NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The Company sells its products pursuant to customer orders or sales contracts entered into with its customers. Revenue is recognized when title and risk of loss pass to the customer and when collectability is reasonably assured. Charges for shipping and handling fees are included in net sales and the corresponding shipping and handling expenses are included in cost of sales in the accompanying condensed consolidated statements of operations.

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in~~(in thousands, except ~~share and~~ per share amounts)

~~Revenue Recognition~~

~~Reporting of Taxes Collected~~

~~Taxes collected from customers and remitted to government authorities are reported on the net basis and are excluded from sales.~~

~~Research and Development~~

~~Research and development costs are charged to expense as incurred, and are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.~~

~~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. The Company is subject to income taxes in certain foreign jurisdictions based on operations. Deferred tax assets and liabilities are created in this process. The Company has netted these deferred tax assets and deferred tax liabilities by jurisdiction. Deferred income tax assets are reviewed for recoverability and valuation allowances are provided when it is more likely than not that a deferred tax asset is not realizable in the future.

Tax positions are recognized in the financial statements when it is more-likely-than-not that the position will be sustained upon examination by the tax authorities. As of September 30, 2010, the Company had no uncertain tax positions that quality for either recognition or disclosure in the financial statements. The Company conducts its business globally. As a result, the Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions, and are subject to examination for the open tax years of 2006-2008.

~~Concentration of Credit Risk~~

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and accounts receivable. Risks associated with cash within the United States are mitigated by banking with federally insured, creditworthy institutions. To date, the Company has not experienced a loss or lack of access to its cash; however, no assurance can be provided that access to the Company’s cash will not be impacted by adverse conditions in the financial markets. In the normal course of business, the Company provides unsecured credit terms to its customers. Accordingly, the Company performs ongoing credit evaluations of its customers and maintains allowances for possible losses as considered necessary by management.

~~Segment Information~~

~~The Company has determined that during 2009, 2008, and 2007, the Company operated in one principal business segment.~~

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in thousands, except share and per share amounts)~~

NOTE 2. ACQUISITIONS

Black Diamond Equipment, Ltd.

On May 28, 2010, ~~Clarus~~the Company acquired ~~BDE,~~BDEL, a Delaware corporation, pursuant to the Agreement and Plan of Merger dated May 7, 2010 (the “Black Diamond Equipment Merger Agreement”), by and among ~~Clarus, BDE,~~the Company, BDEL, Everest/Sapphire Acquisition, LLC (“Purchaser”), a Delaware limited liability company and a wholly-owned direct subsidiary of ~~Clarus,~~the Company, Sapphire Merger Corp. (“Merger Sub”), a Delaware corporation and a wholly-owned direct subsidiary of Purchaser, and Ed McCall, as Stockholders’ Representative. Under the Black Diamond Equipment Merger Agreement, Purchaser acquired ~~BDE~~BDEL and its three subsidiaries through the merger of Merger Sub with and into ~~BDE,~~BDEL, with ~~BDE~~BDEL as the surviving corporation of the merger (the “Black Diamond Equipment Merger”).

In the Black Diamond Merger Agreement, Clarus acquired all of the outstanding common stock of BDE for an aggregate amount of approximately $85,675 (after closing adjustments of $4,335 relating to working capital), $4,500 of which is being held in escrow for a one year period as security for indemnification claims under the Black Diamond Merger Agreement. Certain BDE shareholders used their cash received from the sale of BDE common stock to purchase 484 shares of Clarus common stock from the Company, for a total value of $2,903.

Gregory Mountain Products, Inc.

On May 28, 2010, ~~Clarus~~the Company acquired GMP, a Delaware corporation in a merger transaction (the “Gregory Merger”) pursuant to the Agreement and Plan of Merger (the “Gregory Merger Agreement”) by and among GMP, ~~Clarus,~~the Company, Purchaser, Everest Merger I Corp., a Delaware corporation and a wholly-owned direct subsidiary of Purchaser (“Merger Sub One”), Everest Merger II, LLC, a Delaware limited liability company and a wholly-owned direct subsidiary of Purchaser (“Merger Sub Two”), and each of Kanders GMP Holdings, LLC and Schiller Gregory Investment Company, LLC, as the stockholders of Gregory (collectively, the “Gregory Stockholders”).

In the Gregory Merger, the Company acquired all of the outstanding common stock of GMP for an aggregate amount of approximately $44,111 (after closing adjustments of $889 relating to debt repayments, working capital and equity plan allocation), payable to the Gregory Stockholders in proportion to their respective ownership interests of Gregory as follows: (i) the issuance of 2,419 shares to Kanders GMP Holdings, LLC and 1,256 shares to Schiller Gregory Investment Company, LLC of Clarus’ unregistered common stock, and (ii) the issuance by Clarus of the 5% seven year subordinated promissory notes dated May 28, 2010 (the “Merger Consideration Subordinated Notes”) in the aggregate principal amount of $14,517 to Kanders GMP Holdings, LLC and in the aggregate principal amount of $7,539 to Schiller Gregory Investment Company, LLC. The merger consideration payable to the Gregory Stockholders was approved by a special committee comprised of independent directors of Clarus’ Board of Directors.

Clarus’ actual closing stock price was $6.85 on May 28, 2010, the date that each of the Black Diamond Merger and the Gregory Merger (together, the “Mergers”) was completed. Since a two year lock up is in place on all the shares issued to Kanders GMP LLC and to Schiller Gregory Investment Company, LLC, a discount of $1.58 (23%) was applied against the $6.85 closing stock price to yield a fair value of $5.27 per share. The 23% discount was calculated using the Finerty model with a two-year term and a volatility of 75.9%.

