Attached files
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EX-31.2 - Clarus Corp | v164312_ex31-2.htm |
EX-32.1 - Clarus Corp | v164312_ex32-1.htm |
EX-31.1 - Clarus Corp | v164312_ex31-1.htm |
EX-32.2 - Clarus Corp | v164312_ex32-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
one)
x Quarterly Report
Pursuant to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
For the
quarterly period ended September 30, 2009
or
¨ 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
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
Number)
|
One
Landmark Square
Stamford, Connecticut
06901
(Address
of principal executive offices)
(Zip
code)
(203)
428-2000
(Registrant's
telephone number, including area code)
Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES x NO
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). YES ¨ NO
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. Large accelerated filer ¨ Accelerated
filer x Non-accelerated
filer ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) YES o NO x
As of
October 27, 2009, there were outstanding 17,366,747 shares of Common Stock, par
value $0.0001.
INDEX
CLARUS
CORPORATION
Page
|
||
PART I
|
FINANCIAL INFORMATION
|
|
Item
1.
|
Financial
Statements
|
|
Condensed
Consolidated Balance Sheets -
September 30, 2009 (unaudited) and December 31, 2008 |
1
|
|
Condensed
Consolidated Statements of Operations (unaudited) -
Three and nine months ended September 30, 2009 and 2008 |
2
|
|
Condensed
Consolidated Statements of Cash Flows (unaudited) -
Nine months ended September 30, 2009 and 2008 |
3
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements -
September 30, 2009 |
4
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
10
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
13
|
Item
4.
|
Procedures
and Controls
|
13
|
PART II
|
OTHER INFORMATION
|
|
Item
1A.
|
Risk
Factors
|
14
|
Item
6.
|
Exhibits
|
15
|
SIGNATURES
|
15
|
|
EXHIBIT
INDEX
|
16
|
PART
I. FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
CLARUS
CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
(IN
THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
SEPTEMBER 30,
|
DECEMBER 31,
|
|||||||
2009
|
2008
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ | 58,856 | $ | 19,342 | ||||
Marketable
securities
|
24,921 | 66,670 | ||||||
Interest
receivable
|
10 | 24 | ||||||
Prepaids
and other current assets
|
178 | 109 | ||||||
Total
current assets
|
83,965 | 86,145 | ||||||
PROPERTY
AND EQUIPMENT, NET
|
776 | 1,032 | ||||||
TOTAL
ASSETS
|
$ | 84,741 | $ | 87,177 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable and accrued liabilities
|
$ | 319 | $ | 383 | ||||
Total
current liabilities
|
319 | 383 | ||||||
LONG-TERM
LIABILITIES:
|
||||||||
Deferred
rent
|
434 | 410 | ||||||
Total
liabilities
|
753 | 793 | ||||||
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 shares
issued and 17,366,747 outstanding in 2009 and 2008,
respectively
|
2 | 2 | ||||||
Additional
paid-in capital
|
370,875 | 370,504 | ||||||
Accumulated
deficit
|
(286,895 | ) | (284,523 | ) | ||||
Treasury
stock, at cost
|
(2 | ) | (2 | ) | ||||
Accumulated
other comprehensive income
|
8 | 403 | ||||||
Total
stockholders' equity
|
83,988 | 86,384 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 84,741 | $ | 87,177 |
SEE
ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
1
CLARUS
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN
THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE
MONTHS
|
NINE
MONTHS
|
|||||||||||||||
ENDED SEPTEMBER 30,
|
ENDED SEPTEMBER 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
REVENUES:
|
$ | — | $ | — | $ | — | $ | — | ||||||||
Total
revenues
|
— | — | — | — | ||||||||||||
OPERATING
EXPENSES:
|
||||||||||||||||
General
and administrative
|
791 | 1,160 | 2,744 | 3,563 | ||||||||||||
Transaction
expenses
|
32 | — | 32 | — | ||||||||||||
Depreciation
|
83 | 89 | 260 | 267 | ||||||||||||
Total
operating expenses
|
906 | 1,249 | 3,036 | 3,830 | ||||||||||||
OPERATING
LOSS
|
(906 | ) | (1,249 | ) | (3,036 | ) | (3,830 | ) | ||||||||
INTEREST
INCOME
|
56 | 534 | 664 | 1,915 | ||||||||||||
NET
LOSS
|
$ | (850 | ) | $ | (715 | ) | $ | (2,372 | ) | $ | (1,915 | ) | ||||
Loss
per common share:
|
||||||||||||||||
