Clarus Corp - Annual Report: 2007 (Form 10-K)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
FOR
ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark
One)
x
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF m
THE
SECURITIES EXCHANGE ACT OF 1934
For
the
fiscal year ended December 31, 2007
o TRANSITION
REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the
transition period from ____________ to ____________
Commission
file number 0-24277
CLARUS
CORPORATION
(Exact
name of Registrant as specified in its Charter)
|
Delaware
|
58-1972600
|
|
(State
of Incorporation)
|
(I.R.S.
Employer Identification No.)
|
One
Landmark Square
Stamford,
Connecticut 06901
(Address
of principal office, including zip code)
(203)
428-2000
(Registrant's
telephone number, including area code)
SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common
Stock,
par
value
$.0001
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act. YES o NO
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.
YES
o NO x
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. YES x NO o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to
this
Form 10-K. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Large
accelerated filer o Accelerated filer x
Non-accelerated
filer
o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) YES o NO
x
The
aggregate market value of the voting stock and non-voting common equity held
by
non-affiliates of the Registrant at June 30, 2007 was approximately $133.1
million based on $9.10 per share, the closing price of the common stock as
quoted on the OTC Pink Sheets Electronic Quotation Service.
The
number of shares of the Registrant's common stock outstanding at March 3, 2008
was 17,366,747 shares.
DOCUMENT
INCORPORATED BY REFERENCE
Portions
of our Proxy Statement for the 2008 Annual Meeting of Stockholders to be filed
with the Securities and Exchange Commission within 120 days of the Registrant's
2007 fiscal year end are incorporated by reference into Part III of this report.
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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.
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.
At
the
2002 annual meeting of our stockholders held on May 21, 2002, Warren B. Kanders,
Burtt R. Ehrlich and Nicholas Sokolow were elected by our stockholders to serve
on our Board of Directors. Under the leadership of these directors, our Board
of
Directors adopted a strategy of seeking to enhance stockholder value by pursuing
opportunities to redeploy our assets through an acquisition of, or merger with,
an operating business that will serve as a platform company, using our cash,
cash equivalents, marketable securities, other non-operating assets (including,
to the extent available, our net operating loss carryforward) and our
publicly-traded stock to enhance future growth. The strategy also sought to
reduce significantly our cash expenditure rate by targeting, to the extent
practicable, our overhead expenses to the amount of our investment income until
the completion of an acquisition or merger. While the Company's operating
expenses, excluding transaction expenses, have remained relatively stable during
the past three fiscal years, management currently believes that the Company's
operating expenses, excluding potential unsuccessful transaction expenses,
will
exceed investment income during 2008 due to declines in interest rates and
earnings on investments.
As
part
of our strategy to enhance stockholder value, on December 6, 2002, we
consummated the sale of substantially all of the assets of our electronic
commerce business, which represented substantially all of our revenue generating
operations and related assets, to Epicor Software Corporation ("Epicor"), a
Delaware corporation, for a purchase price of $1.0 million in cash (the "Asset
Sale"). Epicor is traded on the NASDAQ National Market under the symbol "EPIC."
The sale included licensing, support and maintenance activities from our
eProcurement, Sourcing, View (for eProcurement), eTour (for eProcurement),
ClarusNET, and Settlement software products, our customer lists, certain
contracts and certain intellectual property rights related to the purchased
assets, maintenance payments and certain furniture and equipment. Epicor agreed
to assume certain of our liabilities, such as executory obligations
arising
under
certain contracts, agreements and commitments related to the transferred assets.
We remained responsible for all of our other liabilities, including liabilities
under certain contracts, any violations of environmental laws and for our
obligations related to any of our indebtedness and employee benefit plans
or taxes that were due and payable in connection with the acquired assets on
or
before the closing date of the Asset Sale.
Upon
the
closing of the sale to Epicor, Warren B. Kanders assumed the position of
Executive Chairman of the Board of Directors, Stephen P. Jeffery ceased to
serve
as Chief Executive Officer and Chairman of the Board, and James J. McDevitt
ceased to serve as Chief Financial Officer and Corporate Secretary. Mr. Jeffery
agreed to continue to serve on the Board of Directors and serve in a consulting
capacity for a period of three years. In addition, the Board of Directors
appointed Nigel P. Ekern as Chief Administrative Officer to oversee the
operations of Clarus and to assist with our asset redeployment strategy. Mr.
Ekern resigned December 31, 2006. Philip A. Baratelli assumed the role of Chief
Financial Officer on February 1, 2007.
On
January 1, 2003, we sold the assets related to our Cashbook product, which
were
excluded from the Epicor transaction, to an employee group headquartered in
Limerick, Ireland. This completed the sale of nearly all of our active software
operations as part of our strategy to limit operating losses and enable us
to
reposition our business in order to enhance stockholder value. In anticipation
of the redeployment of our assets, our cash equivalents and marketable
securities are being held in short-term, highly rated instruments designed
to
preserve safety and liquidity and to exempt us from registration as an
investment company under the Investment Company Act of 1940.
We
are
currently working to identify suitable merger partners or acquisition
opportunities. Although we are not targeting specific industries for potential
acquisitions, we plan to seek businesses with substantial operations and free
cash flow, experienced management teams, and operations in markets offering
substantial growth opportunities. Our investment criteria generally includes
companies with a transaction value of between $200 million to over $500 million
with levels of earnings before income tax, taxes, depreciation and amortization
of approximately $25 million or greater so as to utilize our available net
operating loss tax carryforwards (“NOLs”). In addition, we believe that our
common stock, which has a strong institutional stockholder base, offers us
flexibility as acquisition currency and will enhance our attractiveness to
potential merger or acquisition candidates. This strategy is, however, subject
to certain risks. See "Risk Factors" below.
As
previously disclosed in our Current Report on Form 8-K filed with the Securities
and Exchange Commission on October 4, 2004, the Company's common stock was
delisted from the NASDAQ National Market effective with the open of business
on
October 5, 2004. The delisting followed a determination by the NASDAQ Listing
Qualifications Panel that the Company was a "public shell" and should be
delisted due to policy concerns raised under NASDAQ Marketplace Rules 4300
and
4300(a)(3). The Company's common stock is now quoted on the OTC Pink Sheets
Electronic Quotation Service under the symbol "CLRS.PK."
At
the
Company's annual stockholders meeting on July 24, 2003, the stockholders
approved an amendment (the "Amendment") to our Amended and Restated Certificate
of Incorporation to restrict certain acquisitions of Clarus' securities in
order
to help assure the preservation of our NOLs. Although the transfer restrictions
imposed on our securities are intended to reduce the likelihood of an
impermissible ownership change, no assurance can be given that such restrictions
would prevent all transfers that would result in an impermissible ownership
change. The Amendment generally restricts and requires prior approval of our
Board of Directors of direct and indirect acquisitions of the Company's equity
securities if such acquisition will affect the percentage of our capital stock
that is treated as owned by a 5% stockholder. The restrictions will generally
only affect persons trying to acquire a significant interest in our common
stock.
On
February 7, 2008, our Board of Directors approved a Rights Agreement (the
“Rights Agreement”) which provides for a dividend distribution of one preferred
share purchase right (a “Right”) for each outstanding share of our common stock,
payable to stockholders of record as of the close of business on February 12,
2008. Each Right entitles the registered holder to purchase from the Company
one
one-hundredth of a share of our Series A Junior Participating Preferred Stock,
par value $0.0001 per share, at a purchase price of $12.00. The Rights Agreement
is designed to assist in limiting the number of 5% or more owners and thus
reduce the risk of a possible “change of ownership” under Section 382 of the
Internal Revenue Code of 1986 as amended. A significant penalty is imposed
on
any person or group that acquires 4.9% or more (but less than 50%) of our
then-outstanding common stock without the prior approval of our Board of
Directors. There is no guaranty that the objective of the Rights Agreement
of
preserving the NOLs will be achieved. There is a possibility that certain
transactions may be completed by stockholders or prospective stockholders that
could trigger an “ownership change.” The parties to the Rights Agreement, dated
as of February 12, 2008 are Clarus and American Stock Transfer & Trust
Company, as rights agent.
Prior
to
the sale of substantially all of our operating assets in December 2002, we
developed, marketed and supported Internet-based business-to-business e-commerce
software that automated the procurement, sourcing, and settlement of goods
and
services. Our software was designed to help organizations reduce the costs
associated with the purchasing and payment settlement of goods and services,
and
help to maximize procurement economies of scale.
There
were several milestones in the evolution of our business prior to the December
2002 sale:
| - |
On
May 26, 1998, we completed an initial public offering of our common
stock
in which we sold 2.5 million shares of common stock at $10.00 per
share,
resulting in net proceeds to us of approximately $22.0 million.
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| - |
On
October 18, 1999, we sold substantially all of the assets of our
financial
and human resources software ("ERP") business to Geac Computer Systems,
Inc. and Geac Canada Limited. In this sale, we received approximately
$13.9 million.
|
| - |
On
March 10, 2000, we sold 2,243,000 shares of common stock in a secondary
public offering at $115.00 per share resulting in net proceeds to
us of
approximately $244.4 million.
|
All
of
our employees are based in the United States. As of December 31, 2007, we had
a
total of ten employees, all of which are located in our Stamford, Connecticut
headquarters. Our employees devote as much of their time as is necessary to
the
affairs of the Company and also serve in various capacities with other public
and private entities. None of our employees are represented by a labor union
or
are subject to a collective bargaining agreement. We have not experienced any
work stoppages and consider our relationship with our employees to be good.
Executive
Officers of the Registrant
Pursuant
to General Instruction G(3), the information regarding our executive officers
called for by Item 401(b) of Regulation S-K is hereby included in Part I of
this Annual Report on Form 10-K.
The
executive officers of our Company as of March 3, 2008 are as follows:
Warren
B.
Kanders, 50, has served as one of our directors since June 2002 and as Executive
Chairman of our Board of Directors since December 2002. Since May 2007,
Mr. Kanders has served as a director of Highlands Acquisition Corp., a
publicly-held blank check company formed with a focus on acquiring a business
in
the healthcare industry. Since August 2007, Mr. Kanders has served as the
Chairman of the Board and Chief Executive Officer of Kanders Acquisition
Company, Inc., a blank check company formed with a focus on acquiring a business
in no particular industry or geography. Mr. Kanders has served as the
President of Kanders & Company since 1990. Prior to the completion of the
acquisition of Armor Holdings, Inc., formerly a New York Stock Exchange-listed
company and a manufacturer and supplier of military vehicles, armed vehicles
and
safety and survivability products and systems to the aerospace & defense,
public safety, homeland security and commercial markets, by BAE Systems plc
on
July 31, 2007, he served as the Chairman of the Board of Armor
Holdings, Inc. since January 1996 and as its Chief Executive Officer since
April 2003. From April 2004 until October 2006, Mr. Kanders
served as the Executive Chairman, and since October 2006, has served as the
Non-Executive Chairman of the Board of Stamford Industrial Group, Inc., a
publicly-held company that, through its subsidiary, Concord Steel, is a leading
independent manufacturer of steel counterweights. Since November 2004,
Mr. Kanders has served as the Chairman of the Board of Directors of Langer,
Inc., a Nasdaq-listed provider of orthotic and skin-care products. From
October 1992 to May 1996, Mr. Kanders served as Founder and Vice
Chairman of the Board of Benson Eyecare Corporation, a distributor of eye care
products and services.
Philip
A.
Baratelli, 40, has served as our Chief Financial Officer, Secretary and
Treasurer since February 2007. Since
February 2007, Mr. Baratelli has also served as Chief Financial
Officer for Kanders & Company, Inc., a private investment firm principally
owned and controlled by Mr. Warren B. Kanders that makes investments in and
provides consulting services to public and private entities. Since
April 2007, Mr. Baratelli has served as the Chief Financial Officer
for Highlands Acquisition Corp., a publicly-held
blank
check company formed with a focus on acquiring a business in the healthcare
industry. Since
August 2007, Mr. Baratelli has served as the Chief
Financial Officer of Kanders Acquisition Company, Inc. a blank check
company formed with a focus on acquiring a business in no particular industry
or
geography.
From
June 2001 to February 2007, Mr. Baratelli was the Corporate
Controller and Treasurer of Armor Holdings, Inc., a manufacturer and supplier
of
military vehicles, armored vehicles and safety and survivability products and
systems serving aerospace & defense, public safety, homeland security and
commercial markets. From February 1998 to February 2001,
Mr. Baratelli was employed by PricewaterhouseCoopers LLP in various
positions ranging from Associate to Senior Associate. From 1991 to 1997,
Mr. Baratelli worked for Barnett Banks, Inc. in various finance and credit
analysis positions. Mr.
Baratelli received a Bachelor of Science in finance from Florida State
University in 1989 and a Bachelor of Business Administration in accounting
from
the University of North Florida in 1995. Mr. Baratelli is a Certified Public
Accountant.
Our
Internet address is www.claruscorp.com. We make available free of charge on
or
through our Internet website our annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and amendments to those reports,
and
the proxy statement for our annual meeting of stockholders as soon as reasonably
practicable after we electronically file such material with, or furnish it
to,
the Securities and Exchange Commission. Forms 3, 4 and 5 filed with respect
to
our equity securities under section 16(a) of the Securities Exchange Act of
1934, as amended, are also available on our Internet website. All of the
foregoing materials are located at the ‘‘SEC Filings’’ tab. The information
found on our website shall not be deemed incorporated by reference by any
general statement incorporating by reference this report into any filing under
the Securities Act of 1933, as amended, or under the Securities Exchange Act
of
1934, as amended, and shall not otherwise be deemed filed under such
Acts.
We
have
adopted a Code of Ethics for Senior Executive Officers and Senior Financial
Officers, a Code of Business Conduct and Ethics for directors, officers,
employees, agents, representatives, subsidiaries and affiliates, an Audit
Committee Charter, Complaint Procedures for Accounting and Auditing Matters,
a
Compensation Committee Charter, a Nominating/Corporate Governance Committee
Charter, and Corporate Governance Guidelines, all of which are available at
our
Internet website at the tab ‘‘Investor Relations.’’ We will provide to any
person without charge, upon request, a copy of the foregoing materials. We
intend to disclose future amendments to the provisions of the foregoing
documents, policies and guidelines and waivers therefrom, if any, on our
Internet website and/or through the filing of Current Report on Form 8-K with
the Securities and Exchange Commission.
Materials
we file with the Securities and Exchange Commission may be read and copied
at
the Securities and Exchange Commission’s Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549. You may obtain information on the operation of
the
Securities and Exchange Commission’s Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission also maintains an Internet website that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the Securities and Exchange Commission at www.sec.gov.
In addition, you may request a copy of any such materials, without charge,
by
submitting a written request to: Clarus Corporation, c/o the Secretary, One
Landmark Square, 22nd Floor, Stamford, Connecticut 06901.
Information
on our Internet website does not constitute a part of this Annual Report on
Form
10-K.
In
addition to other information in this Annual Report on Form 10-K, the following
risk factors should be carefully considered in evaluating our business because
such factors may have a significant impact on our business, operating results,
liquidity and financial condition. As a result of the risk factors set forth
below, actual results could differ materially from those projected in any
forward-looking statements. Additional risks and uncertainties not presently
known to us, or that we currently consider to be immaterial, may also impact
our
business, operating results, liquidity and financial condition. If any of the
following risks occur, our business, operating results, liquidity and financial
condition could be materially adversely affected. In such case, the trading
price of our securities could decline, and you may lose all or part of your
investment.
RISKS
RELATED TO CLARUS CORPORATION
WE
CONTINUE TO INCUR OPERATING LOSSES.
As
a
result of the sale of substantially all of our electronic commerce business,
we
will no longer generate revenue previously associated with the products and
contracts comprising our electronic commerce business. We are not profitable
and
have incurred an accumulated deficit of $282.1 million from our inception
through December 31, 2007. Our current ability to generate revenues and to
achieve profitability and positive cash flow will depend on our ability to
redeploy our assets and use our cash, cash equivalents and marketable securities
to reposition our business whether it is through a merger or acquisition. Our
ability to become profitable will depend, among other things, (i) on our success
in identifying and acquiring a new operating business, (ii) on our development
of new products or services relating to our new operating business, and (iii)
on
our success in distributing and marketing our new products or services.
WE
MAY BE UNABLE TO REDEPLOY OUR ASSETS SUCCESSFULLY.
As
part
of our strategy to limit operating losses and enable Clarus to redeploy its
assets and use its cash, cash equivalents and marketable securities to enhance
stockholder value, we have sold our electronic commerce business, which
represented substantially all of our revenue generating operations and related
assets. We are pursuing a strategy of identifying suitable merger partners
and
acquisition candidates that will serve as a platform company. Although we are
not targeting specific business industries for potential acquisitions, we plan
to seek businesses with operations and free cash flow, experienced management
teams, and operations in markets offering significant growth opportunities.
In
identifying, evaluating and selecting a target business for a potential
acquisition, we expect to encounter intense competition from other entities
having a business objective similar to ours including other blank check
companies, private equity groups, venture capital funds, leveraged buyout funds,
and operating businesses seeking strategic acquisitions. Many of these entities
are well-established and have extensive experience identifying and effecting
business combinations directly or through affiliates. Moreover, many of these
competitors possess greater financial, technical, human and other resources
than
us which will give them a competitive advantage in pursuing the acquisition
of
certain target businesses. We may not be able to successfully identify such
a
business, obtain financing for such acquisition, or successfully operate any
business that we identify. We have been working without success since December
2002 to identify a suitable merger partner and consummate an acquisition.
Failure to redeploy successfully will result in our inability to become
profitable.
Even
if
we identify an appropriate acquisition opportunity, we may be unable to
negotiate favorable terms for that acquisition. We may be unable to select,
manage or absorb or integrate any future acquisitions successfully. Any
acquisition, even if effectively integrated, may not benefit our stockholders.
Any acquisitions that we attempt or complete may involve a number of unique
risks including: (i) executing successful due diligence; (ii) our exposure
to
unforeseen liabilities of acquired companies; and (iii) our ability to integrate
and absorb the acquired company successfully. We may be unable to address these
problems successfully. Our failure to redeploy our assets could have a material
adverse effect on the market price of our common stock and our business,
financial condition and results of operations.
OUR
EFFORTS TO REDEPLOY OUR ASSETS COULD BE MATERIALLY ADVERSELY AFFECTED BY THE
LOSS OF KEY MANAGEMENT OR THE DIVERSION OF OUR MANAGEMENT TO OUTSIDE
INTERESTS.
Our
ability to successfully effect a redeployment of our assets and successfully
run
the Company following such a transaction is dependent upon the efforts of key
management, including Warren B. Kanders, our Executive Chairman of the Board
of
the Directors. The loss of his services, or the inability of the Company to
continue to retain his services on mutually satisfactory terms, could have
a
detrimental effect on the market price of our common stock and our future
business, financial condition and results of operations.