~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805,~~ ~~Business Combinations~~, requires that the fair value of replacement awards and cash payments made to settle vested awards attributed to precombination service be included in the consideration transferred. The fair value of GMP share awards, not including stock units, which will immediately vest at the effective date of the Mergers, as applicable, has been attributed to precombination service and included in the consideration transferred in the amounts of $593, consisting of $185 in cash, $316 in notes, and $92 in stock. The amount attributable to post combination service that will be expensed subsequent to the date of acquisition was $682.

~~The Company believes the merger of Clarus, BDE and GMP will produce the following significant benefits:~~

~~Create a unique platform to build a large, global and diversified outdoor equipment and lifestyle company, which seeks to be strengthened from both organic and acquisition growth;~~

~~Access to ample liquidity to fuel brand penetration and expansion;~~

~~Utilization of a significant portion of its deferred tax asset;~~

~~Preservation of an organization and culture with a strong foundation with greater resources and opportunities;~~

~~Ability to better utilize existing supply chain and distribution channels;~~

~~Greater combined global revenue balance; and~~

~~Improved efficiencies by combining certain operational functions.~~

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in thousands, except share and per share amounts)~~

The Company’s fair value estimates for the purchase price allocation are preliminary and may change during the allowable allocation period, which is up to one year from the date of acquisition, as we continue to obtain information that existed as of the date of acquisition so that we may finalize the assets acquired and liabilities assumed and determine the associated fair values. The following table is a reconciliation to the fair value of the purchase consideration and how the purchase consideration is preliminarily allocated to assets acquired and liabilities assumed which have been estimated at their fair values. The excess of purchase consideration over the assets acquired and liabilities assumed is recorded as goodwill.

BDE GMP

Estimated Fair Value Number of Shares Estimated Fair Value Estimated Fair Value

Cash paid to BDE and GMP $ 85,675 - $ 185 $ 85,860

Issuance to GMP of shares of Clarus - 3,676 19,373 19,373

Issuance to GMP of 5% subordinated notes - - 13,120 13,120

Issuance of additional shares of Clarus - 31 92 92

Payment of deferred compensation (5% notes) - - 316 316

Total estimated purchase consideration $ 85,675 3,707 $ 33,086 $ 118,761

Assets Acquired and Liabilities Assumed
Assets
Cash and cash equivalents $ 1,854 $ 1,446 $ 3,300
Accounts receivable, net 12,393 3,053 15,445
Inventories 26,079 4,390 30,469
Prepaid and other current assets 2,161 148 2,309
Property and equipment 13,687 693 14,380
Amortizable definite lived intangible assets 12,733 5,483 18,216
Identifiable indefinite lived intangible assets 19,600 13,050 32,650
Goodwill 21,583 12,603 34,186
Deferred income taxes 920 65 985
Other long-term assets 345 133 478
  Total Assets 111,355 41,064 152,419

Liabilities
Accounts payable and accrued liabilities 8,077 3,058 11,135
Current portion of debt 200 - 200
Long-term debt 245 - 245
Other long-term liabilities 1,030 - 1,030
Deferred income taxes 16,128 4,920 21,048
    Total Liabilities 25,680 7,978 33,658

Net book value acquired $ 85,675 $ 33,086 $ 118,761

The estimated fair value of inventory was recorded at expected sales price less cost to sell plus a reasonable profit margin for selling efforts. The fair value of BDE’s and GMP’s property and equipment was estimated using the replacement cost method. Under the replacement cost method, fair value is estimated to be the amount a market participant would pay to replace the asset. The fair value of BDE’s and GMP’s assembled workforce and buyer-specific synergies has been included in goodwill.

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in thousands, except share and per share amounts)~~

~~PRO FORMA RESULTS~~Pro Forma Results

The following pro forma results are based on the individual historical results of ~~Clarus, BDE~~the Company, BDEL and GMP, with adjustments to give effect to the combined operations as if the Mergers had been consummated at the beginning of the periods presented. The pro forma results are intended for information purposes only and do not purport to represent what the combined companies’ results of operations would actually have been had the transaction in fact occurred at the beginning of the earliest periods presented.

	PRO FORMA
	THREE MONTHS ENDED		NINE MONTHS ENDED				PRO FORMA
							THREE MONTHS ENDED
	September 30, 2009		September 30, 2010		September 30, 2009		March 31, 2010

Sales	$	30,942	$	90,794	$	83,385	$	33,113
Net (loss)/income	$	1,594	$	54,532	$	1,627	$	(39	)
Net (loss)/income per share - basic	$	0.09	$	2.86	$	0.10	$	(0.00	)
Net (loss)/income per share - diluted	$	0.09	$	2.82	$	0.10	$	(0.00	)

NOTE 3. INVENTORIES

Inventories, as of ~~September 30, 2010,~~March 31, 2011 and December 31, ~~2009 and for the Predecessor, as of June 30, 2009,~~2010, were as follows:

	March 31, 2011		December 31, 2010

Finished goods	$	26,505	$	29,192
Work-in-process		632		801
Raw materials and supplies		5,725		4,949
	$	32,862	$	34,942

Predecessor
Company
September 30, 2010 December 31, 2009 June 30, 2009

Finished goods $ 27,695 $ - $ 20,404
Work-in-process 829 - 465
Raw materials and supplies 4,814 - 4,711