Basic
|
$ | (0.05 | ) | $ | (0.04 | ) | $ | (0.14 | ) | $ | (0.11 | ) | ||||
Diluted
|
$ | (0.05 | ) | $ | (0.04 | ) | $ | (0.14 | ) | $ | (0.11 | ) | ||||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic
|
16,867 | 16,867 | 16,867 | 16,867 | ||||||||||||
Diluted
|
16,867 | 16,867 | 16,867 | 16,867 |
SEE
ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
2
CLARUS
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN
THOUSANDS, EXCEPT SHARE AMOUNTS)
NINE
MONTHS
|
||||||||
ENDED SEPTEMBER 30,
|
||||||||
2009
|
2008
|
|||||||
OPERATING
ACTIVITIES:
|
||||||||
Net
loss
|
$ | (2,372 | ) | $ | (1,915 | ) | ||
Adjustments
to reconcile net loss to net cash used in Operating
activities:
|
||||||||
Depreciation
on property and equipment
|
260 | 266 | ||||||
Amortization
of equity compensation plans
|
371 | 537 | ||||||
Amortization
of discount on securities, net
|
(452 | ) | (1,436 | ) | ||||
Loss
on disposal of equipment
|
2 | — | ||||||
Changes
in operating assets and liabilities:
|
||||||||
(Increase)/decrease
in interest receivable, prepaids and other current assets
|
(55 | ) | 6 | |||||
Decrease
in accounts payable and accrued liabilities
|
(64 | ) | (56 | ) | ||||
Increase
in deferred rent
|
24 | 50 | ||||||
NET
CASH USED IN OPERATING ACTIVITIES
|
(2,286 | ) | (2,548 | ) | ||||
INVESTING
ACTIVITIES:
|
||||||||
Purchases
of marketable securities
|
(30,892 | ) | (96,407 | ) | ||||
Proceeds
from maturity of marketable securities
|
72,698 | 68,938 | ||||||
Purchase
of property and equipment
|
(6 | ) | (3 | ) | ||||
NET
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
41,800 | (27,472 | ) | |||||
FINANCING
ACTIVITIES:
|
||||||||
Proceeds
from the exercises of stock options
|
— | — | ||||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
— | — | ||||||
CHANGE
IN CASH AND CASH EQUIVALENTS
|
39,514 | (30,020 | ) | |||||
CASH
AND CASH EQUIVALENTS, Beginning of Period
|
19,342 | 41,886 | ||||||
CASH
AND CASH EQUIVALENTS, End of Period
|
$ | 58,856 | $ | 11,866 | ||||
SUPPLEMENTAL
DISCLOSURE:
|
||||||||
Cash
paid for franchise and property taxes
|
$ | 306 | $ | 374 |
SEE
ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
3
CLARUS
CORPORATION
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
NOTE
1. BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements of Clarus
Corporation and subsidiaries ("Clarus" or the "Company," which may be referred
to as "we," "us," or "our") as of and for the three and nine months ended
September 30, 2009 and 2008, have been prepared in accordance with accounting
principles generally accepted in the United States of America and instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information in notes required by accounting principles generally
accepted in the United States of America for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the unaudited condensed
consolidated financial statements have been included. The results of the three
and nine months ended September 30, 2009 are not necessarily indicative of the
results to be obtained for the year ending December 31, 2009. In the
preparation of these financial statements, Clarus evaluate all subsequent events
that provide additional evidence about conditions that existed at the date of
the balance sheet. Subsequent events were evaluated through November 2,
2009, up to the time the financial statements were issued. These
interim financial statements should be read in conjunction with the Company's
audited consolidated financial statements and footnotes thereto included in the
Company's Form 10-K for the fiscal year ended December 31, 2008, filed with the
Securities and Exchange Commission.
NOTE
2. ASSET REDEPLOYMENT STRATEGY
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 equivalent
assets 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. During January 2003, we sold the assets relating to our Cashbook product
representing the remainder of our operating assets.
The
Company has recognized $32,000 in transaction expenses for the three and nine
months ended September 30, 2009. There were no transaction expenses
incurred during the three and nine months ended September 30,
2008. Transaction expense consists primarily of accounting fees
related to a potential acquisition.
