                    
                    
                    
                    87,416Valuation
      allowance for deferred income tax assets
                    
                    
                    (87,520
                    )
                    
                    
                    (87,416
                    )Net
      deferred income tax assets
                    
                    $
                    —
                    
                    
                    $
                    —





The net
change in the valuation allowance for deferred income tax assets for 2008 was an
increase of $0.1 million as compared to a decrease of $5.1 million in 2007 and a
decrease in 2006 of $0.2 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, 2008,
because the ultimate realization of those benefits and assets does not meet the
more likely than not criteria.


38





At
December 31, 2008, 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 $229.8 million, $1.3 million and
$56,000, respectively, which expire in varying amounts beginning in the year
2009.  The Company also had a capital loss carryforward of $1.6
million which expired 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 $225.4 million of the $229.8 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 $225.4
million of net operating losses available to offset taxable income,
approximately $207.8 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:





Net
Operating Loss And Capital Loss Carryforward Expiration Dates*


(Unaudited)


December
31, 2008





Net Operating
                        LossExpiration Dates
                        December 31
                      
                      Amount
                        (000’s)2009
                      
                      $
                      1,9002010
                      
                      
                      7,4172011
                      
                      
                      7,5202012
                      
                      
                      5,1572020
                      
                      
                      29,5332021
                      
                      
                      50,4302022
                      
                      
                      115,0002023
                      
                      
                      5,7122024
                      
                      
                      3,5662025
                      
                      
                      1,7072026
                      
                      
                      4762028
                      
                      
                      1,372Total
                      
                      
                      229,790Section 382 limitation
                      
                      
                      (4,428
                      )After
      Limitations
                      
                      $
                      225,362





*Subject
to compliance with Section 382 of the Internal Revenue Code.





5.
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 $39,000, $31,000 and
$29,000 during the years ended December 31, 2008, 2007 and 2006,
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, 2008, 2007
and 2006, no shares were purchased for the benefit of the participants under the
Plans.


39





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.





6.
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, 2008.





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 4.4 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, 2008, 625,000 stock options have been
awarded under the plan of which 240,000 are unvested and 385,000 are vested and
eligible for exercise.





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, 2008 and 2007, $268,000 was amortized to compensation
expense for this award.





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
reduced 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 related to unvested restricted stock under SFAS 123R for
fiscal 2008 and 2007.  For the years ended December 31, 2008 and 2007,
the Company incurred compensation expense of approximately $409,000 and $176,000
respectively, related to stock options.  For fiscal 2006 the Company
incurred no compensation expense related to stock options under SFAS
123R.


40





On
September 24, 2008, the Company issued 60,000 stock options, under the Company’s
2005 Plan, to directors of the Company.  The stock options vest and
become exercisable in four equal consecutive quarterly tranches commencing on
September 30, 2008.  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 yearDividend
      Yield
                  
                  
                  0.00
                  %Expected
      volatility
                  
                  
                  28.95
                  %Risk-free
      interest rate
                  
                  
                  2.98
                  %Expected
      life
                  
                  5.31
      yearsWeighted
      average fair value
                  
                  $
                  1.61








The
expected life in years is based on the “simplified” calculation provided for in
SEC Staff Accounting Bulletin No. 107. The simplified method determines the
expected life in years based on the vesting period and contractual terms as set
forth when the award is made. The Company continues to use the simplified method
for awards of stock-based compensation after January 1, 2008 as permitted
by SEC Staff Accounting Bulletin 110 (“SAB No. 110”), since it does not
have the necessary historical exercise and forfeiture data to determine an
expected life for stock options. Originally, the use of the simplified method
was due to expire on December 31, 2007, but SAB No. 110 permits
continued use of the simplified method if the Company concludes that it is not
reasonable to base its estimate of expected term on its experience with
historical exercise patterns.  Using these assumptions, the fair value
of the stock options granted during the year ended December 31, 2008 was
approximately $96,750 which will be amortized over the vesting period of the
options.





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.





The
Company recorded total non-cash stock compensation expense of approximately
$300,000 respectively, for the years ended December 31, 2008, 2007 and 2006 for
500,000 shares of restricted stock.   Total non-cash stock
compensation expense related to stock options was $409,000 and $176,000,
respectively, for the years ended December 31, 2008 and 2007,
respectively.  There was no stock compensation expense incurred by the
Company related to stock options for the years ended December 31,
2006.