Total Inventory $ 33,338 $ - $ 25,580

At the time of acquisition, on May 28, 2010, inventories reflected an increase of $3,850 and $1,147 to record BDE and GMP’s inventory, respectively, at its estimated fair value. The estimated fair value of inventory was recorded at expected sales price less cost to sell plus a reasonable profit margin for selling efforts. As the Company has sold through a portion of the acquired inventory, the cost of sales reflect the non-cash increased valuation of BDE’s and GMP’s inventory, which has temporarily reduced the Company’s gross margin through September 30, 2010 and will continue to do so until the end of fiscal year 2010. During the three and nine-month periods ending September 30, 2010, $3,158 and $4,321, respectively, of the fair value adjustment was recognized in cost of goods sold, and $676 of the fair value adjustment remains in inventory at September 30, 2010 to be recognized in cost of goods sold by the end of the fiscal year.

137

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 4. PROPERTY AND EQUIPMENT

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in~~(in thousands, except ~~share and~~ per share amounts)

Property and ~~Equipment,~~equipment, net as of ~~September 30, 2010,~~March 31, 2011 and December 31, ~~2009 and for the Predecessor, as of June 30, 2009 was~~2010, were as follows:

Predecessor
Company
September 30, 2010 December 31, 2009 June 30, 2009

Land $ 2,850 $ - $ 336
Building and improvements 2,687 1,894 4,279
Furniture and fixtures 1,581 453 2,177
Computer hardware and software 1,964 120 3,620
Machinery and equipment 5,520 144 8,662
Construction in progress 784 - 725

Total Property & Equipment $ 15,386 $ 2,611 $ 19,799

Less accumulated depreciation (1,222 ) (1,915 ) (10,018 )

Property and equipment, net $ 14,164 $ 696 $ 9,781

Property and equipment reflects an increase of approximately $4,262 and $150 to record BDE’s and GMP’s property and equipment, respectively, at their respective estimated fair values. The Company believes these amounts represent the best estimates of fair value. The fair value of BDE’s and GMP’s property and equipment was estimated using the replacement cost method. Under the replacement cost method, fair value is estimated to be the amount a market participant would pay to replace the asset.

	March 31, 2011			December 31, 2010

Land	$	2,850		$	2,850
Building and improvements		3,019			3,011
Furniture and fixtures		2,085			2,043
Computer hardware and software		2,989			2,726
Machinery and equipment		6,491			6,419
Construction in progress		2,303			1,431
		19,737			18,480
Less accumulated depreciation		(4,344	)		(3,740	)
	$	15,393		$	14,740

NOTE 5. ~~INTANGIBLES~~GOODWILL AND OTHER INTANGIBLE ASSETS

~~Indefinite lived intangible assets~~Goodwill

~~In connection with~~There were no changes in goodwill during the Mergers, the Company acquired certain tradenames and trademarks which provide BDE and GMP with the exclusive and perpetual rights to manufacture and sell their respective products. A preliminary fair value estimate pertaining to tradenames and trademarks is noted in the tables below. Tradenames and trademarks will not be amortized, but reviewed annually for impairment or upon the existence of a triggering event.three months ended March 31, 2011.

~~The fair value of BDE’s and GMP’s assembled workforce and buyer-specific synergies has been included in goodwill.~~Other Intangible Assets

~~Definite lived~~Other intangible assets, net

Intangible assets such as certain customer relationships, core technologies and product technologies are amortizable over their estimated useful lives. Preliminary fair value estimates for amortizable intangible assets acquired, primarily consisting of customer relationships, core technologies and product technologies are below. Intangible assets, net of amortization as of ~~September 30, 2010~~March 31, 2011 and December 31, ~~2009 and for the Predecessor as of June 30, 2009~~2010, were as follows:

	March 31, 2011			December 31, 2010

Intangibles subject to amortization
Customer relationships	$	16,375		$	16,375
Core technologies		1,505			1,505
Product technologies		335			335
		18,215			18,215
Less accumulated amortization		(1,108	)		(776	)
	$	17,107		$	17,439

Intangibles not subject to amortization
Tradenames and trademarks	$	32,650		$	32,650

Future amortization expense for definite-lived intangible assets is as follows as of March 31, 2011:

Remainder 2011	$	998
2012		1,330
2013		1,330
2014		1,312
2015		1,275
Thereafter		10,862
	$	17,107

148

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

~~There were no intangible assets as of December 31, 2009.~~

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in~~(in thousands, except ~~share and~~ per share amounts)

September 30, 2010

Accumulated Weighted Average
Gross Amortization Net Useful Life

Intangibles subject to amortization
  Customer relationships $ 16,376 $ (365 ) $ 16,011 15.1 years
  Core technologies 1,505 (55 ) 1,450 9.3 years
  Product technologies 335 (24 ) 311 4.6 years
Intangibles not subject to amortization
  Tradenames and trademarks 32,650 - 32,650 N/A
Intangibles, net $ 50,866 $ (444 ) $ 50,422 $ 14.4 years

Predecessor Company
June 30, 2009

Accumulated Weighted Average
Gross Amortization Net Useful Life

Intangibles subject to amortization
Product technologies $ 68 $ (36 ) $ 32 14.1 years
Intangibles not subject to amortization
Tradenames and trademarks 897 - 897 N/A
Intangibles, net $ 965 $ (36 ) $ 929 $ 14.1 years