We are
currently working to identify suitable merger partners or acquisition
opportunities. Although we are not targeting specific business
industries for potential acquisitions, we plan to seek businesses with
substantial cash flow, experienced management teams, and operations in markets
offering substantial growth opportunities.
NOTE
3. EARNINGS (LOSS) PER SHARE
Basic net
(loss) per share attributable to common stockholders is computed by dividing the
net (loss) attributable to common stockholders by the weighted average number of
shares of common stock outstanding for each period. Diluted net (loss) per share
attributable to common stockholders is computed by including the effect of all
potentially dilutive securities, including options, warrants, restricted stock
and redeemable convertible preferred stock. Potentially dilutive securities are
excluded from the computation of diluted net (loss) per share attributable to
common stockholders if their effect is anti-dilutive.
For the
three and nine months ended September 30, 2009, basic net loss per share
attributable to common stockholders is the same as diluted net loss per share
attributable to common stockholders because all potentially dilutive securities
were anti-dilutive in computing diluted net loss per share for the
period. Options to acquire 1,845,000 shares of common stock and
500,000 shares of restricted stock during the three and nine months ended
September 30, 2009 were outstanding, but not included in the calculation of
weighted average number of diluted shares outstanding because the option and
stock grant prices were higher than the average market price of the Company's
common stock during the period. In addition, diluted net loss per
share attributable to common stockholders excludes the potentially dilutive
effect of options to purchase 123,750 shares of the Company's common stock whose
exercise prices were lower than the average market price of the Company's common
stock during the three and nine months ended September 30, 2009, as their
inclusion would have been anti-dilutive because the Company incurred losses
during the periods.
4
For the
three and nine months ended September 30, 2008, basic net loss per share
attributable to common stockholders is the same as diluted net loss per share
attributable to common stockholders because all potentially dilutive securities
were anti-dilutive in computing diluted net loss per share for the
period. Options to acquire 1,848,750 and 1,458,750 shares of common
stock, respectively, during the three and nine months ended September 30, 2008,
were outstanding, but not included in the calculation of weighted average number
of diluted shares outstanding because the option exercise prices were higher
than the average market price of the Company's common stock during the
period. In addition, diluted net loss per share attributable to
common stockholders excludes the potentially dilutive effect of options to
purchase 60,000 and 450,000 shares of the Company's common stock,
respectively,
and 500,000 shares of restricted stock whose exercise prices were lower than the
average market price of the Company's common stock during the three and nine
months ended September 30, 2008, as their inclusion would have been
anti-dilutive because the Company incurred losses during the
periods.
The
following table is a reconciliation of basic and diluted shares outstanding used
in the calculation of earnings per share:
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Basic
earnings per share calculation:
|
||||||||||||||||
Net
loss
|
$ | (850 | ) | $ | (715 | ) | $ | (2,372 | ) | $ | (1,915 | ) | ||||
Weighted
average common shares – basic
|
16,867 | 16,867 | 16,867 | 16,867 | ||||||||||||
Basic
net loss per share
|
$ | (0.05 | ) | $ | (0.04 | ) | $ | (0.14 | ) | $ | (0.11 | ) | ||||
Diluted
earnings per share calculation:
|
||||||||||||||||
Net
loss
|
$ | (850 | ) | $ | (715 | ) | $ | (2,372 | ) | $ | (1,915 | ) | ||||
Weighted
average common shares – basic
|
16,867 | 16,867 | 16,867 | 16,867 | ||||||||||||
Effect
of dilutive stock options
|
— | — | — | — | ||||||||||||
Effect
of dilutive restricted stock
|
— | — | — | — | ||||||||||||
Weighted
average common shares diluted
|
16,867 | 16,867 | 16,867 | 16,867 | ||||||||||||
Diluted
net loss per share
|
$ | (0.05 | ) | $ | (0.04 | ) | $ | (0.14 | ) | $ | (0.11 | ) |
NOTE
4. 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 September 30, 2009, the number of shares
authorized and reserved for issuance under the 2005 Plan is 5.0 million, subject
to an automatic annual increase equal to 4% of the total number of shares of
Clarus’ common stock outstanding. The aggregate number of shares of
common stock that may be granted through awards under the 2005 Plan to any
employee in any calendar year may not exceed 500,000 shares. The 2005
Plan will continue in effect until June 2015 unless terminated
sooner. As of September 30, 2009, 748,750 stock options have been
awarded under the plan of which 165,000 are unvested and 583,750 are vested and
eligible for exercise.