41


Total
options available for grant under all plans as of December 31, 2008 were 4.4
million.  A summary of changes in outstanding options during the three
years ended December 31, 2008 is as follows:





Shares
                    
                    
                    Range of
                      Exercise
                      Prices
                    
                    
                    Weighted
                      Average
                      Exercise
                      PriceDecember
      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
                    
                    
                    $
                    7.24Granted
                    
                    
                    60,000
                    
                    
                    
                    $5.01
                    
                    
                    $
                    5.01Forfeited
                    
                    
                    —Expired
                    
                    
                    —Exercised
                    
                    
                    —December
      31, 2008
                    
                    
                    1,908,750
                    
                    
                    
                    $5.01-$10.00
                    
                    
                    $
                    7.17Vested
      and exercisable at December 31, 2008
                    
                    
                    1,668,750
                    
                    
                    
                    
                    
                    
                    $
                    7.36Vested
      and exercisable at December 31, 2007
                    
                    
                    1,493,750
                    
                    
                    
                    
                    
                    
                    $
                    7.54Vested
      and exercisable at December 31, 2006
                    
                    
                    1,673,750
                    
                    
                    
                    
                    
                    
                    $
                    7.36





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, 2008





Outstanding
                        
                        
                        ExercisableExercise
                          Price
                          Range
                        
                        Number
                          of Shares
                          Outstanding at
                          December 31, 2008
                        
                        
                        Weighted
                          Average
                          Exercise
                          Price
                        
                        
                        Weighted
                          Average
                          Remaining
                          Contractual
                          Life (Years)
                        
                        
                        Number
                          of Shares
                          Exercisable at
                          December 31, 2008
                        
                        
                        Weighted
                          Average
                          Exercise
                          Price$
      5.01 - $  5.52
                        
                        
                        450,000
                        
                        
                        $
                        4.97
                        
                        
                        
                        6.0
                        
                        
                        
                        420,000
                        
                        
                        $
                        5.33$
      5.53 - $10.00
                        
                        
                        1,458,750
                        
                        
                        $
                        6.89
                        
                        
                        
                        6.6
                        
                        
                        
                        1,248,750
                        
                        
                        $
                        8.041,908,750
                        
                        
                        $
                        7.17
                        
                        
                        
                        6.4
                        
                        
                        
                        1,668,750
                        
                        
                        $
                        7.36




42


7.
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, 2008, 2007, and 2006, 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, 2008, are as
follows (in thousands):





Gross Rental
                  
                  
                  Sub-LeaseObligations
                  
                  
                  IncomeYear
      ending December 31,2009
                  
                  
                  426
                  
                  
                  
                  1062010
                  
                  
                  451
                  
                  
                  
                  1132011
                  
                  
                  1,128
                  
                  
                  
                  2822012
                  
                  
                  —
                  
                  
                  
                  —2013
                  
                  
                  —
                  
                  
                  
                  —Thereafter
                  
                  
                  —
                  
                  
                  
                  —Total
                  
                  $
                  2,005
                  
                  
                  $
                  501





Our
corporate headquarters is currently located in Stamford, Connecticut where we
lease approximately 8,600 square feet for $28,960 a month during 2008, 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.





8.
RIGHTS AGREEMENT





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.


43


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, 2008,
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, 2008 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, 2008. 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, 2008.





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.





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, 2008 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.


44


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 2009 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 2009 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 2009 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 2009 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 2009 Annual Meeting of
Stockholders, is incorporated herein by reference.


45


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
                    
                    24Consolidated
      Balance Sheets - December 31, 2008 and 2007
                    
                    25Consolidated
      Statements of Operations -Years Ended December 31, 2008, 2007 and
      2006
                    
                    26Consolidated
      Statements of Stockholders' Equity and Comprehensive Loss -Years Ended
      December 31, 2008, 2007 and 2006
                    
                    27Consolidated
      Statements of Cash Flows -Years Ended December 31, 2008, 2007 and
      2006
                    
                    29Notes
      to Consolidated Financial Statements
                    
                    30(2)
      The following additional financial statement schedule and report of
      independent registered public accounting firm are furnished herewith
      pursuant to the requirements of Form 10-K:Schedule
      II Valuation and Qualifying Accounts
                    
                    51





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





Exhibit
                    Number
                  
                  Exhibit3.1
                  
                  Amended
      and Restated Certificate of Incorporation of the Company (incorporated
      herein by reference to Exhibit 3.3 of the  Company's Form S-1/A
      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 the  Company'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 to  Exhibit 3.1 of the
      Company's Current Report on Form 8-K, filed with the Securities and
      Exchange Commission on July 31,  2003).3.5
                  
                  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 of  the 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 Amended  and Restated
      Bylaws of the Company defining rights of the holders of Common Stock of
      the Company.4.2
                  
                  Specimen
      Stock Certificate (incorporated herein by reference to Exhibit 4.2 of the
      Company's Registration Statement on  Form S-1 filed with the
      Securities and Exchange Commission on May 26, 1998 (File No.
      333-46685)).