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in thousands, except share and per share amounts)~~

NOTE 6. LONG-TERM DEBT

Long-term debt, net as of ~~September 30, 2010,~~March 31, 2011 and December 31, ~~2009 and for the Predecessor, as of June 30, 2009,~~2010, was as follows:

Predecessor
Company
September 30, 2010 December 31, 2009 June 30, 2009

Revolving credit facility (a) $ 19,163 $ - $ 12,669
5% Senior Subordinated Notes due 2017 (b) 13,382 - -
Revolving line of credit (c ) - - 2,763
Note payable to government agency (d) - - 345
Capital leases (e) 381 - 613
Total 32,926 - 16,390
Less current portion (185 ) (2,992 )
Total long term debt obligations $ 32,741 $ - $ 13,398

	March 31, 2011			December 31, 2010

Revolving credit facility	$	18,269		$	14,735
5% Senior Subordinated Notes due 2017		14,277			14,018
Trademark payable		714			706
Capital leases		269			305
		33,529			29,764
Less current portion		(302	)		(308	)
	$	33,227		$	29,456

~~(a)~~

In connection with the closing of the acquisition of BDE, the Company entered into a loan agreement effective May 28, 2010 among Zions First National Bank, a national banking association (“Lender”) and the Company and its direct and indirect subsidiaries, BDE, Black Diamond Retail, Inc. (“BD-Retail”), and Purchaser, as co-borrowers (the “Borrowers”) (the “Loan Agreement”). Concurrently with the closing of the acquisition of BDE, Gregory Mountain Products, LLC, as the surviving company of the Gregory Merger, entered into an assumption agreement and became an additional Borrower under the Loan Agreement.

Pursuant to the terms of the Loan Agreement, the Lender has made available to the Borrowers a thirty-five million dollar ($35,000) unsecured revolving credit facility (the “Loan”), of which $25,000 was made available at the time of the closing of the acquisition of BDE and an additional $10,000 was made available to the Company upon the closing of the acquisition of GMP. The Loan matures on July 2, 2013. The Loan may be prepaid or terminated at the Company's option at anytime without penalty. No amortization is required. Any outstanding principal balance together with any accrued but unpaid interest or fees will be due in full at maturity. The Loan bears interest at the 90-day London Interbank Offered Rate (“LIBOR”) plus an applicable margin as determined by the ratio of Senior Net Debt (as calculated in the Loan Agreement) to Trailing Twelve Month EBITDA (as calculated in the Loan Agreement) as follows: (i) 90-day LIBOR Rate plus 3.5% per annum at all times that Senior Net Debt to Trailing Twelve Month EBITDA ratio is greater than or equal to 2.5; (ii) 90-day LIBOR Rate plus 2.75% per annum at all times that Senior Net Debt to Trailing Twelve Month EBITDA ratio is less than 2.5. The Loan requires the payment of an unused commitment fee of (i) 0.6% per annum at all times that the ratio of Senior Net Debt to Trailing Twelve Month EBITDA is greater than or equal to 2.5, and (ii) 0.45% per annum at all times that the ratio of Senior Net Debt to Trailing Twelve Month EBITDA is less than 2.5.

~~The Loan Agreement contains~~long-term debt agreements contain certain restrictive debt covenants that require the Company and its subsidiaries to maintain ~~an EBITDA~~earnings before interest, taxes, depreciation, and amortization (“EBITDA”) based minimum Trailing Twelve Month EBITDA, a minimum tangible net worth, and a positive amount of asset ~~coverage, all as calculated in the Loan Agreement. In addition, the Loan Agreement contains covenants restricting~~coverage. At March 31, 2011, the Company ~~and its subsidiaries from pledging or encumbering their assets,~~was in compliance with certain exceptions, and from engaging in acquisitions other than acquisitions permitted by the Loan Agreement. The Loan Agreement contains customary events of default (with grace periods where customary), including, among other things, failure to pay any principal or interest when due; any materially false or misleading representation, warranty, or financial statement; failure to comply with or to perform any provision of the Loan Agreement; and default on any debt or agreement in excess of certain amounts.all associated covenants.

~~(b)~~

In connection with the Gregory Merger, $22,056 in subordinated notes was issued. The notes have a seven year term, 5% stated interest rate payable quarterly, and are prepayable at any time. Given the below market interest rate for comparably secured notes and the relative illiquidity of the notes, we have discounted it to $13,127 at date of acquisition.

~~(c)~~

~~Unsecured revolving line of credit with a bank with a maximum availability of $3,685, interest at 2.0%. This revolving line of credit was paid off on May 28, 2010.~~

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in thousands, except share and per share amounts)~~

~~(d)~~

Note payable to a government agency which bears interest at 6.345%, requires monthly installments of $5,409, and secured by real property and certain equipment. This note was guaranteed by an executive officer and was paid in full in December 2009.

~~(e)~~

Various capital leases payable to banks: interest rates ranging from 4.63% to 7.75%; monthly installments ranging from $1 to $5; ending between October 2010 and April 2014; secured by certain equipment.

The aggregate maturities of long-term debt and revolving lines of credit for the years subsequent to September 30, 2010, excluding the debt discount of $8,674 associated with the 5% Senior Subordinated Notes due 2017, are as follows:

Maturities of long term debt are as follows:

Remainder of 2010 $ -
2011 -
2012 -
2013 19,163
2014 -
Thereafter 13,382
$ 32,545

Property held under capital leases as of September 30, 2010, December 31, 2009 and for the Predecessor Company as of June 30, 2009 was approximately $590, $0, and $848, respectively, and accumulated amortization was approximately $27, $0 and $192, respectively.