Our
executive employees devote as much of their time as is necessary to the affairs
of the Company and also serve in various capacities with other public and
private entities, including blank check companies and not-for-profit entities
affiliated with Kanders & Company. While management believes these
non-exclusive arrangements benefit the Company by availing itself of certain
of
the resources of Kanders & Company, the other business interests of these
individuals could limit their ability to devote time to our affairs. It is
noted, however, that the obligations of our executive management team to present
business opportunities to the other business entities they are affiliated with
is first subject to any pre-existing fiduciary or other obligations our
executive management team may owe to Clarus.
WE
WILL INCUR SIGNIFICANT COSTS IN CONNECTION WITH OUR EVALUATION OF SUITABLE
MERGER PARTNERS AND ACQUISITION CANDIDATES.
As
part
of our plan to redeploy our assets, our management is seeking, analyzing and
evaluating potential acquisition and merger candidates. We have incurred and
will continue to incur significant costs, such as due diligence and legal and
other professional fees and expenses, as part of these redeployment efforts.
We
incurred approximately $1.4 million of transaction related expenses during
2006
for due diligence and negotiation of potential acquisitions. In 2004, we
incurred $1.6 million of transaction related expenses during due diligence
and
negotiation of potential acquisitions. Notwithstanding these efforts and
expenditures, we cannot give any assurance that we will identify an appropriate
acquisition opportunity in the near term, or at all.
SINCE
WE HAVE NOT YET SELECTED A PARTICULAR INDUSTRY OR TARGET BUSINESS WITH WHICH
TO
REDEPLOY OUR ASSETS, YOU WILL BE UNABLE TO CURRENTLY ASCERTAIN THE MERITS OR
RISKS OF THE INDUSTRY OR BUSINESS IN WHICH WE MAY ULTIMATELY OPERATE.
Because
we may consummate a merger or acquisition with a company in any industry and
are
not limited to any particular type of business there is no current basis for
you
to evaluate the possible merits or risks of the particular industry in which
we
may ultimately operate or the target business which we may ultimately acquire.
If we complete a merger or acquisition with an entity in an industry
characterized by a high level of risk, we may be affected by the currently
unascertainable risks of that industry. Although our management will endeavor
to
evaluate the risks inherent in a particular industry or target business, we
cannot assure you that we will properly ascertain or assess all of the
significant risk factors. Even if we properly assess those risks, some of them
may be outside of our control or ability to affect. We also cannot assure you
that an investment in our securities will not ultimately prove to be less
favorable to our stockholders than a direct investment, if an opportunity were
available, in a target business.
WE
WILL LIKELY HAVE NO OPERATING HISTORY IN OUR NEW LINE OF BUSINESS, WHICH IS
YET
TO BE DETERMINED, AND THEREFORE WE WILL BE SUBJECT TO THE RISKS INHERENT IN
ESTABLISHING A NEW BUSINESS.
We
have
not identified what our new line of business will be; therefore, we cannot
fully
describe the specific risks presented by such business. It is likely that we
will have had no operating history in the new line of business and it is
possible that the target company may have a limited operating history in its
business. Accordingly, there can be no assurance that our future operations
will
generate operating or net income, and as such our success will be subject to
the
risks, expenses, problems and delays inherent in establishing a new line of
business for Clarus. The ultimate success of such new business cannot be
assured.
OUR
ABILITY TO BE SUCCESSFUL AFTER A REDEPLOYMENT OF OUR ASSETS MAY BE DEPENDENT
UPON THE CONTINUED EFFORTS OF OUR MANAGEMENT TEAM AND KEY PERSONNEL WHO MAY
JOIN
US FOLLOWING A REDEPLOYMENT OF OUR ASSETS.
The
role
of our management team and key personnel from the target business we acquire
cannot presently be ascertained. While we intend to closely scrutinize any
individuals we engage after a redeployment of our assets, we cannot assure
you
that our assessment of these individuals will prove to be correct. These
individuals may be unfamiliar with the requirements of operating a public
company which could cause us to have to expend time and resources helping them
become familiar with such requirements. This could be expensive and
time-consuming and could lead to various regulatory issues which may adversely
affect our operations.
AS
A RESULT OF AN ASSET REDEPLOYMENT WE MAY BE REQUIRED TO SUBSEQUENTLY TAKE
WRITE-DOWNS OR WRITE-OFFS, RESTRUCTURING, AND IMPAIRMENT OR OTHER CHARGES THAT
COULD HAVE A SIGNIFICANT NEGATIVE EFFECT ON OUR FINANCIAL CONDITION, RESULTS
OF
OPERATIONS AND OUR STOCK PRICE, WHICH COULD CAUSE YOU TO LOSE SOME OR ALL OF
YOUR INVESTMENT.
We
must
conduct a due diligence investigation of the target businesses we intend to
acquire. Intensive due diligence is time consuming and expensive due to the
operations, accounting, finance and legal professionals who must be involved
in
the due diligence process. Even if we conduct extensive due diligence on a
target business with which we combine, we cannot assure you that this diligence
will reveal all material issues that may affect a particular target business,
or
that factors outside the control of the target business and outside of our
control will not later arise. If our diligence fails to identify issues specific
to a target business, industry or the environment in which the target business
operates, we may be forced to later write-down or write-off assets, restructure
our operations, or incur impairment or other charges that could result in our
reporting losses. Even though these charges may be non-cash items and not have
an immediate impact on our liquidity, the fact that we report charges of this
nature could contribute to negative market perceptions about us or our common
stock. In addition, charges of this nature may cause us to violate net worth
or
other covenants to which we may be subject as a result of assuming pre-existing
debt held by a target business or by virtue of our obtaining post-combination
debt financing.
THE
REPORTING REQUIREMENTS UNDER RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION RELATING TO SHELL COMPANIES MAY DELAY OR PREVENT US FROM MAKING
CERTAIN ACQUISITIONS.
As
a
result of the final rules adopted by the Securities and Exchange Commission
on
June 29, 2005, Clarus may be deemed to be a shell company. The rules are
designed to ensure that investors in shell companies that acquire operations
have timely access to the same kind of information as is available to investors
in public companies generally. The rules prohibit the use by shell companies
of
a Form S-8 and revise the Form 8-K to require a shell company to include
extensive registration-level information required to register a class of
securities under the Securities Exchange Act of 1934 (the “Exchange Act”), in
the filing on Form 8-K that the shell company files to report the acquisition
of
a business.
The
extensive registration-level information includes a detailed description of
a
company’s business and properties, management, executive compensation, related
party transactions, legal proceedings and historical market price information,
as well as audited historical financial statements and management’s discussion
and analysis of results of operations. The revised Form 8-K rules also require
a
shell company to file pro forma financial statements giving effect to the
acquisition not later than four business days after completion of the
acquisition, instead of 75 days as required by non-shell companies.
The
time
and additional costs that may be incurred by some acquisition prospects to
prepare such detailed disclosures and obtain audited financial statements may
significantly delay or essentially preclude consummation of an otherwise
desirable acquisition by Clarus, or deter potential targets from negotiating
with Clarus. If Clarus were to be deemed a shell company, any increased
difficulty in Clarus’ ability to identify and consummate an acquisition with an
appropriate merger candidate can materially adversely affect Clarus’ ability to
successfully implement its redeployment strategy.
WE
MAY BE UNABLE TO REALIZE THE BENEFITS OF OUR NET OPERATING LOSS ("NOL") AND
TAX
CREDIT CARRYFORWARDS.
NOLs
may
be carried forward to offset federal and state taxable income in future years
and eliminate income taxes otherwise payable on such taxable income, subject
to
certain adjustments. Based on current federal corporate income tax rates, our
NOL and other carryforwards could provide a benefit to us, if fully utilized,
of
significant future tax savings. However, our ability to use these tax benefits
in future years will depend upon the amount of our otherwise taxable income.
If
we do not have sufficient taxable income in future years to use the tax benefits
before they expire, we will lose the benefit of these NOL carryforwards
permanently. Consequently, our ability to use the tax benefits associated with
our substantial NOL will depend significantly on our success in identifying
suitable merger partners and/or acquisition candidates, and once identified,
successfully consummate a merger with and/or acquisition of these
candidates.
Additionally,
if we underwent an ownership change, the NOL carryforward limitations would
impose an annual limit on the amount of the taxable income that may be offset
by
our NOL generated prior to the ownership change. If an ownership change were
to
occur, we may be unable to use a significant portion of our NOL to offset
taxable income. In general, an ownership change occurs when, as of any testing
date, the aggregate of the increase in percentage points of the total amount
of
a corporation's stock owned by "5-percent stockholders" within the meaning
of
the NOL carryforward limitations whose percentage ownership of the stock has
increased as of such date over the lowest percentage of the stock owned by
each
such "5-percent stockholder" at any time during the three-year period preceding
such date is more than 50 percentage points. In general, persons who own 5%
or
more of a corporation's stock are "5-percent stockholders," and all other
persons who own less than 5% of a corporation's stock are treated together
as a
public group.
The
amount of NOL and tax credit carryforwards that we have claimed has not been
audited or otherwise validated by the U.S. Internal Revenue Service (the “IRS”).
The IRS could challenge our calculation of the amount of our NOL or our
determinations as to when a prior change in ownership occurred and other
provisions of the Internal Revenue Code may limit our ability to carry forward
our NOL to offset taxable income in future years. If the IRS was successful
with
respect to any such challenge, the potential tax benefit of the NOL
carryforwards to us could be substantially reduced.
CERTAIN
PROTECTIVE MEASURES IMPLEMENTED BY US TO PRESERVE OUR NOL MAY NOT BE EFFECTIVE
OR MAY HAVE SOME UNINTENDED NEGATIVE EFFECTS.
On
July
24, 2003, at our Annual Meeting of Stockholders, our stockholders approved
an
amendment (the "Amendment") to our Amended and Restated Certificate of
Incorporation to restrict certain acquisitions of our securities in order to
help assure the preservation of our NOL. The Amendment generally restricts
direct and indirect acquisitions of our equity securities if such acquisition
will affect the percentage of Clarus' capital stock that is treated as owned
by
a "5% stockholder." Additionally, on February 7, 2008, our Board of Directors
approved a Rights Agreement which is designed to assist in limiting the number
of 5% or more owners and thus reduce the risk of a possible “change of
ownership” under Section 382 of the Internal Revenue Code of 1986 as amended.
Although
the transfer restrictions imposed on our capital stock and the Rights Agreement
are intended to reduce the likelihood of an impermissible ownership change,
there is no guarantee that such protective measures would prevent all transfers
that would result in an impermissible ownership change. These protective
measures also will require any person attempting to acquire a significant
interest in us to seek the approval of our Board of Directors. This may have
an
"anti-takeover" effect because our Board of Directors may be able to prevent
any
future takeover. Similarly, any limits on the amount of capital stock that
a
stockholder may own could have the effect of making it more difficult for
stockholders to replace current management. Additionally, because protective
measures implemented by us to preserve our NOL will have the effect of
restricting a stockholder's ability to acquire our common stock, the liquidity
and market value of our common stock might suffer.
IF
WE EFFECT AN ACQUISITION OR MERGER WITH A COMPANY LOCATED OUTSIDE OF THE UNITED
STATES, WE WOULD BE SUBJECT TO A VARIETY OF ADDITIONAL RISKS THAT MAY NEGATIVELY
IMPACT OUR OPERATIONS.
We
may
effect an acquisition or merger with a company located outside of the United
States. If we did, we would be subject to any special considerations or risks
associated with companies operating in the target business’ home jurisdiction,
including any of the following:
| • |
rules
and regulations or currency conversion or corporate withholding taxes
on
individuals;
|
| • |
tariffs
and trade barriers;
|
| • |
regulations
related to customs and import/export matters;
|
| • |
longer
payment cycles;
|
| • |
tax
issues, such as tax law changes and variations in tax laws as compared
to
the United States;
|
| • |
currency
fluctuations and exchange controls;
|
| • |
challenges
in collecting accounts receivable;
|
| • |
cultural
and language differences;
|
| • |
employment
regulations;
|
| • |
crime,
strikes, riots, civil disturbances, terrorist attacks and wars; and
|
| • |
deterioration
of political relations with the United States.
|
We
cannot
assure you that we would be able to adequately address these additional risks.
If we were unable to do so, our operations might suffer.
IF
WE EFFECT AN ACQUISITION OR MERGER WITH A COMPANY LOCATED OUTSIDE OF THE UNITED
STATES, THE LAWS APPLICABLE TO SUCH COMPANY WILL LIKELY GOVERN ALL OF OUR
MATERIAL AGREEMENTS AND WE MAY NOT BE ABLE TO ENFORCE OUR LEGAL
RIGHTS.
If
we
effect an acquisition or merger with a company located outside of the United
States, the laws of the country in which such company operates will govern
almost all of the material agreements relating to its operations. We cannot
assure you that the target business will be able to enforce any of its material
agreements or that remedies will be available in this new jurisdiction. The
system of laws and the enforcement of existing laws in such jurisdiction may
not
be as certain in implementation and interpretation as in the United States.
The
inability to enforce or obtain a remedy under any of our future agreements
could
result in a significant loss of business, business opportunities or capital.
Additionally, if we acquire a company located outside of the United States,
it
is likely that substantially all of our assets would be located outside of
the
United States and some of our officers and directors might reside outside of
the
United States. As a result, it may not be possible for investors in the United
States to enforce their legal rights, to effect service of process upon our
directors or officers or to enforce judgments of United States courts predicated
upon civil liabilities and criminal penalties of our directors and officers
under Federal securities laws.
COMPLIANCE
WITH THE SARBANES-OXLEY ACT OF 2002 WILL REQUIRE SUBSTANTIAL FINANCIAL AND
MANAGEMENT RESOURCES AND MAY INCREASE THE TIME AND COSTS OF COMPLETING AN
ACQUISITION.
Section
404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and report
on
our system of internal controls and requires that we have such system of
internal controls audited. If we fail to maintain the adequacy of our internal
controls, we could be subject to regulatory scrutiny, civil or criminal
penalties and/or stockholder litigation. Any inability to provide reliable
financial reports could harm our business. Section 404 of the Sarbanes-Oxley
Act
also requires that our independent registered public accounting firm report
on
management’s evaluation of our system of internal controls. An acquisition
target may not be in compliance with the provisions of the Sarbanes-Oxley Act
regarding adequacy of their internal controls. The development of the internal
controls of any such entity to achieve compliance with the Sarbanes-Oxley Act
may increase the time and costs necessary to complete any such acquisition.
Furthermore, any failure to implement required new or improved controls, or
difficulties encountered in the implementation of adequate controls over our
financial processes and reporting in the future, could harm our operating
results or cause us to fail to meet our reporting obligations. Inferior internal
controls could also cause investors to lose confidence in our reported financial
information, which could have a negative effect on the trading price of our
stock.
WE
COULD BE REQUIRED TO REGISTER AS AN INVESTMENT COMPANY UNDER THE INVESTMENT
COMPANY ACT OF 1940, WHICH COULD SIGNIFICANTLY LIMIT OUR ABILITY TO OPERATE
AND
ACQUIRE AN ESTABLISHED BUSINESS.
The
Investment Company Act of 1940 (the "Investment Company Act") requires
registration, as an investment company, for companies that are engaged primarily
in the business of investing, reinvesting, owning, holding or trading
securities. We have sought to qualify for an exclusion from registration
including the exclusion available to a company that does not own "investment
securities" with a value exceeding 40% of the value of its total assets on
an
unconsolidated basis, excluding government securities and cash items. This
exclusion, however, could be disadvantageous to us and/or our stockholders.
If
we were unable to rely on an exclusion under the Investment Company Act and
were
deemed to be an investment company under the Investment Company Act, we would
be
forced to comply with substantive requirements of the Investment Company Act,
including: (i) limitations on our ability to borrow; (ii) limitations on our
capital structure; (iii) restrictions on acquisitions of interests in associated
companies; (iv) prohibitions on transactions with affiliates; (v) restrictions
on specific investments; (vi) limitations on our ability to issue stock options;
and (vii) compliance with reporting, record keeping, voting, proxy disclosure
and other rules and regulations. Registration as an investment company would
subject us to restrictions that would significantly impair our ability to pursue
our fundamental business strategy of acquiring and operating an established
business. In the event the Securities and Exchange Commission or a court took
the position that we were an investment company, our failure to register as
an
investment company would not only raise the possibility of an enforcement action
by the Securities and Exchange Commission or an adverse judgment by a court,
but
also could threaten the validity of corporate actions and contracts entered
into
by us during the period we were deemed to be an unregistered investment company.
Moreover, the Securities and Exchange Commission could seek an enforcement
action against us to the extent we were not in compliance with the Investment
Company Act during any point in time.
RISKS
RELATED TO OUR COMMON STOCK
OUR
COMMON STOCK IS NO LONGER LISTED ON THE NASDAQ NATIONAL MARKET.
On
October 5, 2004, our common stock was delisted from the NASDAQ National Market.
The delisting followed a determination by the NASDAQ Listing Qualifications
Panel that the Company was a "public shell" and should be delisted due to policy
concerns raised under NASDAQ Marketplace Rules 4300 and 4300(a)(3). Additional
information concerning the delisting is set forth in the Company's Current
Report on Form 8-K filed with the Securities and Exchange Commission on October
4, 2004. The Company's common stock is now quoted on the OTC Pink Sheets
Electronic Quotation Service under the symbol "CLRS.PK." As a result of the
delisting, stockholders may find it more difficult to dispose of, or to obtain
accurate quotations as to the price of, our common stock, the liquidity of
our
stock may be reduced, making it difficult for a stockholder to buy or sell
our
stock at competitive market prices or at all, we may lose support from
institutional investors and/or market makers that currently buy and sell our
stock and the price of our common stock could decline.
WE
ARE VULNERABLE TO VOLATILE MARKET CONDITIONS.
The
market prices of our common stock have been highly volatile. The market has
from
time to time experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies. Please see
the
table contained in Item 5 of this Report which sets forth the range of high
and
low closing prices of our common stock for the calendar quarters indicated.
WE
DO NOT EXPECT TO PAY DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE FUTURE.
Although
our stockholders may receive dividends if, as and when declared by our Board
of
Directors, we do not intend to pay dividends on our common stock in the
foreseeable future. Therefore, you should not purchase our common stock if
you
need immediate or future income by way of dividends from your investment.
OUR
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AUTHORIZES THE ISSUANCE OF
SHARES OF PREFERRED STOCK.
Our
Amended and Restated Certificate of Incorporation provides that our Board of
Directors will be authorized to issue from time to time, without further
stockholder approval, up to 5,000,000 shares of preferred stock in one or more
series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each series,
including the dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, including sinking fund provisions, redemption price or
prices, liquidation preferences and the number of shares constituting any series
or designations of any series. Such shares of preferred stock could have
preferences over our common stock with respect to dividends and liquidation
rights. We may issue additional preferred stock in ways which may delay, defer
or prevent a change in control of Clarus without further action by our
stockholders. Such shares of preferred stock may be issued with voting rights
that may adversely affect the voting power of the holders of our common stock
by
increasing the number of outstanding shares having voting rights, and by the
creation of class or series voting rights.
WE
MAY ISSUE A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK IN THE FUTURE, WHICH COULD
CAUSE DILUTION TO CURRENT INVESTORS AND OTHERWISE ADVERSELY AFFECT OUR STOCK
PRICE.