46





4.3
                
                Restricted
      Stock Agreement, dated as of April 11, 2003, between the Company and
      Warren B. Kanders (incorporated herein  by reference to Exhibit
      4.1 of the Company's Form 10-Q filed with the Securities and Exchange
      Commission on May 15,  2003). *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).10.7
                
                Form
      of Indemnification Agreement for Directors and Executive Officers of the
      Company (incorporated herein by reference  to Exhibit 10.1 of
      the Company's Form 8-K filed with the Securities and Exchange Commission
      on December 23, 2002).10.8
                
                Employment
      Agreement, dated as of December 6, 2002, between the Company and Warren B.
      Kanders (incorporated herein  by reference to Exhibit 10.2 of
      the Company's Form 8-K filed with the Securities and Exchange Commission
      on December  23, 2002).*10.9
                
                Amended
      and Restated Stock Incentive Plan (incorporated herein by reference to
      Exhibit 10.2 of the Company's Form 10-Q  filed with the
      Securities and Exchange Commission on August 14, 2000).
  *10.10
                
                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 to  Exhibit 10.1 of the
      Company's Form 10-Q filed with the Securities and Exchange Commission on
      November 3, 2005). *10.15
                
                Amendment
      to the form of Stock Option Agreement for the Clarus Corporation 2005
      Stock Incentive Plan (incorporated  herein by reference to
      Exhibit 10.1 of the Company's Form 8-K filed with the Securities and
      Exchange Commission on  January 6, 2006). *10.16
                
                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.**




47





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


48


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
      3, 2009By:
                        /s/ Philip A. BaratelliPhilip
      A. BaratelliChief
      Financial Officer
 
 Signature
                                                      
                                                      Title
                                                      
                                                      Date/s/ Warren B. Kanders
                                                      
                                                      Executive
      Chairman of the
                                                      
                                                      March 3,
      2009Warren
      B. Kanders
                                                      
                                                      Board
      of Directors(principal
      executive officer)/s/ Philip A. Baratelli
                                                      
                                                      Chief
      Financial Officer
                                                      
                                                      March 3,
      2009Philip
      A. Baratelli
                                                      
                                                      (principal
      financial officer)/s/ Donald L. House
                                                      
                                                      Director
                                                      
                                                      March 3,
      2009Donald
      L. House/s/ Burtt R. Ehrlich
                                                      
                                                      Director
                                                      
                                                      March 3,
      2009Burtt
      R. Ehrlich/s/ Nicholas Sokolow
                                                      
                                                      Director
                                                      
                                                      March 3,
      2009Nicholas
      Sokolow
  49
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 The Board
of Directors and Stockholders
 of Clarus
Corporation:
 
 Under
date of March 3, 2009, we reported on the consolidated balance sheets of Clarus
Corporation and subsidiaries as of December 31, 2008 and 2007, 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, 2008, which are included in the 2008 annual report on Form 10-K of
Clarus Corporation. 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 LLPStamford,
      ConnecticutMarch 3,
      2009
  50
  Schedule
II
 
 Valuation
and Qualifying Accounts
 Clarus
Corporation and Subsidiaries
 For the
years ended December 31, 2008, 2007 and 2006
 Valuation
Allowance for Deferred Income Tax Assets and Restructuring and Related
Charges
 
 Balance at
                        Beginning of
                        Period
                      
                      
                      Charged
                        (Credited) to
                        Costs and
                        Expenses
                      
                      
                      Deductions (a) (b)
                      
                      
                      Balance at
                        End of
                        PeriodValuation
      Allowance for Deferred Income Tax Assets2006
                      
                      $
                      92,705,000
                      
                      
                      $
                      (220,000
                      )
                      
                      $
                      —
                      
                      
                      $
                      92,485,0002007
                      
                      
                      92,485,000
                      
                      
                      
                      (5,069,000
                      )
                      
                      
                      —
                      
                      
                      
                      87,416,0002008
                      
                      $
                      87,416,000
                      
                      
                      $
                      256,000
                      
                      
                      $
                      (152,000
                      )
                      
                      $
                      87,520,000Restructuring
      Accruals2006
                      
                      $
                      17,000
                      
                      
                      
                      —
                      
                      
                      $
                      (17,000
                      )
                      
                      
                      —
 
 (a)
              Deductions
      related to restructuring and related accruals represent cash
      payments.
 (b)
              Deduction
      related to valuation allowance for deferred income tax assets represents
      decrease in valuation allowance credited to stockholders’
      equity.
  51
  EXHIBIT
INDEX
 
 Number
                
                Exhibit23.1
                
                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
  52