~~Capital lease future minimum lease payments and the present value of net minimum lease payments for the years subsequent to September 30, 2010, are as follows:~~

Remainder of 2010 $ 82
2011 174
2012 92
2013 47
2014 16
Thereafter -
Total Future minimum lease payments 411
Less amount representing interest (30 )
Present value of net minimum lease payments 381
Less current portion (185 )
Long-term capial lease obligations $ 196

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in thousands, except share and per share amounts)~~

NOTE 7. OTHER LONG-TERM LIABILITIES

Other long-term liabilities were $810 and $785 as of ~~September 30, 2010,~~March 31, 2011 and December 31, ~~2009 and~~2010, respectively. The balance relates to a pension liability of the benefit plan for the ~~Predecessor,~~Company’s European employees that, under U.S. GAAP, is considered to be a defined benefit plan. The Company also has an insurance policy whereby any underfunded amounts related to the pension liability are recoverable from the insurance company. The Company has recorded a receivable for these amounts under other long-term assets for the underfunded amount as of ~~June 30, 2009, were as follows:~~

Predecessor
Company

September 30,
2010

December 31,
2009

June 30,
2009

Trademark payable $ 697 $ - $ 797
GMP deferred compensation 385 - -
BDAG pension liability 409 - -
Total 1,491 - 797
Less current portion (150 ) - -
Total Other Long-Term Liabilities $ 1,341 $ - $ 797
March 31, 2011 and December 31, 2010, respectively.

In June 2009, the Company entered into a contract to purchase the exclusive rights to the Black Diamond trademark for clothing. The face amount of the non-interest bearing note was $1,000. The unamortized discount, based upon an imputed interest rate of 5%, was $103 at inception.

~~Future payments under this agreement (including imputed interest) for the years subsequent to September 30, 2010 are approximately:~~

Remainder of 2010 $ -
2011 150
2012 600
$ 750

189

~~CLARUS CORPORATION~~

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

~~(UNAUDITED)~~

~~(in thousands, except share and per share amounts)~~

NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS

~~Derivative Contracts not designated as hedged instruments~~

The Company’s primary exchange rate risk management objective is to mitigate the uncertainty of anticipated cash flows attributable to changes in exchange rates. The Company ~~held~~primarily focuses on mitigating changes in cash flows resulting from sales denominated in currencies other than the ~~following contracts not~~U.S. dollar. The Company manages this risk primarily by using currency forward and option contracts. If the anticipated transactions are deemed probable, the resulting relationships are formally designated as ~~hedged instruments as of September 30, 2010 and for the Predecessor Company as of June 30, 2009. There were no derivative contracts not designated as hedged instruments as of December 31, 2009.~~

September 30, 2010
Notional Latest
Amount Maturity

Foreign exchange contracts - Norwegian Kroners $ 2,348 November-10
Foreign exchange contracts - Euros 2,634 November-10
Foreign exchange contracts - British Pounds 282 November-10
Foreign exchange contracts - Swiss Francs 3,750 November-10
Foreign exchange contracts - Canadian Dollars 1,578 November-10

Predecessor Company
June 30, 2009
Notional Latest
Amount Maturity

Foreign exchange contracts - Euros $ 2,500 October-09
Foreign exchange contracts - Swiss Francs 750 November-09
Non-deliverable contracts - Chinese Yuans 25,300 February-10

~~Forward interest rate swap not designated as hedged instrument~~

During period ended June 30, 2009, the Predecessor Company held a forward interest rate swap, in an effort to manage interest rate risk on a certain debt instrument with a variable interest rate. In September 2005, the Predecessor Company entered into a swap agreement with a notional amount of $4,000, a maturity date of October 2010, and a fixed rate of 4.54%. The fair value as of June 30, 2009 was approximately $201. This swap does not qualify for hedge accounting treatment; therefore, the change in the agreement’s fair value has been expensed on the condensed consolidated statements of operations.

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in thousands, except share and per share amounts)~~

~~Derivative Contracts designated as hedged instruments~~cash flow hedges.

The Company held the following contracts designated as hedged instruments as of ~~September 30, 2010~~March 31, 2011 and ~~for the Predecessor Company as of June 30, 2009. There were no derivative contacts designated as hedged instruments at~~ December 31, ~~2009.~~2010:

	March 31, 2011
	Notional		Latest
	Amount		Maturity

Foreign exchange contracts - British Pounds		180	May-11
Foreign exchange contracts - Canadian Dollars		1,600	June-11
Foreign exchange contracts - Euros		7,712	December-11
Foreign exchange contracts - Swiss Francs		12,835	February-12

	December 31, 2010
	Notional		Latest
	Amount		Maturity

Foreign exchange contracts - Norwegian Kroners		465	January-11
Foreign exchange contracts - British Pounds		415	May-11
Foreign exchange contracts - Canadian Dollars		3,965	June-11
Foreign exchange contracts - Euros		10,072	December-11
Foreign exchange contracts - Swiss Francs		15,835	February-12

The Company accounts for these contracts as cash flow hedges and tests effectiveness by determining whether changes in the cash flow of the derivative offset, within a range, changes in the cash flow of the hedged item. For contracts that qualify as effective hedge instruments, the effective portion of gains and losses resulting from changes in fair value of the instruments are included in accumulated other comprehensive income and reclassified to sales in the period the underlying hedge item is recognized in earnings. ~~No amounts~~$(210) and $0 were reclassified to sales during the three months ended March 31, 2011 and ~~nine-month periods ended September 30, 2010.~~2010, respectively.