A
key
element of our growth strategy is to make acquisitions. As part of our
acquisition strategy, we may issue additional shares of common stock as
consideration for such acquisitions. These issuances could be significant.
To
the extent that we make acquisitions and issue our shares of common stock as
consideration, your equity interest in us will be diluted. Any such issuance
will also increase the number of outstanding shares of common stock that will
be
eligible for sale in the future. Persons receiving shares of our common stock
in
connection with these acquisitions may be more likely to sell off their common
stock, which may influence the price of our common stock. In addition, the
potential issuance of additional shares in connection with anticipated
acquisitions could lessen demand for our common stock and result in a lower
price than might otherwise be obtained. We may issue common stock in the future
for other purposes as well, including in connection with financings, for
compensation purposes, in connection with strategic transactions or for other
purposes.
None
Our
corporate headquarters is currently located in Stamford, Connecticut where
we
lease approximately 8,600 square feet for $25,156 per month, pursuant to a
lease, which expires on March 31, 2019.
We
also
leased approximately 5,200 square feet near Toronto, Canada, at a cost of
approximately $11,000 per month, which prior to October 2001, was used for
the
delivery of services as well as research and development. This lease expired
on
February 14, 2006. This facility had been sub-leased for approximately $5,000
a
month, pursuant to a sublease, which expired on January 30, 2006.
We
are
not a party to nor are any of our properties subject to any pending legal,
administrative or judicial proceedings other than routine litigation incidental
to our business.
A
complaint was filed on May 14, 2001 in the United States District Court for
the
Northern District of Georgia on behalf of all purchasers of common stock of
the
Company during the period beginning December 8, 1999 and ending on October
25,
2000. Generally the complaint alleged that the Company and certain of its
directors and officers made material misrepresentations and omissions in public
filings made with the Securities and Exchange Commission and in certain press
releases and other public statements. The Company agreed to settle the class
action in exchange for a payment of $4.5 million, which was covered by
insurance. The Court approved the final settlement and dismissed the action
on
January 6, 2005.
No
matters were submitted to a vote of security holders, through the solicitation
of proxies or otherwise, during the quarter ended December 31, 2007.
Our
common stock was listed on the NASDAQ National Market System on May 26, 1998,
the effective date of our initial public offering, until October 5, 2004, when
our common stock was delisted from the NASDAQ National Market following a
determination by the NASDAQ Listing Qualifications Panel that the Company was
a
"public shell" and should be delisted due to policy concerns raised under NASDAQ
Marketplace Rules 4300 and 4300(a)(3). Additional information concerning the
delisting is set forth in the Company's Current Report on Form 8-K filed with
the Securities and Exchange Commission on October 4, 2004. The Company's common
stock is now quoted on the OTC Pink Sheets Electronic Quotation Service under
the symbol "CLRS.PK".
The
following table sets forth, for the indicated periods, the range of high and
low
bids for our common stock as reported by the OTC Pink Sheets Electronic
Quotation Service. The quotes listed below reflect inter-dealer prices or
transactions solely between market-makers, without retail mark-up, mark-down
or
commission and may not represent actual transactions.
|
High
|
Low
|
||||||
|
Calendar
Year 2008
|
|||||||
|
First
Quarter (through March 3, 2008)
|
$
|
6.40
|
$
|
5.60
|
|||
|
Year
ended December 31, 2007
|
|||||||
|
First
Quarter
|
$
|
8.20
|
$
|
7.05
|
|||
|
Second
Quarter
|
$
|
9.80
|
$
|
8.05
|
|||
|
Third
Quarter
|
$
|
9.85
|
$
|
6.75
|
|||
|
Fourth
Quarter
|
$
|
7.30
|
$
|
5.73
|
|||
|
Year
ended December 31, 2006
|
|||||||
|
First
Quarter
|
$
|
8.45
|
$
|
6.90
|
|||
|
Second
Quarter
|
$
|
7.19
|
$
|
6.30
|
|||
|
Third
Quarter
|
$
|
7.34
|
$
|
6.40
|
|||
|
Fourth
Quarter
|
$
|
7.50
|
$
|
6.70
|
|||
PERFORMANCE
GRAPH
Set
forth
below is a line graph comparing the yearly percentage change in the cumulative
total stockholder return on our common stock to the cumulative total return
of
the NASDAQ National Market Composite and The Russell 2000 Index for the period
commencing on December 31, 2002 and ending on December 31, 2007 (the “Measuring
Period”). The graph assumes that the value of the investment in our common stock
and each index was $100 on December 31, 2002. The yearly change in cumulative
total return is measured by dividing (1) the sum of (i) the cumulative amount
of
dividends for the Measuring Period, assuming dividend reinvestment, and (ii)
the
change in share price between the beginning and end of the Measuring Period,
by
(2) the share price at the beginning of the Measuring Period.
The
Company considered providing a comparison consisting of a group of peer
companies in an industry or line-of-business similar to us, but could not
reasonably identify a group of comparable peer companies that the Company
believed would provide our stockholders with a meaningful comparison. The stock
price performance on the following graph is not necessarily indicative of future
stock price performance.
COMPARISON
OF CUMULATIVE TOTAL RETURN*
AMONG
CLARUS, THE NASDAQ NATIONAL MARKET COMPOSITE AND
THE
RUSSELL 2000 INDEX
|
|
|
12/31/02
|
|
12/31/03
|
|
12/31/04
|
|
12/31/05
|
|
12/31/06
|
|
12/31/07
|
|
CLARUS
CORPORATION
|
|
$100.00
|
|
$129.89
|
|
$160.14
|
|
$148.58
|
|
$125.44
|
|
$104.98
|
|
NASDAQ
NATIONAL MARKET COMPOSITE
|
|
$100.00
|
|
$150.01
|
|
$162.89
|
|
$165.14
|
|
$180.85
|
|
$135.99
|
|
THE
RUSSELL 2000 INDEX
|
|
$100.00
|
|
$145.37
|
|
$170.08
|
|
$175.73
|
|
$205.61
|
|
$199.96
|
*
$100 INVESTED ON 12/31/02 IN STOCK OR INDEX - INCLUDING
REINVESTMENT OF DIVIDENDS.
STOCKHOLDERS
On
March
3, 2008, the last reported sales price for our common stock was $6.40 per share.
As of March 3, 2008, there were 141 holders of record of our common stock.
DIVIDENDS
We
currently anticipate that we will retain all future earnings for use in our
business and do not anticipate that we will pay any cash dividends in the
foreseeable future. The payment of any future dividends will be at the
discretion of our Board of Directors and will depend upon, among other things,
our results of operations, capital requirements, general business conditions,
contractual restrictions on payment of dividends, if any, legal and regulatory
restrictions on the payment of dividends, and other factors our Board of
Directors deems relevant.
RECENT
SALES OF UNREGISTERED SECURITIES
None.
RECENT
PURCHASES OF OUR REGISTERED EQUITY SECURITIES
We
did
not purchase any shares of our common stock during the Company’s fourth quarter
of 2007.
SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The
following table sets forth certain information regarding our equity plans as
of
December 31, 2007:
|
Plan
Category
|
(A)
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
(B)
Weighted-average
exercise price of outstanding options, warrants and rights
|
(C)
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(A))Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|||||||
|
Equity
compensation plans approved by security holders (1)
|
1,248,750
|
$
|
5.98
|
3,771,847
|
||||||
|
Equity
compensation plans not approved by security holders (2) (3)
(4)
|
1,100,000
|
$
|
7.83
|
—
|
||||||
|
Total
|
2,348,750
|
$
|
6.84
|
3,771,847
|
||||||
| (1) |
Consists
of stock options and restricted stock awards issued under the Amended
and
Restated Stock Incentive Plan of Clarus Corporation (the “2000 Plan”).
Also consists of stock options issued and issuable under the 2005
Clarus
Corporation Stock Incentive Plan (the “2005 Plan”).
|
| (2) |
Includes
options granted to the Company’s Executive Chairman, Warren B. Kanders to
purchase 400,000 shares of common stock, having an exercise price
of $7.50
per share.
|
| (3) |
Includes
options granted to the Company’s Executive Chairman, Warren B. Kanders to
purchase 400,000 shares of common stock, having an exercise price
of
$10.00 per share.
|
| (4) |
Includes
300,000 shares of restricted stock granted to the Company’s Executive
Chairman, Warren B. Kanders, having voting, dividend, distribution
and
other rights, which shall vest and become nonforfeitable if Mr. Kanders
is
an employee and/or a director of the Company or a subsidiary or affiliate
of the Company on the earlier of (i) the date the closing price of
the
Company’s common stock equals or exceeds $15.00 per share for each of the
trading days during a ninety consecutive day period, or (ii) April
11,
2013, subject to acceleration in certain
circumstances.
|
Our
selected financial information set forth below should be read in conjunction
with our consolidated financial statements, including the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of Part II of this Report. The following statement of operations
and
balance sheet data have been derived from our audited consolidated financial
statements
and should be read in conjunction with those statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
Part II of this Report.
|
Years
ended December 31,
|
||||||||||||||||
|
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||
|
(in
thousands, except per share data)
|
||||||||||||||||
|
Statement
of Operations Data:
|
||||||||||||||||
|
Revenues:
|
||||||||||||||||
|
License
fees
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
1,106
|
$
|
—
|
||||||
|
Service
fees
|
—
|
—
|
—
|
—
|
130
|
|||||||||||
|
Total
Revenues
|
—
|
—
|
—
|
1,106
|
130
|
|||||||||||
|
Operating
expenses:
|
||||||||||||||||
|
General
and administrative
|
3,767
|
3,530
|
3,504
|
3,395
|
4,986
|
|||||||||||
|
Provision
for doubtful accounts
|
—
|
—
|
—
|
—
|
18
|
|||||||||||
|
Transaction
expense
|
(13
|
)
|
1,431
|
(59
|
)
|
1,636
|
—
|
|||||||||
|
Loss
on sale or disposal of assets
|
—
|
—
|
—
|
—
|
36
|
|||||||||||
|
Depreciation
|
359
|
346
|
334
|
186
|
762
|
|||||||||||
|
Total
Operating Expenses
|
4,113
|
5,307
|
3,779
|
5,217
|
5,802
|
|||||||||||
|
Operating
Loss
|
(4,113
|
)
|
(5,307
|
)
|
(3,779
|
)
|
(4,111
|
)
|
(5,672
|
)
|
||||||
|
Other
income (expense)
|
(6
|
)
|
—
|
(2
|
)
|
19
|
169
|
|||||||||
|
Interest
income
|
4,239
|
4,016
|
2,490
|
1,203
|
1,238
|
|||||||||||
|
Interest
expense
|
—
|
—
|
—
|
—
|
(66
|
)
|
||||||||||
|
Net
Income (Loss) Before Income Tax
|
$
|
120
|
$
|
(1,291
|
)
|
$
|
(1,291
|
)
|
$
|
(2,889
|
)
|
$
|
(4,331
|
)
|
||
|
Income
tax
|
3
|
—
|
—
|
—
|
—
|
|||||||||||
|
Net
Income (Loss)
|
$
|
117
|
$
|
(1,291
|
)
|
$
|
(1,291
|
)
|
$
|
(2,889
|
)
|
$
|
(4,331
|
)
|
||
|
Income
(Loss) Per Share
|
||||||||||||||||
|
Basic
|
$
|
0.01
|
$
|
(0.08
|
)
|
$
|
(0.08
|
)
|
$
|
(0.18
|
)
|
$
|
(0.27
|
)
|
||
|
Diluted
|
$
|
0.01
|
$
|
(0.08
|
)
|
$
|
(0.08
|
)
|
$
|
(0.18
|
)
|
$
|
(0.27
|
)
|
||
|
Weighted
Average Common Shares Outstanding
|
||||||||||||||||
|
Basic
|
16,658
|
16,613
|
16,329
|
16,092
|
15,905
|
|||||||||||
|
Diluted
|
17,051
|
16,613
|
16,329
|
16,092
|
15,905
|
|||||||||||
|
Balance
Sheet Data:
|
As
of December 31,
|
|||||||||||||||
|
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||
|
Cash
and cash equivalents
|
$
|
41,886
|
$
|
1,731
|
$
|
23,270
|
$
|
48,377
|
$
|
15,045
|
||||||
|
Marketable
securities
|
$
|
45,223
|
$
|
82,634
|
$
|
61,601
|
$
|
35,119
|
$
|
73,685
|
||||||
|
Total
assets
|
$
|
88,680
|
$
|
86,673
|
$
|
88,278
|
$
|
86,437
|
$
|
89,445
|
||||||
|
Total
stockholders' equity
|
$
|
87,719
|
$
|
85,716
|
$
|
86,609
|
$
|
84,854
|
$
|
86,819
|
||||||
This
report contains certain forward-looking statements, including information about
or related to our future results, certain projections and business trends.
Assumptions relating to forward-looking statements involve judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control.
When
used in this report, the words "estimate," "project," "intend," "believe,"
"expect" and similar expressions are intended to identify forward-looking
statements. Although we believe that our assumptions underlying the
forward-looking statements are reasonable, any or all of the assumptions could
prove inaccurate, and we may not realize the results contemplated by the
forward-looking statements. Management decisions are subjective in many respects
and susceptible to interpretations and periodic revisions based upon actual
experience and business developments, the impact of which may cause us to alter
our business strategy or capital expenditure plans that may, in turn, affect
our
results of operations. In light of the significant uncertainties inherent in
the
forward-looking information included in this report, you should not regard
the
inclusion of such information as our representation that we will achieve any
strategy, objectives or other plans. The forward-looking statements contained
in
this report speak only as of the date of this report, and we have no obligation
to update publicly or revise any of these forward-looking statements.
These
and
other statements, which are not historical facts, are based largely upon our
current expectations and assumptions and are subject to a number of risks and
uncertainties that could cause actual results to differ materially from those
contemplated by such forward-looking statements. These risks and uncertainties
include, among others, our planned effort to redeploy our assets and use our
substantial cash, cash equivalents and marketable securities to enhance
stockholder value following the sale of substantially all of our electronic
commerce business, which represented substantially all of our revenue generating
operations and related assets, and the risks and uncertainties set forth in
the
section headed "Risk Factors" of Part I, Item 1A of this Report and described
in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of Part II of this Report. We cannot assure you that we will be
successful in our efforts to redeploy our assets or that any such redeployment
will result in Clarus’ future profitability. Our failure to redeploy our assets
could have a material adverse effect on the market price of our common stock
and
our business, financial condition and results of operations.
OVERVIEW
AS
PART OF OUR PREVIOUSLY ANNOUNCED STRATEGY TO LIMIT OPERATING LOSSES AND ENABLE
THE COMPANY TO REDEPLOY ITS ASSETS AND USE ITS SUBSTANTIAL CASH, CASH
EQUIVALENTS AND MARKETABLE SECURITIES TO ENHANCE STOCKHOLDER VALUE, ON DECEMBER
6, 2002, WE SOLD SUBSTANTIALLY ALL OF OUR ELECTRONIC COMMERCE BUSINESS, WHICH
REPRESENTED SUBSTANTIALLY ALL OF OUR REVENUE GENERATING OPERATIONS AND RELATED
ASSETS. THE INFORMATION APPEARING BELOW, WHICH RELATES TO PRIOR PERIODS, IS
THEREFORE NOT INDICATIVE OF THE RESULTS THAT MAY BE EXPECTED FOR ANY SUBSEQUENT
PERIODS. RESULTS FOR THE YEAR ENDED DECEMBER 31, 2007 AND ANY FUTURE PERIODS
PRIOR TO A REDEPLOYMENT OF OUR ASSETS ARE EXPECTED PRIMARILY TO REFLECT GENERAL
AND ADMINISTRATIVE EXPENSES AND TRANSACTION EXPENSES ASSOCIATED WITH THE
CONTINUING ADMINISTRATION OF THE COMPANY AND ITS EFFORTS TO REDEPLOY ITS ASSETS.
SUCCESSFUL
REDEPLOYMENT OF OUR ASSETS IS DEPENDENT UPON THE EFFORTS OF OUR EXECUTIVE
MANAGEMENT TEAM, IN PARTICULAR WARREN B. KANDERS, OUR EXECUTIVE CHAIRMAN OF
THE
BOARD OF DIRECTORS. WHILE MR. KANDERS RESIGNED EFFECTIVE JULY 31, 2007 AS
CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF ARMOR HOLDINGS, INC. IN CONNECTION
WITH
ITS SALE, HE AND OUR OTHER EMPLOYEES ALSO SERVE IN VARIOUS CAPACITIES WITH
OTHER
PUBLIC AND PRIVATE ENTITIES, INCLUDING BLANK CHECK COMPANIES AND NOT-FOR-PROFIT
ENTITIES. AS PREVIOUSLY DISCLOSED, OUR EXECUTIVE EMPLOYEES, INCLUDING MR.
KANDERS DEVOTE AS MUCH OF THEIR TIME AS IS NECESSARY TO THE AFFAIRS OF THE
COMPANY.
CRITICAL
ACCOUNTING POLICIES AND USE OF ESTIMATES
The
Company's discussion of financial condition and results of operations is based
on the consolidated financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America.
The preparation of these consolidated financial statements require management
to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
consolidated financial statements. Estimates also affect the reported amounts
of
revenues and expenses during the reporting periods. The Company continually
evaluates its estimates and assumptions including those related to revenue
recognition, impairment of long-lived assets, impairment of investments, and
contingencies and litigation. The Company bases its estimates on historical
experience and other assumptions that are believed to be reasonable under the
circumstances. Actual results could differ from these estimates.
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.
|
| - |
The
Company accounts for income taxes pursuant to Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109").
Under the asset and liability method specified thereunder, deferred
taxes
are determined based on the difference between the financial reporting
and
tax bases of assets and liabilities. Deferred tax liabilities are
offset
by deferred tax assets relating to net operating loss carryforwards,
tax
credit carryforwards and deductible temporary differences. Recognition
of
deferred tax assets is based on management’s belief that it is more likely
than not that the tax benefit associated with temporary differences
and
operating and capital loss carryforwards will be utilized. A valuation
allowance is recorded for those deferred tax assets for which it
is more
likely than not that the realization will not
occur.
|
| - |
On
January 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123 (revised 2004), “Share-Based Payments” (“SFAS 123R”),
requiring recognition of expense related to the fair value of stock
option
awards. The Company recognizes the cost of the share-based awards
on a
straight-line basis over the requisite service period of the award.
Prior
to January 1, 2006, the Company accounted for stock option plans
under the
recognition and measurement provisions of Accounting Principles Board
Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and
related interpretations, as permitted by Statement of Financial Accounting
Standard No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”).
Under SFAS 123R, compensation cost recognized during 2007 and 2006
would
include: (a) compensation cost for all share-based payments granted
prior
to, but not yet vested as of January 1, 2006, based on the grant
date fair
value estimated in accordance with the original provisions of SFAS
123,
and (b) compensation cost for all share-based payments granted subsequent
to January 1, 2006, based on the grant-date fair value estimated
in
accordance with the provisions of SFAS 123R.
|
| - |
Through
2004, the Company had recognized revenue in connection with its prior
business from two primary sources, software licenses and services.