On July
1, 2009, the Company accelerated the vesting of 100,000 options originally
issued December 13, 2007 to a terminated employee. As part of the
severance agreement, the expiration period of these options was extended until
June 30, 2010. The total decrease to non-cash equity compensation
related to these options was $90,000 which was recorded in general and
administrative expenses during the three months ended September 30,
2009. There were no options issued during the three month period
ended
5
September
30, 2009. For the nine month period ended September 30, 2009, the
Company granted 123,750 options. For the three and nine month periods
ended September 30, 2008 the Company granted 60,000 options.
The
Company recorded total non-cash equity compensation expense related to stock
options and restricted stock as follows:
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Restricted
Stock
|
$ | 67,000 | $ | 67,000 | $ | 201,000 | $ | 201,000 | ||||||||
Stock
Options
|
$ | (38,325 | ) | $ | 73,129 | $ | 170,297 | $ | 335,629 | |||||||
Total
|
$ | 28,675 | $ | 140,129 | $ | 371,297 | $ | 536,629 |
A summary
of the status of stock option grants as of September 30, 2009, and changes
during the nine months ended September 30, 2009, is presented
below:
Weighted
|
||||||||
Average
|
||||||||
Options
|
Exercise Price
|
|||||||
Outstanding
at December 31, 2008
|
1,908,750 | $ | 7.17 | |||||
Granted
|
123,750 | $ | 4.03 | |||||
Exercised
|
— | — | ||||||
Forfeited/Expired
|
(63,750 | ) | $ | 5.99 | ||||
Outstanding
at September 30, 2009
|
1,968,750 | $ | 7.03 | |||||
Options
exercisable at September 30, 2009
|
1,803,750 | $ | 7.14 |
The
following table summarizes information about stock options outstanding as of
September 30, 2009:
Weighted
|
||||||||||||||||
Remaining
Life
|
Average
|
|||||||||||||||
Exercise Price Range
|
Outstanding
|
Exercisable
|
In Years
|
Exercise Price
|
||||||||||||
$3.85
- $ 4.09
|
123,750 | 93,750 | 6.2 | $ | 4.03 | |||||||||||
$4.10
- $10.00
|
1,845,000 | 1,710,000 | 5.7 | $ | 7.23 | |||||||||||
Total
|
1,968,750 | 1,803,750 | 6.0 | $ | 7.03 |
The fair
value of unvested options is determined based on the closing market price of our
shares on the grant date and is recognized over the requisite service period of
one to six years. As of September 30, 2009, there were 165,000
unvested shares and unrecognized compensation cost of $315,665 related to
unvested stock options.
NOTE
5. COMPREHENSIVE LOSS
The
Company utilizes Topic 220 – Other Comprehensive Income. Other
Comprehensive Loss refers to revenues, expenses and gains and losses that are
not included in net loss but rather are recorded directly in stockholders'
equity. The components of comprehensive loss for the three and nine months ended
September 30, 2009 and 2008 were as follows:
THREE MONTHS ENDED
SEPTEMBER 30,
|
NINE MONTHS ENDED
SEPTEMBER 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Net
loss
|
$ | (850 | ) | $ | (715 | ) | $ | (2,372 | ) | $ | (1,915 | ) | ||||
Unrealized
gain/(loss) on marketable securities
|
4 | ( 47 | ) | (395 | ) | (75 | ) | |||||||||
Comprehensive
loss
|
$ | (846 | ) | $ | (762 | ) | $ | (2,767 | ) | $ | (1,990 | ) |
6
NOTE
6. CONTINGENCIES
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.
NOTE
7. NEW ACCOUNTING PRONOUNCEMENTS
Effective
for financial statements issued for interim and annual periods ending after
September 15, 2009, The FASB
Accounting Standards Codification™ (the
"Codification") became the source of authoritative U.S.
generally accepted accounting principles recognized by the Financial Accounting
Standards Board (“FASB”) to be applied to nongovernmental entities. Rules
and interpretive releases of the Securities and Exchange Commission (the
"SEC") under authority of federal securities laws are also sources of
authoritative GAAP to SEC registrants. On the effective date, the
Codification superseded, but did not change, all then-existing non-SEC
accounting and reporting standards, and all other nongrandfathered, non-SEC
accounting literature not included in the codification became
nonauthoritative. Transition to the Codification did not affect Clarus’
results of operations, cash flows or financial positions. This Form 10-Q
reflects the implementation of the Codification.