As of December 31, 2010, the Company reported an accumulated derivative instrument loss of $(237). During the three ~~and nine-month period~~months ended ~~September 30, 2010,~~March 31, 2011, the Company reported an adjustment to accumulated other comprehensive income of approximately $205, as a result of the change in fair value of these contracts. During the three and nine-month period ended September 30, 2009, the Predecessor reported an adjustment to accumulated other comprehensive income of approximately $(461)$(153), as a result of the change in fair value of these ~~contracts.~~contracts, resulting in an accumulated derivative instrument loss of $(390) reported as of March 31, 2011.

~~Certain of these contracts did not qualify as effective hedge instruments~~The following table presents the balance sheet classification and ~~as such the changes in the~~ fair value of ~~the~~derivative instruments ~~were recognized in other income in the statements~~as of ~~operations for the five-month period ended May 28, 2010 for the Predecessor.~~March 31, 2011 and December 31, 2010:

	Classification	March 31, 2011		December 31, 2010

Derivative instruments in asset positions:
Forward exchange contracts	Prepaid and other current assets	$	509	$	1,346

Derivative instruments in liability positions:
Forward exchange contracts	Accounts payable and accrued liabilities	$	1,220	$	1,387

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 9. FAIR VALUE OF MEASUREMENTS

We measure certain financial assets and liabilities at fair value on a recurring ~~basis based on~~basis. Fair value is defined as an exit price, representing the ~~quality of inputs used~~amount that would be received to ~~measure fair value. The three~~sell an asset or paid to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy ~~levels are defined~~which prioritizes the inputs used in measuring fair value as follows:

Level 1-

inputs to the valuation methodology are quoted market prices for identical assets or liabilities in active markets.

Level 2-

inputs to the valuation methodology include quoted prices in markets that are not active or model inputs that are

observable either directly or indirectly for substantially the full term of the asset or liability.

~~Level 3- inputs to the valuation methodology are based on prices or valuation techniques that are unobservable.~~

Level 3-

inputs to the valuation methodology are based on prices or valuation techniques that are unobservable.

~~The Company applies~~Assets and liabilities measured at fair value ~~techniques~~ on a ~~non-recurring~~recurring basis ~~associated with valuing assets~~at March 31, 2011 and ~~liabilities acquired in connection with acquisitions. These fair value amounts~~December 31, 2010 are ~~derived from significant unobservable inputs. The Company uses a combination of discounted cash flow models, appraisals, and management’s estimates~~ as ~~inputs in deriving the fair value estimates.~~follows:

	March 31, 2011
	Level 1		Level 2		Level 3		Total

Assets
Forward exchange contracts	$	-	$	509	$	-	$	509
	$	-	$	509	$	-	$	509

Liabilities
Forward exchange contracts	$	-	$	1,220	$	-	$	1,220
	$	-	$	1,220	$	-	$	1,220

	December 31, 2010
	Level 1		Level 2		Level 3		Total

Assets
Forward exchange contracts	$	-	$	1,346	$	-	$	1,346
	$	-	$	1,346	$	-	$	1,346

Liabilities
Forward exchange contracts	$	-	$	1,387	$	-	$	1,387
	$	-	$	1,387	$	-	$	1,387

2011

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The following tables present the financial and non-financial assets and liabilities that are recorded at fair value on a recurring, and non-recurring, basis as of September 30 2010, December 31, 2009, and for the Predecessor Company as of June 30, 2009 in the consolidated balance sheets by fair value hierarchy level, as described above.

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in~~(in thousands, except ~~share and~~ per share amounts)

September 30, 2010
Level 1 Level 2 Level 3 Total

Financial Assets:
  Forward exchange contracts $ - $ 1,098 $ - $ 1,098
Total financial assets $ - $ 1,098 $ - $ 1,098

Financial Liabilities
  Forward exchange contracts $ - $ 803 $ - $ 803
Total financial liabilities $ - $ 803 $ - $ 803

December 31, 2009
Level 1 Level 2 Level 3 Total

Assets:
  Cash equivalents $ 58,363 $ - $ - $ 58,363
  Marketable securities 24,059 - - 24,059
Total assets $ 82,422 $ - $ - $ 82,422

Predecessor Company
June 30, 2009

Level 1 Level 2 Level 3 Total

Assets:
  Cash equivalents $ 395 $ - $ - $ 395
  Forward exchange contracts - 57 - 57
Total assets $ 395 $ 57 $ - $ 452

Liabilities
  Forward interest rate swap $ - $ - $ 201 $ 201
  Forward exchange contracts - 593 - 593
Total liabilities $ - $ 593 $ 201 $ 794

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in thousands, except share and per share amounts)~~

NOTE 10. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share was computed by dividing earnings (loss) ~~on common stock~~ by the weighted average number of common shares outstanding during each period. Diluted earnings ~~per common share~~(loss) were computed by dividing earnings ~~on common stock~~(loss) by the total of the weighted average number of shares of common stock outstanding during each period, plus the effect of outstanding stock options and unvested restricted stock grants. Potentially dilutive securities are excluded from the computation of diluted earnings (loss) per share ~~attributable to common shareholders~~ if their effect is anti-dilutive.