Revenue
from software licensing and services fees was recognized in accordance
with Statement of Position ("SOP") 97-2, "Software Revenue Recognition",
and SOP 98-9, "Software Revenue Recognition with Respect to Certain
Transactions" and related interpretations. The Company recognized
software
license revenue when: (1) persuasive evidence of an arrangement existed;
(2) delivery had occurred; (3) the fee was fixed or determinable;
and (4)
collectibility was probable.
|
SOURCES
OF REVENUE
Prior
to
the December 6, 2002 sale of substantially all of the Company's revenue
generating operations and assets, the Company's revenue consisted of license
fees and services fees. License fees were generated from the licensing of the
Company's suite of software products. Services fees were generated from
consulting, implementation, training, content aggregation and maintenance
support services. Following the sale of substantially all of the Company's
operating assets, the Company's revenue consisted solely of the recognition
of
deferred services fees that were recognized ratably over the maintenance term
of
the license agreements for our prior suite of software products. The remaining
deferred revenue was fully recognized by September 30, 2004 upon expiration
of
the maintenance term.
Until
a
redeployment of the Company's assets occurs, the Company's principal income
will
consist of interest, dividend and other investment income from cash, cash
equivalents and marketable securities, which is reported as interest income
in
the Company's statement of operations.
OPERATING
EXPENSES
General
and administrative expense include salaries and employee benefits, rent,
insurance, legal, accounting and other professional fees, state and local
non-income based taxes, board of director fees as well as public company
expenses such as transfer agent and listing fees and expenses.
Transaction
expense consists primarily of professional fees and expenses related to due
diligence, negotiation and documentation of acquisition, financing and related
agreements.
RESTRUCTURING
AND RELATED COSTS
During
the years ended December 31, 2002 and 2001, the Company's management approved
restructuring plans to reorganize and reduce operating costs. Restructuring
and
related charges of $12.8 million were expensed in the years ended December
31,
2002 and 2001 in an attempt to align the Company's cost structure with projected
revenue.
During
the year ended December 31, 2003, the Company determined that actual
restructuring and related charges were in excess of the amounts provided for
in
the years ended December 31, 2002 and 2001 and recorded additional restructuring
charges of $250,000. This amount was charged to general and administrative
costs
during the year ended December 31, 2003. The charges for the year ended December
31, 2003 were comprised of $223,000 for employee separation costs and $27,000
for facility closure and consolidation costs.
During
the year ended December 31, 2004, the Company recorded an additional
restructuring charge of $33,000 for facility closure costs. The increase was
the
result of significant fluctuations in exchange rates and increased rent expense.
Expenditures for the year ended December 31, 2004 totaled $190,000 consisting
of
$125,000 for employee separation costs and $65,000 for facility closing
costs.
During
the years ended December 31, 2006 and 2005, expenditures for facility closing
costs totaled $17,000 and $56,000 respectively. As of December 31, 2006 and
after, the balance for restructuring and related costs was zero.
COMPARISON
OF RESULTS OF OPERATIONS BETWEEN THE YEARS ENDED DECEMBER 31, 2007 AND 2006
On
December 6, 2002, the Company completed the disposition of substantially all
its
operating assets, and the Company is now evaluating alternative ways to redeploy
its cash, cash equivalents and marketable securities into new businesses. The
discussion below is therefore not meaningful to an understanding of future
revenue, earnings, operations, business or prospects of the Company following
such a redeployment of its assets.
REVENUES
Total
revenues for the years ended December 31, 2007 and 2006 were zero.
GENERAL
AND ADMINISTRATIVE EXPENSE
General
and administrative expenses increased $237,000 or 7%, to $3.8 million during
the
year ended December 31, 2007, compared to $3.5 million during the year ended
December 31, 2006. The increase in general and administrative expense for the
year ended December 31, 2007 compared to the year ended December 31, 2006 was
primarily attributable to increases in employment compensation and benefits,
non-cash stock option expense and rent offset by decreases in investment custody
fees, accounting fees, stock administrative fees and other professional fees.
This trend is consistent with management's stated strategy to limit our
expenditure rate to the extent practicable, to levels of our investment income
until the completion of an acquisition or merger. However, management believes
we will incur a net loss in 2008 based on our current level of expenses due
to
lower projected investment yields on our portfolio. General and administrative
expenses include salaries and employee benefits, rent, insurance, legal,
accounting and other professional fees, state and local non income based taxes,
board of director fees as well as public company expenses such as transfer
agent
and listing fees and expenses.
TRANSACTION
EXPENSE
Transaction
expense decreased $1.4 million or 101% to a credit balance of $13,000 during
the
year ended December 31, 2007, compared to $1.4 million during the same period
in
2006. During the year ended December 31, 2007, the Company incurred
approximately $12,000 in expenses and credits of $25,000 related to acquisition
negotiations and due diligence processes that terminated without the
consummation of an acquisition. The Company incurred approximately $1.4 million
of transaction expense during the year ended December 31, 2006, arising out
of
acquisition negotiations and due diligence processes that terminated without
the
consummation of the acquisitions.
Transaction
expense consists primarily of professional fees and expenses related to due
diligence, negotiation and documentation of acquisition, financing and related
agreements.
DEPRECIATION
EXPENSE
Depreciation
expense increased $13,000 or 4%, to $359,000 for the year ended December 31,
2007, compared to $346,000 in the year ended December 31, 2006. The increase
is
primarily attributable to the additional depreciation of office
equipment.
OTHER
INCOME (LOSS)
For
the
year ended December 31, 2007, the Company recorded a loss of $6,000 from the
disposal of equipment compared to the year ended December 31, 2006 when the
Company recorded gains and losses that offset.
INTEREST
INCOME
Interest
income increased $223,000 or 6%, to $4.2 million for the year ended December
31,
2007 compared to $4.0 million for the year ended December 31, 2006. Interest
income for the years ended December 31, 2007 and 2006, includes $3.6 million
and
$2.5 million in discount accretion and premium amortization, respectively.
The
increase in interest income was due primarily to higher rates of return on
investments as well as higher levels of cash available for investment. The
weighted average interest rate for our investments for the year ended December
31, 2007 was 4.95% compared to 4.82% for the year ended December 31, 2006.
The
current earnings rate as of December 31, 2007 is 4.28%.
The
current earnings rate as of January 31, 2008 is 3.98%. As of February 29, 2008,
the current yield on the Company’s portfolio is 3.42% down 0.56% due to
declining interest rates. On January 22, 2008, the Federal Reserve lowered
the
federal funds rate from 4.25% to 3.50%. We expect this interest rate reduction
to negatively impact our reinvestment rate on cash, cash equivalents and
marketable securities for the year ended December 31, 2008.
INCOME
TAXES
For
the
year ended December 31, 2007, the Company recorded a provision of $3,000 for
income taxes. The income tax provision is a result of the federal Alternative
Minimum tax provisions. As a result of the operating losses incurred since
the
Company's inception, no provision or benefit for income taxes was recorded
in
the years ended December 31, 2006 or 2005.
COMPARISON
OF RESULTS OF OPERATIONS BETWEEN THE YEARS ENDED DECEMBER 31, 2006 AND 2005
REVENUES
Total
revenues for the years ended December 31, 2006 and 2005 were zero.
GENERAL
AND ADMINISTRATIVE EXPENSE
During
the years ended December 31, 2006 and 2005, general and administrative expenses
remained stable at $3.5 million. This trend is consistent with management's
stated strategy to limit our expenditure rate to the extent practicable, to
levels of our investment income until the completion of an acquisition or
merger. General and administrative expenses include salaries and employee
benefits, rent, insurance, legal, accounting and other professional fees, state
and local non income based taxes, board of director fees as well as public
company expenses such as transfer agent and listing fees and expenses. General
and administrative expenses for the year ended December 31, 2006, also includes
a one-time charge of $250,000 representing the severance payment related to
Mr.
Nigel P. Ekern’s resignation, effective December 31, 2006.
TRANSACTION
EXPENSE
The
Company incurred approximately $1.4 million of transaction expense during the
year ended December 31, 2006, arising out of acquisition negotiations and due
diligence processes that terminated without the consummation of the
acquisitions. In the first quarter of 2005, the Company incurred $92,000 in
expenses related to an acquisition negotiation and due diligence process and
also recognized a credit of $151,000 in expenses from the final settlement
of
outstanding expenses arising out of an acquisition negotiation and due diligence
process that terminated in September 2004 without the consummation of the
acquisition.
Transaction
expense consists primarily of professional fees and expenses related to due
diligence, negotiation and documentation of acquisition, financing and related
agreements.
DEPRECIATION
EXPENSE
Depreciation
expense for the year ended December 31, 2006 increased slightly to $0.35 million
compared to $0.33 million for the year ended December 31, 2005. The increase
is
primarily attributable to the purchase of new equipment during the
year.
INTEREST
INCOME
Interest
income increased to $4.0 million for the year ended December 31, 2006 compared
to $2.5 million for the year ended December
31, 2005. Interest income for the years ended December 31, 2006 and 2005,
includes $2.5 million and $1.5 million in discount accretion and premium
amortization, respectively. The increase in interest income was due primarily
to
higher rates of return on
investments. The weighted average interest rate for our investments for the
year
ended December 31, 2006 was 4.82% compared to 2.99% for the year ended December
31, 2005. The current earnings rate as of December 31, 2006 was 5.18%.
INCOME
TAXES
As
a
result of the operating losses incurred since the Company's inception, no
provision or benefit for income taxes was recorded in the years ended December
31, 2006 or 2005.
LIQUIDITY
AND CAPITAL RESOURCES
The
Company's cash and cash equivalents increased to $41.9 million at December
31,
2007 from $1.7 million at December 31, 2006 due to a shift in the composition
of
the investment portfolio to cash and cash equivalents. Cash and cash equivalents
are investments with a shorter duration, less than three months, under
accounting principles generally accepted in the United States of America.
Marketable securities decreased to $45.2 million at December 31, 2007 from
$82.6
million at December 31, 2006. The overall combined increase of $2.7 million
in
cash, cash equivalents and marketable securities is primarily due to an increase
in net income, proceeds from the exercise of stock options partially offset
by
an increase in operating expenses for the period ended December 31, 2007.
Cash
used
in operating activities was approximately $1.6 million during the year ended
December 31, 2007 compared to cash used by operating activities of approximately
$3.0 million in the year ended December 31, 2006. The decrease in cash used
by
operations was primarily attributable to the Company’s higher net income, a
decrease in accrued interest receivable, prepaids and other current assets,
offset by an increase in discount amortization, deferred rent and non-cash
items. The trend in cash used in operating activities is consistent with
management's stated strategy, following the sale of substantially all of the
Company's operating assets in December 2002, to reduce our cash expenditure
rate
by targeting, to the extent practicable, our overhead expenses to the amount
of
our investment income until the completion of an acquisition or merger. While
the Company's operating expenses, excluding transaction expenses, have remained
relatively stable during the past three fiscal years, management currently
believes that the Company's operating expenses, excluding potential unsuccessful
transaction expenses, will exceed investment income during 2008, due to the
declining interest rate environment.
Cash
provided by investing activities was approximately $40.3 million during the
year
ended December 31, 2007. The cash was provided by the maturity of marketable
securities partially offset by the purchase of marketable securities. Cash
used
by investing activities was approximately $18.6 million during the year ended
December 31, 2006. The cash was used for the purchase of marketable securities
partially offset by the maturity of marketable securities.
Cash
provided by financing activities during 2007 was attributable to stock option
exercises. Cash provided by financing activities was $1.4 million for the year
ended December 31, 2007. There was no cash provided by financing activities
during the year ended December 31, 2006. There were no stock option exercises
during the year ended December 31, 2006.
On
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
No. 123 (revised 2004), “Share-Based Payments” (“SFAS 123R”), requiring
recognition of expense related to the fair value of stock option awards. The
Company recognizes the cost of the share-based awards on a straight-line basis
over the requisite service period of the award. Prior to January 1, 2006, the
Company accounted for stock option plans under the recognition and measurement
provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock
Issued to Employees” (“APB 25”) and related interpretations, as permitted by
Statement of Financial Accounting Standard No. 123, “Accounting for Stock-Based
Compensation” (“SFAS 123”). Under SFAS 123R, compensation cost recognized during
2007 and 2006 includes: (a) compensation cost for all share-based payments
granted prior to, but not yet vested as of January 1, 2006, based on the grant
date fair value estimated in accordance with the original provisions of SFAS
123, and (b) compensation cost for all share-based payments granted subsequent
to January 1, 2006, based on the grant-date fair value estimated in accordance
with the provisions of SFAS 123R. The Company recorded total non-cash stock
compensation expense of
approximately $268,000 and $301,000, respectively related to unvested restricted
stock under SFAS 123R for the years ended December 31, 2007 and 2006. For the
year ended December 31, 2007, the Company incurred compensation expense of
approximately $176,000 related to stock options. For the year ended December
31,
2006 the Company incurred no compensation expense related to options under
SFAS
123R.
On
December 13, 2007, the Company issued 430,000 stock options, under the Company’s
2005 Stock Incentive Plan, to directors and employees of the Company. The
vesting period for 150,000 options issued to directors was one year and four
years for the remaining 280,000 options issued to employees. For computing
the
fair value of the stock-based awards, the fair value of each option grant has
been estimated as of the date of grant using the Black-Scholes option-pricing
model with the following assumptions:
|
Options
Vesting Period
|
1
year
|
4
years
|
|||||
|
Dividend
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
years
|
|||||
|
Weighted
average fair value
|
$
|
2.22
|
$
|
2.77
|
|||
Using
these assumptions, the fair value of the stock options granted during the year
ended December 31, 2007 was approximately $1.1 million which will be amortized
over the vesting period of the options. There were no options granted during
the
year ended December 31, 2006.
On
December 30, 2005, the Company’s Board of Directors accelerated the vesting of
unvested stock options previously awarded to employees, officers and directors
of the Company under its Amended and Restated Stock Incentive Plan of Clarus
Corporation (as amended and restated effective as of June 13, 2000) and the
Clarus Corporation 2005 Stock Incentive Plan, subject to such optionee entering
into lock-up, confidentiality and non-competition agreements. As a result of
this action, options to purchase 676,669 shares of common stock that would
have
vested over the next one to three years became fully vested.
The
decision to accelerate the vesting of these options was made primarily to reduce
non-cash compensation expense that would have been recorded in future periods
following the Company’s application of the Financial Accounting Standards Board
Statement No. 123, “Share Based Payment (revised 2004) (“SFAS 123R”). The
Company adopted the expense recognition provisions of SFAS 123R beginning
January 1, 2006. The acceleration of the options is expected to reduce the
Company’s non-cash compensation expense related to these options by
approximately $1.5 million or $0.09 per share (pre-tax) for the years 2006
-
2008, based on estimated value calculations using the Black-Scholes methodology.
On
December 6, 2002, the Company had granted options to purchase 1,250,000 shares
of common stock to three senior executives. 450,000 of these options were issued
with an exercise price of $5.35 per share which was less than the fair market
value of the Company’s stock on that date of $5.45; accordingly a compensation
charge of $65,000 was being recognized over the vesting period of five years.
Twenty percent of the options vested annually over five years on the anniversary
of the date of grant. Due to the acceleration of the vesting of stock options
by
the Company, the remaining compensation charge of $8,500 was recognized as
of
December 31, 2005.
At
December 31, 2007, the Company has net operating loss, research and
experimentation credit and alternative minimum tax credit carryforwards for
U.S.
federal income tax purposes of approximately $228.4 million, $1.3 million and
$56,000, respectively, which expire in varying amounts beginning in the year
2009. The Company also has a capital loss carryforward of $1.6 million which
expires in 2008. The Company's ability to benefit from certain net operating
loss and tax credit carryforwards is limited under Section 382 of the Internal
Revenue Code due to a prior ownership change of greater than 50%. Accordingly,
approximately $223.1 million of the $228.4 million of U.S. net operating loss
carryforward is currently available to offset taxable income that the Company
may recognize in the future. Of the approximately $223.1 million of net
operating losses available to offset taxable income, approximately $206.4
million does not begin to expire until 2020 or later, subject to compliance
with
Section 382 of the Internal Revenue Code as indicated by the following schedule:
Net
Operating Loss And Capital Loss Carryforward Expiration
Dates*
(Unaudited)
December
31, 2007
|
Net
Operating Loss
|
Capital
Loss
|
||||||
|
Expiration
Dates
December
31
|
Amount
(000’s)
|
Amount
(000’s)
|
|||||
|
2007
|
$
|
—
|
$
|
0
|
|||
|
2008
|
—
|
1,599
|
|||||
|
2009
|
1,900
|
||||||
|
2010
|
7,417
|
||||||
|
2011
|
7,520
|
||||||
|
2012
|
5,157
|
||||||
|
2020
|
29,533
|
||||||
|
2021
|
50,430
|
||||||
|
2022
|
115,000
|
||||||
|
2023
|
5,712
|
||||||
|
2024
|
3,566
|
||||||
|
2025
|
1,707
|
||||||
|
2026
|
476
|
||||||
|
Total
|
228,418
|
1,599
|
|||||
|
Section
382 limitation
|
(5,363
|
)
|
—
|
||||
|
After
Limitations
|
$
|
223,055
|
$
|
1,599
|
|||
|
*Subject
to compliance with Section 382 of the Internal Revenue
Code.
|
|||||||
CONTRACTUAL
OBLIGATIONS
The
following summarizes the Company's contractual obligations and commercial
commitments at December 31, 2007 with initial or remaining terms of one or
more
years, and the effect such obligations are expected to have on our liquidity
and
cash flow in future periods:
|
Contractual
Obligations
|
||||||||||||||||
|
(in
thousands)
|
Payment
Due By Period
|
|||||||||||||||
|
|
Less
Than
|
More
Than
|
||||||||||||||
|
Total
|
1
Year
|
1-3
Years
|
3-5
Years
|
5
Years
|
||||||||||||
|
Operating
Leases
|
$
|
2,425
|
$
|
420
|
$
|
877
|
$
|
1,128
|
$
|
—
|
||||||
|
Total
|
$
|
2,425
|
$
|
420
|
$
|
877
|
$
|
1,128
|
$
|
—
|
||||||
The
Company does not have commercial commitments under capital leases, lines of
credit, stand-by lines of credit, guaranties, stand-by repurchase obligations
or
other such arrangements, other than the stand-by letter of credit described
below. The Company has no debt and is not a guarantor of any debt.
The
Company does not engage in any transactions or have relationships or other
arrangements with unconsolidated entities. These include special purpose and
similar entities or other off-balance sheet arrangements. The Company also
does
not engage in energy, weather or other commodity-based contracts.
Our
corporate headquarters is currently located in Stamford, Connecticut where
we
lease approximately 8,600 square feet for $25,156 a month during 2007, pursuant
to a lease that includes annual rent escalations, which expires on March 31,
2019.