In June
2009, Clarus adopted guidance on accounting for and disclosures of subsequent
events, events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. The required new
disclosures are made in Note 1 (Basis of Presentation) above, and this guidance
has not otherwise impacted Clarus’ condensed consolidated financial
statements.
In April
of 2009, the Company adopted new guidance which amended previous
other-than-temporary impairment guidance for debt securities to make the
guidance more operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements. This guidance modified previous requirements recognizing
other-than-temporary impairment on debt securities but did not amend existing
recognition and measurement guidance related to other-than-temporary impairments
of equity securities. The adoption did not have a material impact on
the Company’s condensed consolidated financial statements.
In
September 2006, the FASB issued guidance on Fair Value Measurements which
establishes a framework for reporting fair value and expands disclosures about
fair value measurements. The guidance related to financial instruments that are
already required or permitted to be recognized or disclosed at fair value on a
recurring basis was effective for the Company on January 1, 2008. The guidance
related to fair value measurement and disclosure requirements for nonfinancial
assets and liabilities has been delayed by the FASB for one year. The partial
adoption of this pronouncement in 2008 had no impact on the Company's
consolidated financial statements. Adopting the remainder of the provision in
2009 did not have an impact on the Company's consolidated financial
statements.
On
January 1, 2009, Clarus adopted guidance related to business combinations.
This guidance establishes principles and requirements for how an acquirer in a
business combination: (1) recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree; (2) recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain purchase;
and (3) determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. In April 2009, the FASB issued guidance further clarifying
the application of the standard. The guidance primarily relates to
business combinations entered into after December 31, 2009, and has not impacted
Clarus’ condensed consolidated financial statements. The adoption of
this pronouncement had no impact on the Company’s consolidated financial
statements and is not anticipated to affect the Company until an acquisition is
completed.
NOTE
8. RELATED PARTY TRANSACTIONS
In
September 2003, the Company and Kanders & Company, Inc. (“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 agreed to allocate the
total lease payments of $38,958 per month on the basis of Kanders & Company
renting 2,900 square feet for $9,739 per month, and the Company renting 8,600
square feet for $29,222 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.
7
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 $47,400 during the three months ended September 30, 2009 and $51,300
during the three months ended September 30, 2008. For the nine month
periods ended September 30, 2009 and 2008, respectively, such services
aggregated $150,200 and $127,000, respectively.
As of
September 30, 2009, the Company had a net receivable of $33,300 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 October 2009. As of
December 31, 2008, the Company had an outstanding net receivable of $21,000 to
Kanders & Company. The outstanding amount was paid and received
in the first quarter of 2009.
The
Company provided certain telecommunication, administrative and other office
services to Stamford Industrial Group, Inc., formerly known as Net Perceptions,
Inc. (“SIG”) that were reimbursed by SIG. Warren B. Kanders, our
Executive Chairman, also served as the Non-Executive Chairman of
SIG. Such services aggregated $0 during the three months ended
September 30, 2009 and $8,500 during the three months ended September 30,
2008. For the nine month period ended September 30, 2009 and 2008,
respectively, such services aggregated $18,700 and $27,100,
respectively.
As of
September 30, 2009, the Company had no outstanding receivables due from
SIG. As of December 31, 2008, the Company had outstanding a
receivable of $8,300 from SIG. The outstanding amount was paid by SIG
in January 2009.
During
the three- and nine-month periods ended September 30, 2009, the Company incurred
no charges 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. During the quarter ended
September 30, 2008, the Company incurred charges of approximately $14,000 for
payments to Kanders Aviation LLC.
In the
opinion of management, the rates, terms and considerations of the transactions
with the related parties described above approximate those that the Company
would have received in transactions with unaffiliated parties.