The following table is a reconciliation of basic and diluted shares outstanding used in the calculation of earnings (loss) per share:

THREE MONTHS ENDED NINE MONTHS ENDED

September 30, 2010 September 30, 2009 September 30, 2010 September 30, 2009

BASIC EARNINGS (LOSS) PER SHARE CALCULATION:
Net income (loss) $ (3,294 ) $ (850 ) $ 51,644 $ (2,372 )

Weighted average common shares - basic 21,731 16,867 19,092 16,867

Basic net income (loss) per share $ (0.15 ) $ (0.05 ) $ 2.71 $ (0.14 )

DILUTED EARNINGS (LOSS) PER SHARE CALCULATION:
Net income (loss) $ (3,294 ) $ (850 ) $ 51,644 $ (2,372 )

Weighted average common shares - basic 21,731 16,867 19,092 16,867
Effect of dilutive stock options - - 36 -
Effect of dilutive restricted stock and restricted stock units - - 211 -
Weighted average common shares - diluted 21,731 16,867 19,339 16,867

Diluted net income (loss) per share $ (0.15 ) $ (0.05 ) $ 2.67 $ (0.14 )

	THREE MONTHS ENDED
	March 31, 2011		March 31, 2010

Weighted average shares outstanding - basic		21,831		16,867
Effect of dilutive stock options		120		-
Weighted average shares outstanding - diluted		21,951		16,867

Earnings (loss) per share:
Basic	$	0.05	$	(0.14	)
Diluted		0.05		(0.14	)

For the ~~nine-months~~three months ended ~~September 30, 2010,~~March 31, 2011, diluted earnings per share attributable to common stockholders included the dilutive effect of options to purchase 493 shares of the Company’s common stock and 592 shares of restricted stock and restricted stock units as these securities were potentially dilutive in computing earnings per share. Diluted earnings per share for the nine months ended September 30, 2010 also excludes the anti-dilutive effect of options to purchase ~~1,563~~963 shares of ~~the Company’s~~ common stock whose exercise prices were higher than the average market price of the Company’s common stock for the ~~nine-month period~~three months ended ~~September 30, 2010.~~March 31, 2011. Diluted earnings per share also excludes 750 shares of unvested restricted stock as their required performance or market conditions were not met.

For the three months ended ~~September 30,~~March 31, 2010, ~~and the three and nine-month periods ended September 30, 2009,~~ basic net loss per share ~~attributable to common stockholders~~ was the same as diluted net loss per share ~~attributable to common stockholders~~ because all potentially dilutive securities were anti-dilutive ~~in computing diluted~~due to the net loss ~~per share~~ for the period. Options to acquire 838 shares of common stock during the three months ended September 30, 2010 and 1,969 shares of common stock and 500 shares of restricted stock during the three and nine-month periods ended June 30, 2009 were outstanding and anti-dilutive because the Company incurred losses during the periods.

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in thousands, except share and per share amounts)~~

NOTE 11. STOCK-BASED COMPENSATION PLAN ~~(SHARE AMOUNTS NOT IN THOUSANDS)~~

~~The Company adopted~~Under the Company’s 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~~allows for grants of incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, and restricted units. As of September 30, 2010, the number of shares authorized and reserved for issuance under the 2005 Plan is 4.5 million, subject to an automatic annual increase equal to 4% of the total number of shares of the Company’s outstanding common stock. 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~~500 shares. The 2005 Plan will continue in effect until June 2015 unless terminated sooner. ~~As of September 30, 2010, 1,738,750 stock options have been awarded under the 2005 Plan, of which 490,000 are unvested and 727,500 are vested and eligible for exercise.~~

~~On May 28, 2010,~~During the three months ended March 31, 2011, the Company issued ~~572,500~~58 stock options, under the Company’s 2005 Plan, to ~~directors and~~ employees of the Company. Of the ~~572,500~~58 options issued, 38 will vest in three installments as follows: 15 shares shall vest on ~~May 28, 2010, 100,000 were fully vested on the date of grant~~December 31, 2012 and the remaining ~~472,500~~shares shall vest equally on December 31, 2013 and December 31, 2014. The remaining 20 options granted will vest in three installments as follows: ~~189,000~~8 shares shall vest on December 31, ~~2012~~2013 and ~~141,750~~the remaining shares shall vest equally on ~~each of~~ December 31, ~~2013~~2014 and December 31, ~~2014.~~ 2015.

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 Granted During Nine Months Ended September 30, 2010

Number of Options 60,000 40,000 490,000
Option Vesting Period Immediate Immediate 4.5 Years
Grant Price $6.85 $6.85 $6.25 - $6.85
Dividend Yield 0.00% 0.00% 0.00%
Expected Volatility (a) 54.60% 71.70% 54.1% - 55.1%
Risk-free Interest Rate 2.10% 0.34% 2.09% - 2.75%
Expected Life (Years) 5 1.29 6.45
Weighted Average Fair Value $3.33 $2.18 $3.39 - $3.82
Aggregate Fair Value $200 $87 $1,862

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Options Granted During Three Months Ended March 31, 2011

Number of Options		58
Option Vesting Period		4 - 5 Years
Grant Price		$6.22 - $7.01
Dividend Yield		0.00%
Expected Volatility (a)		55.8% - 56.3%
Risk-free Interest Rate		2.71% - 2.92%
Expected Life (Years)		6.45 - 6.95
Weighted Average Fair Value		$3.65 - $3.95

(a)

Since ~~BDE’s~~the Company’s historical volatility was not representative of the business going in the future, therefore, ~~BDE’s~~the Company’s historical volatility was based on the historical volatility of a peer group of companies within similar industries and similar size as ~~BDE.~~the Company.