In
September 2003, the Company and Kanders & Company, an entity owned and
controlled by the Company's Executive Chairman, Warren B. Kanders, entered
into
a 15-year lease with a five-year renewal option, as co-tenants to lease
approximately 11,500 square feet in Stamford, Connecticut. The Company and
Kanders & Company have initially agreed to allocate the total lease payments
of $24,438 per month on the basis of Kanders & Company renting 2,900 square
feet initially for $6,163 per month, and the Company renting 8,600 square feet
initially for $18,275 per month, which are subject to increase during the term
of the lease. The lease provides the co-tenants with an option to terminate
the
lease in years eight and ten in consideration for a termination payment. The
Company and Kanders & Company agreed to pay for their proportionate share of
the build-out construction costs, fixtures, equipment and furnishings related
to
preparation of the space. In connection with the lease, the Company obtained
a
stand-by letter of credit in the amount of $850,000 to secure lease obligations
for the Stamford facility. The bank that issued the letter of credit holds
an
$850,000 deposit against the letter of credit. Kanders & Company reimburses
the Company for a pro rata portion of the approximately $5,000 annual cost
of
the letter of credit.
We
also
leased approximately 5,200 square feet near Toronto, Canada, at a cost of
approximately $11,000 per month, which was used for the delivery of services
as
well as research and development through October 2001. This lease expired on
February 14, 2006. This facility had been sub-leased for approximately $5,000
a
month, pursuant to a sublease, which expired on January 30, 2006. The cost,
net
of the estimated sublease income, was included in general and administrative
expense in the accompanying statement of operations in 2002.
NEW
ACCOUNTING PRONOUNCEMENTS
In
February 2007, the FASB issued Statement of Financial Accounting Standards
No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities -
Including an Amendment of FASB No. 115,” (“SFAS 159”). SFAS 159 allows a company
to irrevocably elect fair value as the initial and subsequent measurement
attribute for certain financial assets and financial liabilities on a
contract-by-contract basis, with changes in fair value recognized in earnings.
SFAS No. 159 is effective for fiscal years beginning after November 15, 2007
and
will be applied prospectively. The Company is currently evaluating the effect
of
the adoption of SFAS 159 will have on its consolidated financial
statements.
Effective
January 1, 2007, we adopted the Financial Accounting Standards Board (FASB)
Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109,” or FIN 48, which clarifies the
accounting for uncertainty in income taxes recognized in
an enterprise’s financial statements in accordance with
SFAS No. 109, “Accounting for Income Taxes.”
FIN 48 prescribes a recognition threshold
and measurement attribute for the financial
statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and
penalties, accounting in interim periods,
disclosure and transition. There was
no change to the net amount of
assets and liabilities recognized in the statement of financial
condition as a result of our adoption of FIN 48. At January 1, 2007, we had
no
unrecognized tax benefits.
In
September 2006, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 157, “Fair Value Measurements”, which establishes a framework
for reporting fair value and expands disclosures about fair value measurements.
SFAS No. 157 was effective for the Company on January 1, 2008, with the
exception that the applicability of SFAS No. 157’s fair value measurement
requirements to nonfinancial assets and liabilities that are not required or
permitted to be recognized or disclosed at fair value on a recurring basis
has
been delayed by the FASB for one year. The Company does not believe that the
requirements of SFAS No. 157 which were effective for the Company on January
1,
2008 will have a material impact on the Company’s consolidated financial
statements. The Company is currently evaluating the impact of the SFAS No.
157
requirements which will be effective for the Company on January 1, 2009 on
the
Company’s results of operations and financial position.
In
December 2007, the FASB released SFAS No. 141(R), Business Combinations (revised
2007) (“SFAS 142(R)”), which changes many well-established business combination
accounting practices and significantly affects how acquisition transactions
are
reflected in the financial statements. Additionally, SFAS 141(R) will affect
how
companies negotiate and structure transactions, model financial projections
of
acquisitions and communicate to stakeholders. SFAS 141(R) must be applied
prospectively to business combinations for which the acquisition date is on
or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company is currently evaluating the impact the adoption
of this statement could have on its financial condition, results of operations
and cash flows.
In
December 2007, the FASB released SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements an amendment of ARB No. 51 (“SFAS 160”), which
establishes accounting and reporting standards for the noncontrolling interests
in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 requires
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the noncontrolling interests and requires
disclosure, on the face of the consolidated statement of income, of the amounts
of consolidated net income attributable to the parent and to the noncontrolling
interest. Previously, net income attributable to the noncontrolling interest
was
reported as an expense or other deduction in arriving at consolidated net
income. SFAS 160 is effective for financial statements issued for fiscal years
beginning after December 15, 2008. The Company believes the adoption of this
statement will not have a material impact on its consolidated financial
statements.
QUARTERLY
DATA
The
following table sets forth selected quarterly data for the years ended December
31, 2007 and 2006 (in thousands, except per share data).
The operating results are not indicative of results for any future
period.
|
2007
|
|||||||||||||
|
First
|
Second
|
Third
|
Fourth
|
||||||||||
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
||||||||||
|
Revenues
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||
|
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
|
)
|
||||
|
2006
|
|||||||||||||
|
First
|
Second
|
Third
|
Fourth
|
||||||||||
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
||||||||||
|
Revenues
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||
|
Operating
loss
|
(2,249
|
)
|
(1,019
|
)
|
(961
|
)
|
(1,078
|
)
|
|||||
|
Net
income (loss)
|
$
|
(1,382
|
)
|
$
|
(24
|
)
|
$
|
99
|
$
|
16
|
|||
|
Net
income (loss) per share:
|
|||||||||||||
|
Basic
|
$
|
(0.08
|
)
|
$
|
(0.00
|
)
|
$
|
0.01
|
$
|
0.00
|
|||
|
Diluted
|
$
|
(0.08
|
)
|
$
|
(0.00
|
)
|
$
|
0.01
|
$
|
0.00
|
|||
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.
CLARUS
CORPORATION AND SUBSIDIARIES
Index
to Financial Statements
|
Page
|
|
|
25
|
|
|
26
|
|
|
27
|
|
|
28
|
|
|
30
|
|
|
31
|
The
Board of Directors and Stockholders of Clarus Corporation:
We
have
audited the accompanying consolidated balance sheets of Clarus Corporation
and
subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the
related consolidated statements of operations, stockholders’ equity and
comprehensive loss, and cash flows for each of the years in the three-year
period ended December 31, 2007. We also have audited the Company’s internal
control over financial reporting as of December 31, 2007, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Company’s
management is responsible for these consolidated financial statements, for
maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on these
consolidated financial statements and an opinion on the Company’s internal
control over financial reporting based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects. Our audits of the consolidated financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing
and
evaluating the design and operating effectiveness of internal control based
on
the assessed risk. Our audits also included performing such other procedures
as
we considered necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures
of
the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use,
or
disposition of the company’s assets that could have a material effect on the
financial statements.
Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In
our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of
December 31, 2007 and 2006, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31,
2007, in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of
December 31, 2007, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
As
discussed in Note 1 to the consolidated financial statements, in 2006, the
Company adopted the provisions of Financial Accounting Standards Board
No. 123(R), Share-Based Payment, as of January 1, 2006.
/s/
KPMG LLP
Stamford,
Connecticut
March
7, 2008
CLARUS
CORPORATION AND SUBSIDIARIES
December
31, 2007 and 2006
(In
Thousands, Except Share and Per Share Amounts)
|
ASSETS
|
|||||||
|
2007
|
2006
|
||||||
|
CURRENT
ASSETS:
|
|||||||
|
Cash
and cash equivalents
|
$
|
41,886
|
$
|
1,731
|
|||
|
Marketable
securities
|
45,223
|
82,634
|
|||||
|
Interest
receivable
|
15
|
402
|
|||||
|
Prepaids
and other current assets
|
175
|
207
|
|||||
|
Total
current assets
|
87,299
|
84,974
|
|||||
|
PROPERTY
AND EQUIPMENT, NET
|
1,381
|
1,699
|
|||||
|
Total
assets
|
$
|
88,680
|
$
|
86,673
|
|||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
|
CURRENT
LIABILITIES:
|
|||||||
|
Accounts
payable and accrued liabilities
|
$
|
618
|
$
|
680
|
|||
|
Total
current liabilities
|
618
|
680
|
|||||
|
|
|||||||
|
Deferred
rent
|
343
|
277
|
|||||
|
Total
liabilities
|
961
|
957
|
|||||
|
COMMITMENTS
AND CONTINGENCIES (Note 9)
|
|||||||
|
STOCKHOLDERS'
EQUITY:
|
|||||||
|
Preferred
stock, $.0001 par value; 5,000,000 shares authorized; none
issued
|
—
|
—
|
|||||
|
Common
stock, $.0001 par value; 100,000,000 shares authorized; 17,441,747
and
17,188,622 shares issued;
and 17,366,747 and 17,113,622 outstanding in 2007 and 2006, respectively |
2
|
2
|
|||||
|
Additional
paid-in capital
|
369,827
|
367,945
|
|||||
|
Accumulated
deficit
|
(282,121
|
)
|
(282,238
|
)
|
|||
|
Less
treasury stock, 75,000 shares at cost
|
(2
|
)
|
(2
|
)
|
|||
|
Accumulated
other comprehensive gain
|
13
|
9
|
|||||
|
Total
stockholders' equity
|
87,719 |
85,716
|
|||||
|
Total
liabilities and stockholders' equity
|
$
|
88,680
|
$
|
86,673
|
|||
See
accompanying notes to consolidated financial statements.
CLARUS
CORPORATION AND SUBSIDIARIES
Years
Ended December 31, 2007, 2006 and 2005
(In
Thousands, Except Per Share Amounts)
|
2007
|
2006
|
2005
|
||||||||
|
REVENUES:
|
||||||||||
|
Total
revenues
|
—
|
—
|
—
|
|||||||
|
OPERATING
EXPENSES:
|
||||||||||
|
General
and administrative
|
3,767
|
3,530
|
3,504
|
|||||||
|
Transaction
expense
|
(13
|
)
|
1,431
|
(59
|
)
|
|||||
|
Depreciation
|
359
|
346
|
334
|
|||||||
|
Total
operating expenses
|
4,113
|
5,307
|
3,779
|
|||||||
|
OPERATING
LOSS
|
(4,113
|
)
|
(5,307
|
)
|
(3,779
|
)
|
||||
|
OTHER
EXPENSE
|
(6
|
)
|
—
|
(2
|
)
|
|||||
|
INTEREST
INCOME
|
4,239
|
4,016
|
2,490
|
|||||||
|
NET
INCOME (LOSS) BEFORE TAXES
|
120
|
(1,291
|
)
|
(1,291
|
)
|
|||||
|
INCOME
TAXES
|
3
|
—
|
—
|
|||||||
|
NET
INCOME (LOSS)
|
$
|
117
|
$
|
(1,291
|
)
|
$
|
(1,291
|
)
|
||
|
NET
INCOME (LOSS) PER SHARE
|
||||||||||
|
Basic
|
$
|
0.01
|
$
|
(0.08
|
)
|
$
|
(0.08
|
)
|
||
|
|
||||||||||
|
Diluted
|
$
|
0.01
|
$
|
(0.08
|
)
|
$
|
(0.08
|
)
|
||
|
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING
|
||||||||||
|
Basic
|
16,658
|
16,613
|
16,329
|
|||||||
|
Diluted
|
17,051
|
16,613
|
16,329
|
|||||||
See
accompanying notes to consolidated financial statements.
CLARUS
CORPORATION AND SUBSIDIARIES
COMPREHENSIVE
LOSS
Years
Ended December 31, 2007, 2006 and 2005
(In
Thousands)
|
Accumulated
|
||||||||||||||||||||||
|
Additional
|
Other
|
|||||||||||||||||||||
|
Common
Stock
|
Paid-In
|
Accumulated
|
Treasury
Stock
|
Comprehensive
|
||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Deficit
|
Shares
|
Amount
|
Income
(loss)
|
||||||||||||||||
|
BALANCES,
December 31, 2004
|
16,735
|
2
|
368,385
|
(279,656
|
)
|
(75
|
)
|
(2
|
)
|
(130
|
)
|
|||||||||||
|
Exercise
of stock options
|
448
|
—
|
2,594
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
Issuance
of restricted shares, net of amortization
|
4
|
—
|
(275
|
)
|
—
|
—
|
—
|
—
|
||||||||||||||
|
Net
loss
|
—
|
—
|
—
|
(1,291
|
)
|
—
|
—
|
—
|
||||||||||||||
|
Increase
in unrealized gain on marketable securities
|
—
|
—
|
—
|
—
|
—
|
—
|
42
|
|||||||||||||||
|
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
|
—
|
—
|
—
|
—
|
—
|
—
|
97
|
|||||||||||||||
|
BALANCES,
December 31, 2006
|
17,188
|
2
|
367,945
|
(282,238
|
)
|
(75
|
)
|
(2
|
)
|
9
|
||||||||||||
|
Exercise
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
|
—
|
—
|
—
|
—
|
—
|
—
|
4
|
|||||||||||||||
|
BALANCES,
December 31, 2007
|
17,442
|
$
|
2
|
$
|
369,827
|
$
|
(282,121
|
)
|
(75
|
)
|
$
|
(2
|
)
|
$
|
13
|
|||||||
See
accompanying notes to consolidated financial statements.
CLARUS
CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY AND
COMPREHENSIVE
LOSS (Cont.)
Years
Ended December 31, 2007, 2006 and 2005
(In
Thousands)
|
Total
|
||||||||||
|
Deferred
|
Stockholders'
|
Comprehensive
|
||||||||
|
Compensation
|
Equity
|
Loss
|
||||||||
|
BALANCES,
December 31, 2004
|
(3,745
|
)
|
84,854
|
—
|
||||||
|
Exercise
of stock options
|
—
|
2,594
|
—
|
|||||||
|
Issuance
of restricted shares, net of amortization
|
685
|
410
|
—
|
|||||||
|
Net
loss
|
—
|
(1,291
|
)
|
(1,291
|
)
|
|||||
|
Increase
in unrealized gain on marketable securities
|
—
|
42
|
42
|
|||||||
|
Total
comprehensive loss
|
|
|
$
|
(1,249
|
)
|
|||||
|
BALANCES,
December 31, 2005
|
(3,060
|
)
|
86,609
|
—
|
||||||
|
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
|
97
|
|||||||
|
Total
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
|
117
|
|||||||
|
Increase
in unrealized gain on marketable securities
|
—
|
4
|
4
|
|||||||
|
Total
comprehensive loss
|
$
|
(1,073
|
)
|
|||||||
|
BALANCES,
December 31, 2007
|
$
|
—
|
$
|
87,719
|
||||||
See
accompanying notes to consolidated financial statements.
CLARUS
CORPORATION AND SUBSIDIARIES
Years
Ended December 31, 2007, 2006 and 2005
(In
Thousands, Except Share Amounts)
|
2007
|
2006
|
2005
|
||||||||
|
OPERATING
ACTIVITIES:
|
||||||||||
|
Net
income (loss)
|
$
|
117
|
$
|
(1,291
|
)
|
$
|
(1,291
|
)
|
||
|
Adjustments
to reconcile net income (loss) to net cash used in operating
activities:
|
||||||||||
|
Depreciation
of property and equipment
|
359
|
346
|
334
|
|||||||
|
Amortization
of (discount) and premium on securities, net
|
(2,929
|
)
|
(2,405
|
)
|
(669
|
)
|
||||
|
Amortization
of equity compensation plans
|
444
|
301
|
410
|
|||||||
|
Changes
in operating assets and liabilities:
|
||||||||||
|
Decrease/(increase)
in interest receivable, prepaids and other current assets
|
419
|
(154
|
)
|
77
|
||||||
|
Decrease/(increase)
in deposits and other long-term assets
|
—
|
956
|
(1
|
)
|
||||||
|
Decrease
in accounts payable and accrued liabilities
|
(62
|
)
|
(781
|
)
|
(731
|
)
|
||||
|
Increase
in deferred rent
|
66
|
69
|
93
|
|||||||
|
Net
cash used in operating activities
|
(1,586
|
)
|
(2,959
|
)
|
(1,778
|
)
|
||||
|
INVESTING
ACTIVITIES:
|
||||||||||
|
Purchase
of marketable securities
|
(150,803
|
)
|
(161,004
|
)
|
(93,887
|
)
|
||||
|
Proceeds
from the sale and maturity of marketable securities
|
191,147
|
142,473
|
68,116
|
|||||||
|
Purchase
of property and equipment
|
(48
|
)
|
(49
|
)
|
(17
|
)
|
||||
|
Disposal
of equipment
|
7
|
—
|
—
|
|||||||
|
Increase
in transaction expenses
|
—
|
—
|
(135
|
)
|
||||||
|
Net
cash provided by (used in) investing activities
|
40,303
|
(18,580
|
)
|
(25,923
|
)
|
|||||
|
FINANCING
ACTIVITIES:
|
||||||||||
|
Proceeds
from the exercise of stock options
|
1,438
|
—
|
2,594
|
|||||||
|
Net
cash provided by financing activities
|
1,438
|
—
|
2,594
|
|||||||
|
CHANGE
IN CASH AND CASH EQUIVALENTS
|
40,155
|
(21,539
|
)
|
(25,107
|
)
|
|||||
|
CASH
AND CASH EQUIVALENTS, beginning of year
|
1,731
|
23,270
|
48,377
|
|||||||
|
CASH
AND CASH EQUIVALENTS, end of year
|
$
|
41,886
|
$
|
1,731
|
$
|
23,270
|
||||
|
SUPPLEMENTAL
DISCLOSURE:
|
||||||||||
|
(Decrease)/increase
in transaction expenses included in accounts payable and accrued
liabilities
|
$
|
—
|
$
|
(778
|
)
|
$
|
778
|
|||
|
(Decrease)/increase
in transaction expenses included in other assets
|
$
|
—
|
$
|
(913
|
)
|
$
|
913
|
|||
|
Grant
of restricted stock
|
$
|
—
|
$
|
—
|
$
|
50
|
||||
|
Cash
paid for franchise and property taxes
|
$
|
456
|
$
|
540
|
$
|
684
|
||||
See
accompanying notes to consolidated financial statements.
CLARUS
CORPORATION AND SUBSIDIARIES
December
31, 2007, 2006 and 2005
1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Clarus
Corporation, a Delaware corporation, and its subsidiaries, (the "Company")
prior
to the sale of substantially all of its operating assets in December 2002,
developed, marketed, and supported Internet-based business-to-business
electronic commerce solutions that automated the procurement and management
of
operating resources.
During
2002, the Company adopted a strategic plan to sell or abandon all active
software operations and redeploy Company capital to enhance stockholder value.
On December 6, 2002, the Company sold substantially all of its software
operations (comprised of the eProcurement, Sourcing and Settlement product
lines) to Epicor Software Corporation for $1.0 million in cash. Separately,
on
January 1, 2003, the Company sold the assets related to the Cashbook product,
which were excluded from the Epicor transaction, to an employee group
headquartered in Limerick, Ireland. Therefore, as of December 31, 2002, the
Company had discontinued or abandoned substantially all software operations.
Management
now consists of four corporate executive officers and a support staff of six,
all of whom are located in Stamford, Connecticut. Management is now engaged
in
analyzing and evaluating potential acquisition and merger candidates as part
of
its strategy to redeploy its cash, cash equivalents and marketable securities
to
enhance stockholder value.