NOTE
9. NET OPERATING LOSS AND CAPITAL LOSS CARRYFORWARD
EXPIRATION
Management
has provided a full valuation allowance against net deferred income tax assets
at September 30, 2009, because the ultimate realization of those benefits and
assets does not meet the more likely than not criteria. At September 30,
2009, 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 $231.6 million, $1.3 million and $56,000,
respectively, which expire in varying amounts beginning in the fourth quarter of
2009. The Company's ability to benefit from certain net operating
loss and tax credit carryforwards is limited under Section 382 of the Internal
Revenue Code due to a prior ownership change of greater than 50%. Accordingly,
approximately $227.8 million of the $231.6 million of U.S. net operating loss
carryforward is currently expected to be available to offset taxable income that
the Company may recognize in the future, subject to compliance with Section 382
of the Internal Revenue Code. Of the approximately $227.8 million of
net operating losses available to offset taxable income, approximately $209.6
million does not expire until 2020 or later, subject to compliance with Section
382 of the Internal Revenue Code as indicated by the following
schedule:
8
NET
OPERATING LOSS AND CAPITAL LOSS CARRYFORWARD EXPIRATION DATES*
(UNAUDITED)
SEPTEMBER
30, 2009
Net Operating
Loss
|
||||
Expiration Dates
December 31,
|
Amount
(000’s)
|
|||
2009
|
1,911 | |||
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 | |||
2028
|
1,360 | |||
2029
|
1,799 | |||
Total
|
231,588 | |||
Section 382 limitation
|
(3,831 | ) | ||
After
Limitations
|
$ | 227,757 |
*Subject
to compliance with Section 382 of the Internal Revenue Code.
9
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FORWARD-LOOKING
STATEMENTS
This
report contains certain forward-looking statements, including information about
or related to our future results, certain projections and business trends.
Assumptions relating to forward-looking statements involve judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control. When
used in this report, the words "estimate," "project," "intend," "believe,"
"expect" and similar expressions are intended to identify forward-looking
statements. Although we believe that our assumptions underlying the
forward-looking statements are reasonable, any or all of the assumptions could
prove inaccurate, and we may not realize the results contemplated by the
forward-looking statements. Management decisions are subjective in many respects
and susceptible to interpretations and periodic revisions based upon actual
experience and business developments, the impact of which may cause us to alter
our business strategy or capital expenditure plans that may, in turn, affect our
results of operations. In light of the significant uncertainties inherent in the
forward-looking information included in this report, you should not regard the
inclusion of such information as our representation that we will achieve any
strategy, objectives or other plans. The forward-looking statements contained in
this report speak only as of the date of this report, and we have no obligation
to update publicly or revise any of these forward-looking
statements.
These and
other statements, which are not historical facts, are based largely upon our
current expectations and assumptions and are subject to a number of risks and
uncertainties that could cause actual results to differ materially from those
contemplated by such forward-looking statements. These risks and uncertainties
include, among others, our planned effort to redeploy our assets and use our
substantial cash, cash equivalents and marketable securities to enhance
stockholder value and the occurrence of events which could limit our ability to
utilize our substantial net operating loss carry forward as well as other
factors described in the "Risk Factors" section found in Part I, Item 1A of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and
described below.
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. RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND ANY
FUTURE PERIODS PRIOR TO A REDEPLOYMENT OF OUR ASSETS ARE EXPECTED PRIMARILY TO
REFLECT GENERAL AND ADMINISTRATIVE EXPENSES AND TRANSACTION EXPENSES ASSOCIATED
WITH THE CONTINUING ADMINISTRATION OF THE COMPANY AND ITS EFFORTS TO REDEPLOY
ITS ASSETS.
CRITICAL
ACCOUNTING POLICIES AND USE OF ESTIMATES
The
Company's discussion of financial condition and results of operations is based
on the consolidated financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America.
The preparation of these consolidated financial statements require management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
consolidated financial statements. Estimates also affect the reported amounts of
revenues and expenses during the reporting periods. The Company continually
evaluates its estimates and assumptions including those related to revenue
recognition, allowance for doubtful accounts, impairment of long-lived assets,
impairment of investments, and contingencies and litigation. The Company bases
its estimates on historical experience and other assumptions that are believed
to be reasonable under the circumstances. Actual results could differ from these
estimates.
The
Company believes the following critical accounting policies include the more
significant estimates and assumptions used by management in the preparation of
its consolidated financial statements. Our accounting policies are more fully
described in Note 1 of our consolidated financial statements included in our
Annual Report on Form 10-K for the fiscal year ended December 31,
2008.