BASIS
OF PRESENTATION
The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries. All intercompany transactions and balances have
been
eliminated. The Company's subsidiaries include or included Clarus CSA, Inc.,
Clarus International, Inc., SAI Recruitment Limited, SAI (Ireland) Limited,
Clarus eMEA Ltd., i2Mobile.com Limited, SAI America Limited, REDEO Technologies,
Inc., Software Architects International, Limited and SAI America LLC. As of
December 31, 2007 all of these subsidiaries have ceased operations and have
been
dissolved or are in the process of being dissolved.
USE
OF ESTIMATES
The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and
disclosure of contingent liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenues and expenses during
the
reporting periods. The Company regularly evaluates its estimates and assumptions
including those related to revenue recognition, impairment of long-lived assets,
impairment of investments, and contingencies and litigation. The Company bases
its estimates on historical experience and other assumptions that are believed
to be reasonable under the circumstances. Actual results could differ from
these
estimates.
CASH
AND CASH EQUIVALENTS
The
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. The Company had
approximately $41.9 million and $1.7 million in cash and cash equivalents
included in the accompanying consolidated balance sheets for the years ended
December 31, 2007 and 2006, respectively.
MARKETABLE
SECURITIES
Marketable
securities for the periods ended December 31, 2007 and 2006, consist of
government notes and bonds. The Company accounts for its marketable securities
under the provisions of Statement of Financial Accounting Standards ("SFAS")
No.
115, "Accounting for Certain Investments in Debt and Equity Securities".
Pursuant to the provisions of SFAS No. 115, the Company has classified its
marketable securities as available-for-sale. Available-for-sale securities
have
been recorded at fair value and related unrealized gains and losses have been
excluded from earnings and are reported as a separate component of accumulated
other comprehensive income (loss) until realized.
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
Life
|
|||||||||
|
2007
|
2006
|
(in
years)
|
||||||||
|
Computers
and equipment
|
$
|
263
|
$
|
249
|
1
- 5
|
|||||
|
Furniture
and fixtures
|
488
|
488
|
7
|
|||||||
|
Leasehold
improvements
|
1,893
|
1,893
|
8
|
|||||||
|
2,644
|
2,630
|
|||||||||
|
Less:
accumulated depreciation
|
(1,263
|
)
|
(931
|
)
|
||||||
|
Property
and equipment, net
|
$
|
1,381
|
$
|
1,699
|
||||||
Depreciation
expense related to property and equipment totaled $359,000, $346,000 and
$334,000 for the years ended December 31, 2007, 2006 and 2005, respectively.
INVESTMENTS
Prior
to
2002, the Company made several equity investments in privately held companies.
The Company's equity ownership in these entities ranged from 2.5% to 12.5%.
These investments were accounted for using the cost method of accounting. The
Company did not recognize any income from these companies during 2007, 2006
or
2005. The Company continues to retain ownership interest in several of the
companies although they have been written down to a zero cost basis in the
Company's consolidated balance sheet at December 31, 2007 and 2006,
respectively.
LONG-LIVED
ASSETS
In
accordance with SFAS 144, long-lived assets, such as property, plant, and
equipment, and purchased intangibles assets subject to amortization, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability
of
assets to be held and used is measured by a comparison of the carrying amount
of
an asset to estimated undiscounted future cash flows expected to be generated
by
the asset. If the carrying amount of an asset exceeds its estimated future
cash
flows, an impairment charge is recognized by the amount by which the carrying
amount of the asset exceeds the fair value of the asset. Assets to be disposed
of are separately presented in the balance sheet and reported at the lower
of
the carrying amount or fair value less costs to sell, and would be no longer
depreciated. The assets and liabilities of a disposal group classified as held
for sale would be presented separately in the appropriate asset and liability
sections of the balance sheet.
ACCOUNTS
PAYABLE AND ACCRUED LIABILITIES
Accounts
payable and accrued liabilities include the following as of December 31, 2007
and 2006 (in thousands):
|
2007
|
2006
|
||||||
|
Accounts
payable
|
$
|
17
|
$
|
335
|
|||
|
Accrued
bonuses
|
220
|
30
|
|||||
|
Accrued
professional services
|
205
|
201
|
|||||
|
Accrued
taxes
|
120
|
98
|
|||||
|
Other
|
56
|
16
|
|||||
|
$
|
618
|
$
|
680
|
||||
FAIR
VALUE OF FINANCIAL INSTRUMENTS
The
Company uses financial instruments in the normal course of its business. The
carrying values of cash and cash equivalents and accounts payable approximates
fair value. Marketable securities are carried at fair value. The fair value
of
the Company's investments in privately held companies is not readily available.
The Company believes the fair values of these investments in privately held
companies approximated their respective carrying values of zero at December
31,
2007 and 2006.
STOCK-BASED
COMPENSATION PLAN
The
Company adopted the 2005 Stock Incentive Plan (the "2005 Plan"), which was
approved by stockholders at the Company’s annual meeting in June 2005. Under the
2005 Plan, the Board of Directors has flexibility to determine the type and
amount of awards to be granted to eligible participants, who must be employees
of the Company or its subsidiaries, directors, officers or consultants to the
Company. The 2005 Plan provides for grants of incentive stock options,
nonqualified stock options, restricted stock awards, stock appreciation rights,
and restricted units. As of December 31, 2007, the number of shares authorized
and reserved for issuance under the 2005 Plan is 3.8 million, subject to an
automatic annual increase equal to 4% of the total number of shares of Clarus’
common stock outstanding. The aggregate number of shares of common stock that
may be granted through awards under the 2005 Plan to any employee in any
calendar year may not exceed 500,000 shares. The 2005 Plan will continue in
effect until June 2015 unless terminated sooner. As of December 31, 2007,
565,000 stock options have been awarded under the plan of which 355,000 are
unvested and 210,000 are vested and eligible for exercise. The Company also
had
two employee stock purchase plans which were terminated in December 2007, as
described more fully in Note 7.
On
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
No. 123 (revised 2004), “Share-Based Payments” (“SFAS 123R”), requiring
recognition of expense related to the fair value of stock option awards. The
Company recognizes the cost of the share-based awards on a straight-line basis
over the requisite service period of the award. Prior to January 1, 2006, the
Company accounted for stock option plans under the recognition and measurement
provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock
Issued to Employees” (“APB 25”) and related interpretations, as permitted by
Statement of Financial Accounting Standard No. 123, “Accounting for Stock-Based
Compensation” (“SFAS 123”). Under SFAS 123R, compensation cost recognized during
2007 and 2006 includes: (a) compensation cost for all share-based payments
granted prior to, but not yet vested as of January 1, 2006, based on the grant
date fair value estimated in accordance with the original provisions of SFAS
123, and (b) compensation cost for all share-based payments granted subsequent
to January 1, 2006, based on the grant-date fair value estimated in accordance
with the provisions of SFAS 123R. The Company recorded total non-cash stock
compensation expense of approximately $268,000 and $301,000, respectively
related to unvested restricted stock under SFAS 123R for fiscal 2007 and 2006.
For fiscal 2007, the Company incurred compensation expense of approximately
$176,000 related to stock options. For fiscal 2006 the Company incurred no
compensation expense related to options under SFAS 123R.
On
December 13, 2007, the Company issued 430,000 stock options to directors and
employees of the Company. The vesting period for 150,000 options issued to
directors was one year and four years for the remaining 280,000 options issued
to employees. For computing the fair value of the stock-based awards, the fair
value of each option grant has been estimated as of the date of grant using
the
Black-Scholes option-pricing model with the following assumptions:
|
Options
Vesting Period
|
1
year
|
4
years
|
|||||
|
Dividend
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
years
|
|||||
|
Weighted
average fair value
|
$
|
2.22
|
$
|
2.77
|
|||
Using
these assumptions, the fair value of the stock options granted during fiscal
2007 was approximately $1.1 million which will be amortized over the vesting
period of the options. There were no options granted during fiscal 2006.
On
December 30, 2005, the Company’s Board of Directors accelerated the vesting of
unvested stock options previously awarded to employees, officers and directors
of the Company under its Amended and Restated Stock Incentive Plan of Clarus
Corporation (as amended and restated effective as of June 13, 2000) and the
Clarus Corporation 2005 Stock Incentive Plan, subject to such optionee entering
into lock-up, confidentiality and non-competition agreements. As a result of
this action, options to purchase 676,669 shares of common stock that would
have
vested over the next one to three years became fully vested.
The
decision to accelerate the vesting of these options was made primarily to reduce
non-cash compensation expense that would have been recorded in future periods
following the Company’s application of the Financial Accounting Standards Board
Statement No. 123, “Share Based Payment (revised 2004) (“SFAS 123R”). The
Company adopted the expense recognition provisions of SFAS 123R beginning
January 1, 2006. The acceleration of the options is expected to reduce the
Company’s non-cash compensation expense related to these options by
approximately $1.5 million or $0.09 per share (pre-tax) for the years 2006
-
2008, based on estimated value calculations using the Black-Scholes
methodology.
On
December 6, 2002, the Company had granted options to purchase 1,250,000 shares
of common stock to three senior executives. 450,000 of these options were issued
with an exercise price of $5.35 per share which was less than the fair market
value of the Company’s stock on that date of $5.45; accordingly a compensation
charge of $65,000 was being recognized over the vesting period of five years.
Twenty percent of the options vested annually over five years on the anniversary
of the date of grant. Due to the acceleration of the vesting of stock options
by
the Company, the remaining compensation charge of $8,500 was recognized as
of
December 31, 2005.
The
following table shows the effect on net loss and earnings per share if the
fair
value method of accounting had been applied to options issued prior to the
adoption of SFAS 123R on January 1, 2006. For purposes of this pro forma
disclosure, the estimated fair value of an option utilizing the Black-Scholes
option pricing model is assumed to be amortized to expense over the option's
vesting periods (in thousands, except per share amounts):
|
2005
|
||||
|
Net
loss, as reported
|
$
|
(1,291
|
)
|
|
|
Add
stock-based employee compensation expense included in reported
net loss
|
410
|
|||
|
Deduct
total stock-based employee compensation expense determined
under fair-value based method for all awards |
(3,467
|
)
|
||
|
Pro
forma net loss
|
$
|
(4,348
|
)
|
|
|
Earnings
per Share:
|
||||
|
Basic
- as reported
|
$
|
(0.08
|
)
|
|
|
Basic
- pro forma
|
$
|
(0.27
|
)
|
|
|
Diluted
- as reported
|
$
|
(0.08
|
)
|
|
|
Diluted
- pro forma
|
$
|
(0.27
|
)
|
|
For
SFAS
No. 123 purposes, the fair value of each option granted in 2005 has been
estimated as of the date of grant using the Black-Scholes option-pricing model
with the following assumptions:
|
2005
|
||||
|
Dividend
yield
|
0
|
%
|
||
|
Expected
volatility
|
57
|
%
|
||
|
Risk-free
interest rate
|
4.31
|
%
|
||
|
Expected
life
|
Four
years
|
|||
Using
these assumptions, the fair value of the stock options granted during the year
ended December 31, 2005 was approximately $692,000, which would be amortized
over the vesting period of the options. The weighted-average grant-date fair
values of the stock options granted during the year ended December 31, 2005
was
$3.95. There were no options issued during 2006.
INCOME
TAXES
Income
taxes are accounted for under the asset and liability method. Deferred income
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred income tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in
the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred income tax assets and liabilities of a change
in
tax rates is recognized in income in the period that includes the enactment
date. We continually assess the need for a tax valuation allowance based on
all
available information. As of December 31, 2007, and as a result of this
assessment, we do not believe that our deferred tax assets are more likely
than
not to be realized. In addition, we continuously evaluate our tax contingencies
in accordance with Financial Accounting Standards Board (FASB) Interpretation
No. (FIN) 48, “Accounting for Uncertainty in Income Taxes - an interpretation of
FASB Statement No. 109,” or FIN 48.
NET
INCOME (LOSS) PER SHARE
Basic
and
diluted net income (loss) per share was computed in accordance with SFAS No.
128, "Earnings Per Share," using the weighted average number of common shares
outstanding. The diluted net income (loss) per share for the years ended
December 31, 2006 and 2005 excludes incremental shares calculated using the
treasury stock method, assumed from the conversion of stock options and
restricted stock due to the net loss for the years ended December 31, 2006
and
2005. The potential effects of the incremental shares are as follows (in
thousands):
|
2007
|
2006
|
2005
|
||||||||
|
Weighted
average common shares - basic
|
16,658
|
16,613
|
16,329
|
|||||||
|
Effect
of dilutive stock options
|
148
|
112
|
316
|
|||||||
|
Effect
of dilutive restricted stock
|
245
|
205
|
502
|
|||||||
|
Total
effect of potential incremental shares
|
393
|
317
|
818
|
|||||||
|
Weighted
average common shares - diluted
|
17,051
|
16,930
|
17,147
|
|||||||
|
Net
income (loss) per share:
|
||||||||||
|
Basic
|
$
|
0.01
|
$
|
(0.08
|
)
|
$
|
(0.08
|
)
|
||
|
Diluted
|
$
|
0.01
|
$
|
(0.08
|
)
|
$
|
(0.08
|
)
|
||
For
fiscal 2007, diluted net income per share attributable to common stockholders
included the dilutive effect of options to purchase 1,298,750 shares of the
Company’s common stock and 500,000 shares of restricted stock as these
securities were potentially dilutive in computing net income per share. Diluted
net income per share for fiscal 2007 excluded the anti-dilutive effect of
options to purchase 550,000 shares of the Company’s common stock whose exercise
prices were higher than the average market price of the Company’s common stock.
Options
to purchase 663,750 shares of common stock at $5.35 to $6.06 per share were
outstanding as of December 31, 2006, but were not included in the computation
of
diluted EPS because the options were anti-dilutive due to the net loss for
the
year ended December 31,
2006.
Options to purchase 1,010,000 shares of common stock at $7.30 to $10.00 were
outstanding as of December 31, 2006, but were
not
included in the computation of diluted EPS because the options were
anti-dilutive as their market price was greater than the average market price
of
the common shares of $7.03 for the year ended December 31, 2006.
Options
to purchase 1,111,250 shares of common stock at $5.35 to $7.50 per share were
outstanding as of December 31, 2005, but were not included in the computation
of
diluted EPS because the options were anti-dilutive due to the net loss for
the
year ended December 31, 2005. Options to purchase 570,000 shares of common
stock
at $8.35 to $10.00 were outstanding as of December 31, 2005, but were not
included in the computation of diluted EPS because the options were
anti-dilutive as their market price was greater than the average market price
of
the common shares of $8.07 for the year ended December 31, 2005.
COMPREHENSIVE
INCOME (LOSS)
The
Company utilizes SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130
establishes standards for reporting and presentation of comprehensive income
(loss) and its components in a full set of financial statements. Comprehensive
income (loss) primarily consists of net income (loss) and unrealized gains
and
losses from available-for-sale marketable securities. Comprehensive income
(loss) is presented in the consolidated statements of stockholders' equity.
SEGMENT
AND GEOGRAPHIC INFORMATION
In
accordance with the provisions of SFAS No. 131, "Disclosures about Segments
of
an Enterprise and Related Information", the Company has determined that during
2007, 2006 and 2005 the Company operated in one principal business segment.
Due
to the sale of our operating assets as discussed in “Prior Business”, the
Company is a holding company.
Geographic
revenue and the carrying value of property and equipment, net as of and for
the
years ended December 31, 2007, 2006 and 2005 were as follows:
|
(in
thousands)
|
2007
|
2006
|
2005
|
|||||||
|
Revenue:
|
||||||||||
|
United
States
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
|
International
|
—
|
—
|
—
|
|||||||
|
Total
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
|
Property
and equipment, net:
|
||||||||||
|
United
States
|
$
|
1,381
|
$
|
1,699
|
$
|
1,996
|
||||
|
Total
|
$
|
1,381
|
$
|
1,699
|
$
|
1,996
|
||||
NEW
ACCOUNTING PRONOUNCEMENTS
In
February 2007, the FASB issued Statement of Financial Accounting Standards
No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities -
Including an Amendment of FASB No. 115,” (“SFAS 159”). SFAS 159 allows a company
to irrevocably elect fair value as the initial and subsequent measurement
attribute for certain financial assets and financial liabilities on a
contract-by-contract basis, with changes in fair value recognized in earnings.
SFAS No. 159 is effective for fiscal years beginning after November 15, 2007
and
will be applied prospectively. The Company is currently evaluating the effect
of
the adoption of SFAS 159 will have on its consolidated financial
statements.
Effective
January 1, 2007, we adopted the Financial Accounting Standards Board (FASB)
Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109,” or FIN 48, which clarifies the
accounting for uncertainty in income taxes recognized in
an enterprise’s financial statements in accordance with
SFAS No. 109, “Accounting for Income Taxes.”
FIN 48 prescribes a recognition threshold
and measurement attribute for the financial
statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and
penalties, accounting in interim periods,
disclosure and transition. There was
no change to the net amount of
assets and liabilities recognized in the statement of financial
condition as a result of our adoption of FIN 48. At January 1, 2007, we had
no
unrecognized tax benefits.
In
September 2006, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) No. 157, “Fair Value Measurements”, which establishes a framework
for reporting fair value and expands disclosures about fair value measurements.
SFAS No. 157 was effective for the Company on January 1, 2008, with the
exception that the applicability of SFAS No. 157’s fair value measurement
requirements to nonfinancial assets and liabilities that are not required or
permitted to be recognized or disclosed at fair value on a recurring basis
has
been delayed by the FASB for one year. The Company does not believe that the
requirements of SFAS No. 157 which were effective for the Company on January
1,
2008 will have a material impact on the Company’s consolidated financial
statements. The Company is currently evaluating the impact of the SFAS No.
157
requirements which will be effective for the Company on January 1, 2009 on
the
Company’s results of operations and financial position.
In
December 2007, the FASB released SFAS No. 141(R), Business Combinations (revised
2007) (“SFAS 142(R)”), which changes many well-established business combination
accounting practices and significantly affects how acquisition transactions
are
reflected in the financial statements. Additionally, SFAS 141(R) will affect
how
companies negotiate and structure transactions, model financial projections
of
acquisitions and communicate to stakeholders. SFAS 141(R) must be applied
prospectively to business combinations for which the acquisition date is on
or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company is currently evaluating the impact the adoption
of this statement could have on its financial condition, results of operations
and cash flows.
In
December 2007, the FASB released SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements an amendment of ARB No. 51 (“SFAS 160”), which
establishes accounting and reporting standards for the noncontrolling interests
in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 requires
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the noncontrolling interests and requires
disclosure, on the face of the consolidated statement of income, of the amounts
of consolidated net income attributable to the parent and to the noncontrolling
interest. Previously, net income attributable to the noncontrolling interest
was
reported as an expense or other deduction in arriving at consolidated net
income. SFAS 160 is effective for financial statements issued for fiscal years
beginning after December 15, 2008. The Company believes the adoption of this
statement will not have a material impact on its consolidated financial
statements.
2.
MARKETABLE SECURITIES
As
of
December 31, 2007, and 2006, those investments with an original maturity of
three months or less are classified as cash equivalents and those investments
with original maturities beyond three months are classified as marketable
securities. Pursuant to the provisions of SFAS No. 115, the Company has
classified all of its marketable securities as available-for-sale.
At
December 31, 2007, marketable securities consisted of government and government
agency notes and bonds with a fair market value of $45.2 million. The amortized
cost of marketable securities at December 31, 2007 was $45.2 million with an
unrealized gain of $7,000. The maturities of all securities are less than 12
months at December 31, 2007.
At
December 31, 2006, marketable securities consisted of government notes and
bonds
with a fair market value of $82.6 million. The amortized cost of marketable
securities at December 31, 2006 was $82.6 million with an unrealized gain of
$12,000 and an unrealized loss of $3,000. The maturities of all securities
are
less than 12 months at December 31, 2006.
3.
ACQUISITIONS AND DISPOSITIONS
SALE
OF OPERATING ASSETS
On
December 6, 2002, the Company sold its e-commerce software business to Epicor
Software Corporation for $1.0 million. Approximately $200,000 of the purchase
price was placed in escrow. The escrowed funds were released in February 2004.
4.
RELATED-PARTY TRANSACTIONS
In
September 2003, the Company and Kanders & Company, an entity owned and
controlled by the Company's Executive Chairman, Warren B. Kanders, entered
into
a 15-year lease with a five-year renewal option, as co-tenants to lease
approximately 11,500 square feet in Stamford, Connecticut. The Company and
Kanders & Company have initially agreed to allocate the total lease payments
of $24,438 per month on the basis of Kanders & Company renting 2,900 square
feet initially for $6,163 per month, and the Company renting 8,600 square feet
initially for $18,275 per month, which are subject to increases during the
term
of the lease. Rent expense is recognized on a straight line basis. The lease
provides the co-tenants with an option to terminate the lease in years eight
and
ten in consideration for a termination payment. The Company and Kanders &
Company agreed to pay for their proportionate share of the build-out
construction costs, fixtures, equipment and furnishings related to preparation
of the space. In connection with the lease, the Company obtained a stand-by
letter of credit in the amount of $850,000 to secure lease obligations for
the
Stamford facility. Kanders & Company reimburses the Company for a pro rata
portion of the approximately $5,000 annual cost of the letter of credit.
The
Company provides certain telecommunication, administrative and other office
services as well as accounting and bookkeeping services to Kanders & Company
that are reimbursed by Kanders & Company. Such services aggregated
$304,600
during the year ended December 31, 2007 and $123,000 during the year ended
December 31, 2006.
As
of
December 31, 2007, the Company had a net receivable of $46,000 from Kanders
& Company. The amount due to and from Kanders & Company is included in
prepaids and other current assets and accounts payable and accrued liabilities
in the accompanying consolidated balance sheet. The outstanding amount was
paid
and received in the first quarter of 2008. As of December 31, 2006, the Company
had a receivable of $76,000 from Kanders & Company. The amount due from
Kanders & Company is included in prepaids and other current assets. The
outstanding amount was paid in the first quarter of 2007.
The
Company provides certain telecommunication, administrative and other office
services to Stamford Industrial Group, Inc., formerly known as Net Perceptions,
Inc. (“SIG”) that are reimbursed by SIG.
Warren
B. Kanders, our Executive Chairman, also serves as the Non-Executive Chairman
of
SIG.
Such
services aggregated $79,000 during the year ended December 31, 2007 and $63,000
during the year ended December 31, 2006.
As
of
December 31, 2007, the Company had an outstanding receivable of $10,000 from
SIG. The amount due from SIG is included in prepaids and other current assets
in
the accompanying consolidated balance sheet. The outstanding amount was paid
in
March 2008. As of December 31, 2006, the Company had an outstanding receivable
of $44,000 from SIG. The amount due from SIG is included in prepaids and other
current assets in the accompanying consolidated balance sheet. The outstanding
amount was paid by SIG in March 2007.
During
the year ended December 31, 2007, the Company incurred no charges related to
Kanders Aviation LLC, an affiliate of the Company’s Executive Chairman, Warren
B. Kanders, relating to aircraft travel by directors and officers of the Company
for potential redeployment transactions, pursuant to the Transportation Services
Agreement, dated December 18, 2003 between the Company and Kanders Aviation
LLC.
For the same period ended December 31, 2006, the Company incurred charges of
approximately $64,000 for payments to Kanders Aviation LLC.
As
of
December 31, 2007 and 2006, the Company had no outstanding receivables from
or
payables to Kanders Aviation.
In
the
opinion of management, the rates, terms and considerations of the transactions
with the related parties described above are at least as favorable as those
we
could have obtained in arms length negotiations or otherwise are at prevailing
market prices and terms.
5.
RESTRUCTURING AND RELATED COSTS
During
2002 and 2001, the Company's management approved restructuring plans to
reorganize and reduce operating costs. Restructuring and related charges of
$12.8 million were expensed in 2001 and 2002 in an attempt to align the
Company's cost structure with projected revenue.
During
2003, the Company determined that actual restructuring and related charges
were
in excess of the amounts provided for in 2002 and 2001 and recorded additional
restructuring charges of $250,000. This amount was charged to general and
administrative costs in the accompanying consolidated statement of operations
during 2003. The charges for 2003 were comprised of $223,000 for employee
separation costs and $27,000 for facility closure and consolidation costs.
During
2004, the Company recorded an additional restructuring charge of $33,000 for
facility closure costs which is classified in the Company’s consolidated
statements of operations under general and administrative expenses. The increase
was the result of significant fluctuations in exchange rates and increased
rent
expense. Expenditures for 2004 totaled $190,000 consisting of $125,000 for
employee separation costs and $65,000 for facility closing costs.
During
2005 and 2006, respectively, expenditures for facility closing costs totaled
$56,000 and $17,000 respectively. As of December 31, 2006, the balance for
restructuring and related costs was zero.
6.
INCOME TAXES
For
financial reporting purposes, profits and (losses) from continuing operations
before income taxes include the following components (in
thousands):
|
YEARS
ENDED
|
||||||||||
|
DECEMBER
31,
|
||||||||||
|
2007
|
2006
|
2005
|
||||||||
|
Pre-Tax
Income (loss):
|
||||||||||
|
Domestic
|
$
|
120
|
$
|
(1,291
|
)
|
$
|
(1,291
|
)
|
||
|
Foreign
|
—
|
—
|
—
|
|||||||
|
$
|
120
|
$
|
(1,291
|
)
|
$
|
(1,291
|
)
|
|||
The
components of the income tax expense for each of the years in the three-year
period ended December 31, 2007 is as follows (in thousands):
|
|
YEARS
ENDED
|
|||||||||
|
DECEMBER
31,
|
||||||||||
|
2007
|
2006
|
2005
|
||||||||
|
Current:
|
||||||||||
|
Federal
|
$
|
3
|
$
|
—
|
$
|
—
|
||||
|
State
|
—
|
—
|
—
|
|||||||
|
Foreign
|
—
|
—
|
—
|
|||||||
|
Total
current income for provision
|
$
|
3
|
$
|
—
|
$
|
—
|
||||
|
YEARS
ENDED
|
||||||||||
|
DECEMBER
31,
|
||||||||||
|
2007
|
2006
|
2005
|
||||||||
|
Deferred:
|
||||||||||
|
Federal
|
3,850
|
(168
|
)
|
(3,122
|
)
|
|||||
|
State
|
1,218
|
350
|
7,057
|
|||||||
|
Foreign
|
—
|
—
|
—
|
|||||||
|
5,068
|
182
|
3,935
|
||||||||
|
Increase
(decrease) in valuation allowance for deferred income
taxes
|
(5,068
|
)
|
(182
|
)
|
(3,935
|
)
|
||||
|
Total
deferred income tax for provision
|
—
|
—
|
—
|
|||||||
|
Total
income tax provision
|
$
|
3
|
$
|
—
|
$
|
—
|
||||
Total
deferred income taxes were allocated as follows for the years ended December
31
(in thousands):
|
2007
|
2006
|
2005
|
||||||||
|
Income
(loss) from operations
|
$
|
(5,068
|
)
|
$
|
(182
|
)
|
$
|
(3,935
|
)
|
|
|
Stockholders’
equity
|
(1
|
)
|
(38
|
)
|
34
|
|||||
|
Total
|
$ | (5,069 | ) | $ | (220 | ) | $ | (3,901 | ) | |
The
income taxes credited to stockholders’ equity relate to the tax benefit arising
from unrealized gains on marketable securities.
The
following is a summary of the items that caused recorded income taxes to differ
from income taxes computed using the statutory federal income tax rate of 34%
for the years ended December 31, 2007, 2006 and 2005:
|
YEARS
ENDED
|
||||||||||
|
DECEMBER
31,
|
||||||||||
|
2007
|
2006
|
2005
|
||||||||
|
Computed
"expected" income tax expense (benefit)
|
34.0
|
%
|
(34.0
|
)%
|
(34.0
|
)%
|
||||
|
Increase
(decrease) in income taxes resulting from:
|
||||||||||
|
State
income taxes, net of federal income taxes
|
514.4
|
(0.5
|
)
|
(7.4
|
)
|
|||||
|
NOL
adjustments
|
152.3
|
18.3
|
376.6
|
|||||||
|
Capital
loss carryforward adjustment
|
3,506.2
|
30.3
|
—
|
|||||||
|
Non-cash
stock compensation
|
(9.5
|
)
|
—
|
(29.5
|
)
|
|||||
|
Income
tax effect attributable to foreign operations
|
—
|
—
|
—
|
|||||||
|
Other
|
8.2
|
—
|
—
|
|||||||
|
(Decrease)
increase in valuation allowance and other items
|
(4,202.8
|
)
|
(14.1
|
)
|
(305.7
|
)
|
||||
|
Income
tax expense (benefit)
|
2.8
|
%
|
—
|
%
|
—
|
%
|
||||
Deferred
income tax assets and liabilities are determined based on the difference between
the financial reporting carrying amounts and tax
bases
of existing assets and liabilities and operating loss and tax credit
carryforwards. Significant components of the Company's existing
deferred income tax assets and liabilities as of December 31, 2007 and 2006
are
as follows (in thousands):
|
YEARS
ENDED
|
|||||||
|
DECEMBER
31,
|
|||||||
|
2007
|
2006
|
||||||
|
Deferred
income tax assets:
|
|||||||
|
Net
operating loss, capital loss amount and research & experimentation
credit carryforwards
|
$
|
84,970
|
$
|
90,209
|
|||
|
Charitable
contribution carryforward
|
4
|
4
|
|||||
|
Depreciation
|
(139
|
)
|
(241
|
)
|
|||
|
Unrealized
loss
|
(5
|
)
|
(4
|
)
|
|||
|
Non-cash
compensation
|
724
|
608
|
|||||
|
Accrued
liabilities
|
134
|
181
|
|||||
|
Reserves
for investments
|
1,728
|
1,728
|
|||||
|
Net
deferred income tax assets before valuation allowance
|
87,416
|
92,485
|
|||||
|
Valuation
allowance for deferred income tax assets
|
(87,416
|
)
|
(92,485
|
)
|
|||
|
Net
deferred income tax assets
|
$
|
—
|
$
|
—
|
|||
The
net
change in the valuation allowance for deferred income tax assets for 2007 was
a
decrease of $5.1 million as compared to a decrease of $0.2 million in 2006
and a
decrease in 2005 of $3.9 million. In assessing the realizability of deferred
income tax assets, management considers whether it is more likely than not
that
some portion or all of the deferred income tax assets will not be realized.
The
ultimate realization of deferred income tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal
of
deferred income tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. Management has provided a
valuation allowance against net deferred income tax assets at December 31,
2007,
because the ultimate realization of those benefits and assets does not meet
the
more likely than not criteria.
At
December 31, 2007, the Company has net operating loss, research and
experimentation credit and alternative minimum tax credit carryforwards for
U.S.
federal income tax purposes of approximately $228.4 million, $1.3 million and
$56,000, respectively, which expire in varying amounts beginning in the year
2009. The Company also has a capital loss carryforward of $1.6 million which
expire in 2008. The Company's ability to benefit from certain net operating
loss
and tax credit carryforwards is limited under Section 382 of the Internal
Revenue Code due to a prior ownership change of greater than 50%. Accordingly,
approximately $223.1 million of the $228.4 million of U.S. net operating loss
carryforward is currently available to offset taxable income that the Company
may recognize in the future. Of the approximately $223.1 million of net
operating losses available to offset taxable income, approximately $206.4
million does not begin to expire until 2020 or later, subject to compliance
with
Section 382 of the Internal Revenue Code as indicated by the following
schedule:
Net
Operating Loss And Capital Loss Carryforward Expiration
Dates*
(Unaudited)
December
31, 2007
|
Net
Operating Loss
|
Capital
Loss
|
||||||
|
Expiration
Dates
December
31
|
Amount
(000’s)
|
Amount
(000’s)
|
|||||
|
2007
|
$
|
—
|
$
|
0
|
|||
|
2008
|
—
|
1,599
|
|||||
|
2009
|
1,900
|
||||||
|
2010
|
7,417
|
||||||
|
2011
|
7,520
|
||||||
|
2012
|
5,157
|
||||||
|
2020
|
29,533
|
||||||
|
2021
|
50,430
|
||||||
|
2022
|
115,000
|
||||||
|
2023
|
5,712
|
||||||
|
2024
|
3,566
|
||||||
|
2025
|
1,707
|
||||||
|
2026
|
476
|
||||||
|
Total
|
228,418
|
1,599
|
|||||
|
Section
382 limitation
|
(5,363
|
)
|
—
|
||||
|
After
Limitations
|
$
|
223,055
|
$
|
1,599
|
|||
|
*
Subject to compliance with Section 382 of the Internal Revenue
Code.
|
|||||||
7.
EMPLOYEE BENEFIT PLANS
The
Company sponsors a 401(k) Plan (the "Plan"), a defined contribution plan
covering substantially all employees of the Company. Under the Plan's deferred
compensation arrangement, eligible employees who elect to participate in the
Plan may contribute between 2% and 20% of eligible compensation, as defined,
to
the Plan. The Company, at its discretion, may elect to provide for either a
matching contribution or discretionary profit-sharing contribution or both.
The
Company made matching contributions of approximately $31,000, $29,000 and $6,000
during the years ended December 31, 2007, 2006 and 2005, respectively.
On
June
13, 2000, the Company adopted the Clarus Corporation Employee Stock Purchase
Plan (the "U.S. Plan") and the Global Employee Stock Purchase Plan (the "Global
Plan") (collectively, the "Plans"), which offered employees the right to
purchase shares of the Company's common stock at 85% of the market price, as
defined. Under the Plans, full-time employees, except persons owning 5% or
more
of the Company's common stock, were eligible to participate after 90 days of
employment. Employees could contribute up to 15% of their annual salary toward
the Purchase Plan. A maximum of 1,000,000 shares of common stock could have
been
purchased under the Plans. Common stock was purchased directly from the Company
on behalf of the participants. During the years ended December 31, 2007, 2006
and 2005, no shares were purchased for the benefit of the participants under
the
Plans.
Effective
December 13, 2007, the Company terminated the Employee Stock Purchase Plan
and
the Global Employee Stock Purchase Plan (the “Plans”). We determined to
discontinue the Plans because, at the time of termination, there were no
employees participating in the Plans and the Plans were no longer a meaningful
part of the Company’s equity incentive program.
8.
STOCK INCENTIVE PLANS
The
Company adopted the 1998 Stock Incentive Plan (the "1998 Plan") in 1998. Under
the 1998 Plan, the Board of Directors had the flexibility to determine the
type
and amount of awards to be granted to eligible participants, who must be
employees of the Company or its subsidiaries or consultants to the Company.
The
1998 Plan provided for grants of incentive stock options, nonqualified stock
options, restricted stock awards, stock appreciation rights, and restricted
units. During 2000, the Board of Directors and stockholders adopted an
amendment, which increased the number of shares authorized and reserved for
issuance from 1.5 million shares to 3.0 million shares. The aggregate number
of
shares of common stock that could be granted through awards under the 1998
Plan
to any employee in any calendar year could not exceed 200,000 shares. The 1998
Plan was terminated in June 2005, but 683,750 stock options awarded under the
plan are vested and remained eligible to be exercised at December 31,
2007.
The
Company adopted the 2005 Stock Incentive Plan (the "2005 Plan"), which was
approved by stockholders at the Company’s annual meeting in June 2005. Under the
2005 Plan, the Board of Directors has the flexibility to determine the type
and
amount of awards to be granted to eligible participants, who must be employees
of the Company or its subsidiaries, directors, officers or consultants to the
Company. The 2005 Plan provides for grants of incentive stock options,
nonqualified stock options, restricted stock awards, stock appreciation rights,
and restricted units. The number of shares authorized and reserved for issuance
under the 2005 Plan is 3.8 million, subject to an automatic annual increase
equal to 4% of the total number of shares of Clarus’ common stock outstanding.
The aggregate number of shares of common stock that may be granted through
awards under the 2005 Plan to any employee in any calendar year may not exceed
500,000 shares. The 2005 Plan will continue in effect until June 2015 unless
terminated sooner. As of December 31, 2007, 565,000 stock options have been
awarded under the plan of which 355,000 are unvested and 210,000 are vested
and
eligible for exercise.
On
December 6, 2002, the Company had granted options to purchase 1,250,000 shares
of common stock to three senior executives. 450,000 of these options were issued
with an exercise price of $5.35 per share. The options issued at $5.35 per
share
were issued at less than the fair market value on that date of $5.45. A
compensation charge of $65,000 was being recognized over the vesting period
of
five years. Twenty percent of the options vested annually over five years on
the
anniversary of the date of grant. Due to the acceleration of the vesting of
stock options by the Company, the remaining compensation charge of $8,500 was
recognized as of December 31, 2005.
In
April
2003, the Company granted 500,000 shares of restricted stock to Warren B.
Kanders, the Executive Chairman of the Board. The shares vest in ten years
or
earlier upon satisfaction of various conditions including performance based
conditions relating to the price of the Company's common stock. Deferred
compensation of $2.7 million was recorded at the date of grant representing
the
fair value of the shares and adjusted as of December 31, 2005 to $4.2 million
to
account for the increase in fair market value from grant date through December
31, 2005. With the implementation of SFAS 123R on January 1, 2006, the remaining
compensation expense of $2.0 million of this award was expensed on a straight
line basis over the remaining time period of 7.5 years. During the years ended
December 31, 2007 and 2006, $268,000 was amortized to compensation expense
for
this award. At December 31, 2007, 245,000 of these shares were included in
the
computation of diluted earnings per share due to the net income for the year
ended December 31, 2007.
On
December 30, 2005, the Board of Directors of Clarus Corporation accelerated
the
vesting of unvested stock options previously awarded to employees, officers
and
directors of the Company under its Amended and Restated Stock Incentive Plan
of
Clarus Corporation (as amended and restated effective as of June 13, 2000)
and
the Clarus Corporation 2005 Stock Incentive Plan, subject to such optionee
entering into lock-up, confidentiality and non-competition agreements. As a
result of this action, options to purchase 676,669 shares of common stock that
would have vested over the next one to three years became fully
vested.