10
- 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.
- Under
the asset and liability method specified, 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.
- The
Company recognizes the cost of the share-based awards on a straight-line basis
over the requisite service period of the
award. Compensation cost recognized during 2009 and 2008
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 Statement of Financial
Accounting Standard (“SFAS”) No. 123, and (b) compensation cost for all
share-based payments granted subsequent to January 1, 2006, based on the
grant-date fair value.
SOURCES
OF REVENUE
Until a
redeployment of the Company's assets occurs, the Company's principal income will
consist of interest, dividend and other investment income from cash, cash
equivalents and marketable securities, which is reported as interest income in
the Company's statement of operations.
OPERATING
EXPENSES
General
and administrative expense include salaries and employee benefits, non-cash
equity compensation, rent, insurance, legal, accounting, investment management
fees and other professional fees, state and local non-income based taxes, board
of director fees as well as public company expenses such as transfer agent and
listing fees and expenses.
Transaction
expense consists primarily of professional fees and expenses related to due
diligence, negotiation and documentation of acquisition, financing and related
agreements.
RESULTS
OF OPERATIONS - COMPARISON OF THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009
AND 2008
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.
GENERAL
AND ADMINISTRATIVE
General
and administrative expenses decreased $369,000, or 32%, to $791,000 during the
three months ended September 30, 2009, compared to $1,160,000 during the three
months ended September 30, 2008. The decrease in general and administrative
expense for the three months ended September 30, 2009, compared to the three
months ended September 30, 2008, was primarily attributable to decreases in
employment compensation and benefits, non-cash equity compensation expense
largely from a modification of an option award for a terminated employee,
consulting fees, travel expenses and other professional fees offset by increases
in franchise and property taxes, insurance and investment management
fees. General and administrative expenses decreased $819,000, or 23%,
to $2,744,000 during the nine-month period ended September 30, 2009, compared to
$3,563,000 during the same period ended September 30, 2008. The
decrease in general and administrative expense for the nine months ended
September 30, 2009 was primarily attributable to decreases in employment
compensation and benefits, non-cash equity compensation expense largely from a
modification of an option award for a terminated employee, consulting fees,
travel expenses, other professional fees and investment management fees offset
by increases in public company filing expenses. Management believes
we will incur a net loss in 2009 as a result of our current level of expenses
and due to lower projected investment yields on our investment
portfolio.
TRANSACTION
EXPENSES
The
Company incurred $32,000 in transaction expenses during the three and nine
months ended September 30, 2009. There were no transaction expenses
incurred during the three and nine months ended September 30,
2008. Transaction expense consists primarily of accounting fees
related to a potential acquisition.
11
DEPRECIATION
EXPENSE
Depreciation
expense decreased $6,000, or 7%, to $83,000 in the three months ended September
30, 2009, compared to $89,000 in the same period ended September 30,
2008. For the nine months ended September 30, 2009, depreciation
expense decreased $7,000, or 3%, to $260,000, compared to $267,000 in the same
period ended September 30, 2008. The decrease is due to the
retirement of office equipment.
INTEREST
INCOME
Interest
income decreased $478,000, or 90%, to $56,000 for the quarter ended September
30, 2009, from $534,000 in the quarter ended September 30,
2008. Interest income for the quarters ended September 30, 2009 and
2008, includes $16,000 and $508,000 in discount accretion and premium
amortization, respectively. The decrease in interest income was due
primarily to lower rates of return on cash, cash equivalents assets and
marketable securities. The weighted average interest rate for our
investments for the three-month period ended September 30, 2009, was 0.26%
compared to 2.51% for same period in 2008.
During
the nine months ended September 30, 2009, interest income decreased $1,251,000,
or 65%, to $664,000 from $1,915,000 during the nine months ended September 30,
2008. Interest income for the nine-month periods ended September 30,
2009 and 2008, includes $452,000 and $1,832,000, respectively, in discount
accretion and premium amortization, respectively. The decrease in
interest income was due primarily to lower rates of return that we received on
our cash, cash equivalent assets and marketable securities. The
weighted average interest rate for our investments for the nine months ended
September 30, 2009 was 1.05% compared to 2.98% for same period in
2008.