The
decision to accelerate the vesting of these options was made primarily to reduce
non-cash compensation expense that would have been recorded in future periods
following the Company’s application of the Financial Accounting Standards Board
Statement No. 123, “Share Based Payment (revised 2004) (“SFAS 123R”). The
Company adopted the expense recognition provisions of SFAS 123R beginning
January 1, 2006. The acceleration of the options is expected to reduce the
Company’s non-cash compensation expense related to these options by
approximately $1.5 million or $0.09 per share (pre-tax) for the years 2006
-
2008, based on estimated value calculations using the Black-Scholes
methodology.
On
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
No. 123 (revised 2004), “Share-Based Payments” (“SFAS 123R”), requiring
recognition of expense related to the fair value of stock option awards. The
Company recognizes the cost of the share-based awards on a straight-line basis
over the requisite service period of the award. Prior to January 1, 2006, the
Company accounted for stock option plans under the recognition and measurement
provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock
Issued to Employees” (“APB 25”) and related interpretations, as permitted by
Statement of Financial Accountant Standard No. 123, “Accounting for Stock-Based
Compensation” (“SFAS 123”). Under SFAS 123R, compensation cost recognized during
2007 and 2006 includes: (a) compensation cost for all share-based payments
granted prior to, but not yet vested as of January 1, 2006, based on the grant
date fair value estimated in accordance with the original provisions of SFAS
123, and (b) compensation cost for all share-based payments granted subsequent
to January 1, 2006, based on the grant-date fair value estimated in accordance
with the provisions of SFAS 123R. The Company recorded total non-cash stock
compensation expense of
approximately $268,000 and $301,000, respectively related to unvested restricted
stock under SFAS 123R for fiscal 2007 and 2006. For fiscal 2007, the Company
incurred compensation expense of approximately $176,000 related to stock
options. For fiscal 2006 the Company incurred no compensation expense related
to
options under SFAS 123R.
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
years
|
|||||
|
Dividend
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
years
|
|||||
|
Weighted
average fair value
|
$
|
2.22
|
$
|
2.77
|
|||
Using
these assumptions, the fair value of the stock options granted during fiscal
2007 was approximately $1.1 million which will be amortized over the vesting
period of the options. There were no options granted during fiscal 2006. For
the
year ended December 31, 2005, the Company granted 175,000 options.
The
Company recorded total non-cash stock compensation expense of approximately
$0.3
million, $0.3 million and $0.4 million for the years ended December 31, 2007,
2006 and 2005, respectively for 508,786 shares of restricted stock. Total
non-cash stock compensation expense related to stock options was $176,000 for
the year ended December 31, 2007. There was no stock compensation expense
incurred by the Company related to stock options for the years ended December
31, 2006 and 2005.
Total
options available for grant under all plans as of December 31, 2007 were 3.8
million. A summary of changes in outstanding options during the three years
ended December 31, 2007 is as follows:
|
Weighted
|
||||||||||
|
Range
of
|
Average
|
|||||||||
|
Exercise
|
Exercise
|
|||||||||
|
Shares
|
Prices
|
Price
|
||||||||
|
December
31, 2004
|
1,961,617
|
|
$4.83
- $10.00
|
$
|
6.93
|
|||||
|
Granted
|
175,000
|
|
$7.40
- $ 8.50
|
$
|
8.16
|
|||||
|
Forfeited
|
—
|
|||||||||
|
Expired
|
(7,500
|
)
|
|
$7.63
|
$
|
7.63
|
||||
|
Exercised
|
(447,867
|
)
|
|
$4.83
- $7.00
|
$
|
5.79
|
||||
|
December
31, 2005
|
1,681,250
|
|
$5.35
- $10.00
|
$
|
7.36
|
|||||
|
Granted
|
—
|
|||||||||
|
Forfeited
|
—
|
|||||||||
|
Expired
|
(7,500
|
)
|
|
$5.41
|
$
|
5.41
|
||||
|
Exercised
|
—
|
|||||||||
|
December
31, 2006
|
1,673,750
|
|
$5.35
- $10.00
|
$
|
7.36
|
|||||
|
Granted
|
430,000
|
|
$5.98
|
$
|
5.98
|
|||||
|
Forfeited
|
(7,757
|
)
|
|
$7.40
- $8.60
|
$
|
8.17
|
||||
|
Expired
|
—
|
|||||||||
|
Exercised
|
(247,243
|
)
|
|
$5.35
- $8.60
|
$
|
5.81
|
||||
|
December
31, 2007
|
1,848,750
|
|
$5.35
- $10.00
|
$
|
7.24
|
|||||
|
Vested
and exercisable at December 31, 2007
|
1,493,750
|
$
|
7.54
|
|||||||
|
Vested
and exercisable at December 31, 2006
|
1,673,750
|
$
|
7.36
|
|||||||
|
Vested
and exercisable at December 31, 2005
|
1,681,250
|
$
|
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, 2007
|
Outstanding
|
Exercisable
|
|||||||||||||||
|
Weighted
|
||||||||||||||||
|
Number
|
Weighted
|
Average
|
Number
|
Weighted
|
||||||||||||
|
Exercise
|
of
Shares
|
Average
|
Remaining
|
of
Shares
|
Average
|
|||||||||||
|
Price
|
Outstanding
at
|
Exercise
|
Contractual
|
Exercisable
at
|
Exercise
|
|||||||||||
|
Range
|
December
31, 2007
|
Price
|
Life
(Years)
|
December
31, 2007
|
Price
|
|||||||||||
|
$
5.35 - $ 7.81
|
1,298,750
|
$
|
6.27
|
6.4
|
943,750
|
$
|
6.37
|
|||||||||
|
$
7.82 - $10.00
|
550,000
|
$
|
9.55
|
5.8
|
550,000
|
$
|
9.55
|
|||||||||
|
1,848,750
|
$
|
7.24
|
6.2
|
1,493,750
|
$
|
7.54
|
||||||||||
9.
COMMITMENTS
AND CONTINGENCIES
LEASES
The
Company rents certain office space, under non-cancelable operating leases.
Rents
charged to expense were approximately $400,000 in each of the years ended
December 31, 2007, 2006, and 2005, respectively. Future minimum lease payments
for the next five years and thereafter under non-cancelable operating leases
with remaining terms greater than one year as of December 31, 2007, are as
follows (in thousands):
|
Gross
Rental
|
Sub-Lease
|
||||||
|
Obligations
|
Income
|
||||||
|
Year
ending December 31,
|
|||||||
|
2008
|
420
|
105
|
|||||
|
2009
|
426
|
106
|
|||||
|
2010
|
451
|
113
|
|||||
|
2011
|
1,128
|
282
|
|||||
|
2012
|
—
|
—
|
|||||
|
Thereafter
|
—
|
—
|
|||||
|
Total
|
$
|
2,425
|
$
|
606
|
|||
Our
corporate headquarters is currently located in Stamford, Connecticut where
we
lease approximately 8,600 square feet for $25,156 a month during 2007, pursuant
to a lease that includes annual rent escalations, which expires on March 31,
2019.
LITIGATION
We
are
not a party to nor are any of our properties subject to any pending legal,
administrative or judicial proceedings other than routine litigation incidental
to our business.
A
complaint was filed on May 14, 2001 in the United States District Court for
the
Northern District of Georgia on behalf of all purchasers of common stock of
the
Company during the period beginning December 8, 1999 and ending on October
25,
2000. Generally the complaint alleged that the Company and certain of its
directors and officers made material misrepresentations and omissions in public
filings made with the Securities and Exchange Commission and in certain press
releases and other public statements. The Company agreed to settle the class
action in exchange for a payment of $4.5 million, which was covered by
insurance. The Court approved the final settlement and dismissed the action
on
January 6, 2005.
10.
SUBSEQUENT EVENTS
On
February 7, 2008, our Board of Directors approved a Rights Agreement (the
“Rights Agreement”) which provides for a dividend distribution of one preferred
share purchase right (a “Right”) for each outstanding share of our common stock,
payable to stockholders of record as of the close of business on February 12,
2008. Each Right entitles the registered holder to purchase from the Company
one
one-hundredth of a share of our Series A Junior Participating Preferred Stock,
par value $0.0001 per share, at a purchase price of $12.00. The Rights Agreement
is designed to assist in limiting the number of 5% or more owners and thus
reduce the risk of a possible “change of ownership” under Section 382 of the
Internal Revenue Code of 1986 as amended. A significant penalty is imposed
on
any person or group that acquires 4.9% or more (but less than 50%) of our
then-outstanding common stock without the prior approval of our Board of
Directors. There is no guaranty that the objective of the Rights Agreement
of
preserving the NOLs will be achieved. There is a possibility that certain
transactions may be completed by stockholders or prospective stockholders that
could trigger an “ownership change.” The parties to the Rights Agreement, dated
as of February 12, 2008 are Clarus and American Stock Transfer & Trust
Company, as rights agent.
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.
Evaluation
of Disclosure Controls and Procedures
The
Company's management carried out an evaluation, under the supervision and with
the participation of the Company's Executive Chairman of the Board of Directors
and Chief Financial Officer, its principal executive officer and principal
financial officer, respectively of the effectiveness of the design and operation
of the Company's disclosure controls and procedures (as such term is defined
in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2007,
pursuant to Exchange Act Rule 13a-15. Such disclosure controls and procedures
are designed to ensure that information required to be disclosed by the Company
is accumulated and communicated to the appropriate management on a basis that
permits timely decisions regarding disclosure. Based upon that evaluation,
the
Company's Executive Chairman of the Board of Directors and Chief Financial
Officer concluded that the Company's disclosure controls and procedures as
of
December 31, 2007 are effective.
Management's
Report on Internal Control Over Financial Reporting
Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. The Company's internal control over financial reporting
is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America ("GAAP"). The Company's internal control over financial
reporting includes those policies and procedures that:
| · |
pertain
to the maintenance of records that, in reasonable detail, accurately
and
fairly reflect the transactions and dispositions of the assets of
the
Company;
|
| · |
provide
reasonable assurance that transactions are recorded as necessary
to permit
preparation of financial statements in accordance with GAAP, and
that
receipts and expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company; and
|
| · |
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company's assets
that
could have a material effect on the financial statements.
|
Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
As
required by Section 404 of the Sarbanes-Oxley Act of 2002, management assessed
the effectiveness of the Company's internal control over financial reporting
as
of December 31, 2007. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") in Internal Control-Integrated Framework.
Based
on
our assessment and those criteria, management concluded that the Company
maintained effective internal control over financial reporting as of December
31, 2007.
KPMG
LLP,
an independent registered public accounting firm, has audited the consolidated
financial statements included in this report and as part of their audit, has
issued their report, included herein in Item 8, on the effectiveness of our
internal control over financial reporting.
Changes
in Internal Control Over Financial Reporting
No
changes in the Company's internal control over financial reporting have come
to
management's attention during the fourth quarter ended December 31, 2007 that
have materially affected, or are reasonably likely to materially affect the
Company's internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act.)
Not
applicable.
Information
regarding executive officers is included in Part I of this Form 10-K as
permitted by General Instruction G(3).
The
Company has adopted a code of ethics that applies to its principal executive
officer and principal financial officer, and to all of its other officers,
directors and employees. The code of ethics may be accessed at
www.claruscorp.com, our Internet website, at the tab "Corporate Governance".
The
Company intends to disclose future amendments to, or waivers from, certain
provisions of its code of ethics, if any, on the above website within five
business days following the date of such amendment or waiver.
Other
information required by Item 10, including information regarding directors,
membership and function of the audit committee, including the financial
expertise of its members, and Section 16(a) compliance, appearing under the
captions "Election of Directors", "Information Regarding Board of Directors
and
Committees" and "Other Matters" in our Proxy Statement used in connection with
our 2008 Annual Meeting of Stockholders, is incorporated herein by reference.
The
information set forth under the caption "Executive Compensation" in our Proxy
Statement used in connection with our 2008 Annual Meeting of Stockholders,
is
incorporated herein by reference.
The
information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in our Proxy Statement used in connection
with
our 2008 Annual Meeting of Stockholders, is incorporated herein by reference.
The
information set forth under the caption "Certain Relationships and Related
Transactions" in our Proxy Statement used in connection with our 2008 Annual
Meeting of Stockholders, is incorporated herein by reference.
The
information set forth under the caption "Principal Accountant Fees and Services"
in our Proxy Statement used in connection with our 2008 Annual Meeting of
Stockholders, is incorporated herein by reference.
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:
|
|
Page
|
||
|
25
|
||
|
26
|
||
|
27
|
||
|
28
|
||
|
30
|
||
|
31
|
| (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:
|
| (3) |
The
following Exhibits are hereby filed as part of this Annual Report
on Form
10-K:
|
|
Exhibit
Number
|
Exhibit |
| 3.1 |
Amended
and Restated Certificate of Incorporation of the Company (incorporated
herein by reference to Exhibit 3.3 of the Company's
Form S-1 Registration Statement filed with the Securities and Exchange
Commission on April 6, 1998 (File No. 333-
46685)).
|
| 3.2 |
Amendment
to Amended and Restated Certificate of Incorporation (incorporated
herein
by reference to Exhibit 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)).
|
| 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).
|
| 10.1 |
Asset
Purchase Agreement, dated as of October 17, 2002, between Epicor
Software
Corporation and the Company (incorporated
herein reference to Exhibit 2.1 of the Company's Form 8-K filed with
the
Securities and Exchange Commission on
October 18, 2002).
|
| 10.2 |
Bill
of Sale and Assumption Agreement, dated as of December 6, 2002, between
Epicor Software Corporation and the Company
(incorporated herein by reference to Exhibit 2.2 of the Company's
Form 8-K
filed with the Securities and Exchange Commission
on October 18, 2002).
|
| 10.3 |
Trademark
Assignment, dated as of December 6, 2002, by the Company in favor
of
Epicor Software Corporation, (incorporated
herein by reference to Exhibit 2.3 of the Company's Form 8-K filed
with
the Securities and Exchange Commission
on October 18, 2002).
|
| 10.4 |
Patent
Assignment, dated as of December 6, 2002, between Epicor Software
Corporation and the Company (incorporated herein
by reference to Exhibit 2.4 of the Company's Form 8-K filed with
the
Securities and Exchange Commission on October
18, 2002).
|
| 10.5 |
Noncompetition
Agreement, dated as of December 6, 2002, between Epicor Software
Corporation and the Company (incorporated
herein by reference to Exhibit 2.5 of the Company's Form 8-K filed
with
the Securities and Exchange Commission
on October 18, 2002).
|
| 10.6 |
Transition
Services Agreement, dated as of December 6, 2002, between Epicor
Software
Corporation and the Company (incorporated
herein by reference to Exhibit 2.7 of the Company's Form 8-K filed
with
the Securities and Exchange Commission
on October 18, 2002).
|
| 10.7 |
Form
of Indemnification Agreement for Directors and Executive Officers
of the
Company (incorporated herein by reference to
Exhibit 10.1 of the Company's Form 8-K filed with the Securities
and
Exchange Commission on December 23, 2002).
|
| 10.8 |
Employment
Agreement, dated as of December 6, 2002, between the Company and
Warren B.
Kanders (incorporated herein by
reference to Exhibit 10.2 of the Company's Form 8-K filed with the
Securities and Exchange Commission on December 23,
2002).*
|
| 10.9 |
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 11, 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. **
|
| 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.
|
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by
the
undersigned, thereunto duly authorized.
CLARUS
CORPORATION
Date:
March 7, 2008
By:
/s/ Philip A. Baratelli
Philip
A. Baratelli
Chief
Financial Officer
|
Signature
|
Title
|
Date
|
||
|
/s/
Warren B. Kanders
|
Executive
Chairman of the Board of Directors
|
March
7, 2008
|
||
|
Warren
B. Kanders
|
(principal
executive officer)
|
|||
|
/s/
Philip A. Baratelli
|
Chief
Financial Officer
|
March
7, 2008
|
||
|
Philip
A. Baratelli
|
(principal
financial officer)
|
|||
|
/s/
Donald L. House
|
Director
|
March
7, 2008
|
||
|
Donald
L. House
|
||||
|
/s/
Burtt R. Ehrlich
|
Director
|
March
7, 2008
|
||
|
Burtt
R. Ehrlich
|
||||
|
/s/
Nicholas Sokolow
|
Director
|
March
7, 2008
|
||
|
Nicholas
Sokolow
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Board
of Directors and Stockholders
of
Clarus
Corporation:
Under
date of March 7, 2008, we reported on the consolidated balance sheets of Clarus
Corporation and subsidiaries as of December 31, 2007 and 2006, and the related
consolidated statements of operations, stockholders' equity and comprehensive
loss, and cash flows for each of the years in the three-year period ended
December 31, 2007, which are included in the Clarus Corporation 2007 Annual
Report on Form 10-K. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related financial
statement schedule. This financial statement schedule is the responsibility
of
Clarus Corporation's management. Our responsibility is to express an opinion
on
this financial statement schedule based on our audits.
In
our
opinion, such financial statement schedule, when considered in relation to
the
basic consolidated financial statements taken as a whole, presents fairly,
in
all material respects, the information set forth therein.
/s/
KPMG LLP
Valuation
and Qualifying Accounts
Clarus
Corporation and Subsidiaries
For
the
years ended December 31, 2007, 2006 and 2005
Valuation
Allowance for Deferred Income Tax Assets and Restructuring and Related
Charges
|
Charged
|
|||||||||||||
|
Balance
at
|
(Credited)
to
|
Balance
at
|
|||||||||||
|
Beginning
of
|
Costs
and
|
End
of
|
|||||||||||
|
Period
|
Expenses
|
Deductions
(a)
|
Period
|
||||||||||
|
Valuation
Allowance for Deferred Income Tax Assets
|
|||||||||||||
|
2005
|
$
|
96,606,000
|
$
|
(3,901,000
|
)
|
$
|
—
|
$
|
92,705,000
|
||||
|
2006
|
92,705,000
|
(220,000
|
)
|
—
|
92,485,000
|
||||||||
|
2007
|
$
|
92,485,000
|
$
|
(5,069,000
|
)
|
$
|
—
|
$
|
87,416,000
|
||||
|
Restructuring
Accruals
|
|||||||||||||
|
2005
|
$
|
73,000
|
—
|
$
|
56,000
|
$
|
17,000
|
||||||
|
2006
|
$
|
17,000
|
—
|
$
|
17,000
|
—
|
|||||||
| (a) |
Deductions
related to restructuring and related accruals represent cash payments.
|
| 31.1 |
Certification
of Principal Executive Officer, as required by Rule 13a-14(a) of
the
Securities Exchange Act of 1934.
|
| 31.2 |
Certification
of Principal Financial Officer, as required by Rule 13a-14(a) of
the
Securities Exchange Act of 1934.
|
| 32.1 |
Certification
of Principal Executive Officer, as required by Rule 13a-14(b) of
the
Securities Exchange Act of 1934.
|
| 32.2 |
Certification
of Principal Financial Officer, as required by Rule 13a-14(b) of
the
Securities Exchange Act of 1934
|
-
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