The
current earnings rate as of October 27, 2009 is .19%. We
expect the current rate to decline as existing higher yielding investments
mature and are invested at lower current interest rates.
INCOME
TAXES
Management
has provided a full valuation allowance against net deferred income tax assets
at September 30, 2009, because the ultimate realization of those benefits and
assets does not meet the more likely than not criteria. As a result of
the operating losses incurred since the Company's inception, no provision or
benefit for income taxes was recorded during the three and nine month periods
ended September 30, 2009 and 2008, respectively.
LIQUIDITY
AND CAPITAL RESOURCES
The
overall combined decrease of $2.2 million in cash, cash equivalents and
marketable securities from $86.0 million to $83.8 million is primarily due to
the decrease in interest income for the nine month period ended September 30,
2009. The Company's cash and cash equivalents increased to $58.9
million at September 30, 2009 from $19.3 million at December 31, 2008 due to a
shift in the composition of the investment portfolio from marketable
securities. Cash and cash equivalents are investments with a shorter
duration, less than three months, under accounting principles generally accepted
in the United States of America. Marketable securities decreased to
$24.9 million at September 30, 2009 from $66.7 million at December 31,
2008.
Cash used
by operating activities was approximately $2.3 million during the nine months
ended September 30, 2009, compared to cash used by operating activities of
approximately $2.6 million during the nine months ended September 30,
2008. The $2.3 million consisted primarily of the Company's net loss,
discount amortization, a decrease in accounts payable and accrued liabilities
and an increase in interest receivable, prepaids and other current assets offset
by non-cash expenses.
Cash
provided by investing activities was approximately $41.8 million during the nine
months ended September 30, 2009. The cash was provided by the maturity of
marketable securities partially offset by the purchase of marketable
securities. Cash used in investing activities was approximately $27.5
million during the nine months ended September 30, 2008. The cash was used to
purchase of marketable securities partially offset by the maturity of marketable
securities. Capital expenditures were approximately $6,000 for the
nine-month period ended September 30, 2009, compared to $3,000 for the same
period in 2008.
There was
no cash provided by or used in financing activities during the three and nine
months ended September 30, 2009 or 2008, respectively.
At
September 30, 2009, 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 $231.6 million, $1.3 million and
$56,000, respectively, which expire in varying amounts beginning in the fourth
quarter of 2009. The Company's ability to benefit from certain net
operating loss and tax credit carryforwards is limited under section 382 of the
Internal Revenue Code due to a prior ownership change of greater than 50%.
Accordingly, approximately $227.8 million of the $231.6 million of U.S. net
operating loss carryforward is currently expected to be available to offset
taxable income that the Company may recognize in the future, subject to
compliance with Section 382 of the Internal Revenue Code. Of the
approximately $227.8 million of net operating losses available to offset taxable
income, approximately $209.6 million does not expire until 2020 or later,
subject to compliance with Section 382 of the Internal Revenue
Code.
12
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
There
have been no material changes to our exposures to market risk since December 31,
2008.
ITEM
4. PROCEDURES AND CONTROLS
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 September
30, 2009, 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 September 30, 2009 are
effective.
Changes
in Internal Control over Financial Reporting
There
have not been any changes in the Company’s internal control over financial
reporting that have come to management’s attention during the third quarter
ended September 30, 2009 evaluation that have materially affected, or are
reasonably likely to materially affect the Company’s internal control over
financial reporting.
13
PART
II. OTHER INFORMATION
ITEM
1A. RISK FACTORS
There
have been no material changes to the risk factors described in the Company’s
Form 10-K for the year ended December 31, 2008.
14
ITEM
6. EXHIBITS
Exhibit
|
||
Number
|
Exhibit
|
|
31.1
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of Principal Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification
of Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
SIGNATURE
Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
CLARUS
CORPORATION
|
|
Date:
November 2, 2009
|
|
/s/ Warren B. Kanders
|
|
Warren
B. Kanders,
|
|
Executive
Chairman of the Board of Directors
|
|
(Principal
Executive Officer)
|
|
/s/ Philip A. Baratelli
|
|
Philip
A. Baratelli,
|
|
Chief
Financial Officer
|
|
(Principal
Financial and
|
|
Chief
Accounting Officer)
|
15
EXHIBIT
INDEX
Number
|
Exhibit
|
|
31.1
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification
of Principal Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification
Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
16