Using these assumptions, the fair value of the stock options granted ~~on May 28, 2010~~during the three months ended March 31, 2011 was approximately ~~$2,092,~~$216, which will be amortized over the vesting period of the options.

Also on May 28, 2010, the Company accelerated the vesting of 180,000 unvested options originally issued December 13, 2007 to terminated employees. As part of the severance agreements, the expiration period of these options was extended until May 28, 2013. The total increase to non-cash equity compensation related to these options was $199, which was recorded in general and administrative expenses on the date of acceleration.

The Company’s Compensation Committee and Board of Directors approved, effective as of May 28, 2010, the extension of the expiration date from December 20, 2012 to May 31, 2020 of an aggregate of 800,000 vested non-plan stock options previously granted to Mr. Kanders pursuant to a stock option agreement, dated December 23, 2002, between the Company and Mr. Kanders. The total increase to non-cash equity compensation related to these options was $1,124, which was recorded in general and administrative expenses on the effective date of the extension of the expiration date.

The Company’s Compensation Committee and Board of Directors approved effective as of May 28, 2010, the acceleration of vesting of 500,000 shares of restricted common stock that had been previously granted to Mr. Kanders, pursuant to a restricted stock agreement dated April 11, 2003, between the Company and Mr. Kanders. ~~The total increase to non-cash equity compensation related to this award was $871, which was recorded in general and administrative expenses on the date of acceleration.~~

On May 28, 2010, the Company entered into a restricted stock award agreement (the “RSA Agreement”) with Mr. Warren B. Kanders. Under the RSA Agreement, on January 17, 2011, the Company granted to Mr. Kanders ~~was granted~~ a seven-year restricted stock award of ~~500,000 restricted~~250 shares ~~under~~of common stock pursuant to the Company’s 2005 Plan, of which ~~(i) 250,000 restricted shares~~award will vest ~~and become nonforfeitable~~ on the date the ~~closing price~~Fair Market Value (as defined in the 2005 Plan) of the Company’s common stock shall have equaled or exceeded ~~$10.00~~$14.00 per share for twenty consecutive trading days; and (ii) 250,000 restricted shares shall vest and become nonforfeitable on the date the closing price of the Company’s common stock shall have equaled or exceeded $12.00 per share for twenty20 consecutive trading days. For computing the fair value of the ~~500,000~~250 seven-year restricted stock-based awards, the fair value of each restricted stock award grant has been estimated as of the date of grant using the Monte-Carlo pricing model with the following assumptions:

Restricted Stock Granted on January 17, 2011

~~CLARUS CORPORATION~~Number issued		250
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~ Vesting Period		$14.00 Stock Price target
~~(UNAUDITED)~~Grant Price		$7.34
~~(in thousands, except share and per share amounts)~~Dividend Yield		0.00%
Expected Volatility (a)		58.00%
Risk-free Interest Rate		2.64%
Expected Life (Years)		1.90
Weighted Average Fair Value		$6.27

Restricted Stock Granted on May 28, 2010

Number issued 250,000 250,000
Vesting Period $10.00 Stock Price target $12.00 Stock Price target
Grant Price $6.85 $6.85
Dividend Yield 0.00% 0.00%
Expected Volatility (a) 56.60% 56.60%
Risk-free Interest Rate 2.88% 2.88%
Expected Life (Years) 1.12 1.62
Weighted Average Fair Value $6.13 $5.83
Aggregate Fair Value $1,533 $1,457

(a)

Since ~~BDE’s~~the Company’s historical volatility was not representative of the ongoing future business, accordingly, ~~BDE’s~~the Company’s historical volatility was based on the historical volatility of a peer group of companies within similar industries and similar size as ~~BDE.~~the Company.

Using these assumptions, the fair value of the restricted stock ~~awards~~award granted on ~~May 28, 2010~~January 17, 2011 was approximately ~~$2,990,~~$1,567, which will be amortized over the expected life of the ~~awards.~~award.

The Company has determined that on January 2, 2011, the Company shall grant to Mr. Kanders a seven-year restricted stock award of 250,000 shares of common stock pursuant to the Company’s 2005 Plan, which award shall vest on the date the Fair Market Value (as defined in the 2005 Plan) of the Company’s common stock shall have equaled or exceeded the lesser of three times the Fair Market Value of the Company’s common stock on January 2, 2011 or $14.00 per share, in each case for 20 consecutive trading days, provided that Mr. Kanders is employee and/or a director of the Company or any Subsidiary (as defined in the 2005 Plan) on January 2, 2011.

In connection with the acquisition of GMP, the Company issued 92,401 restricted stock units as replacement awards on May 28, 2010. ASC 805 requires that the fair value of replacement awards and cash payments made to settle vested awards attributed to precombination service be included in the consideration transferred. The fair value of GMP share awards, as applicable, has been attributed to precombination service and included in the consideration transferred in the amounts of $593, consisting of $185 in cash, $316 in notes payable, and $92 in stock. The amount attributable to post combination service expensed on the date of acquisition is $682 related to the 92,401 restricted stock units.

~~The Company recorded~~ total non-cash stock compensation expense related to stock options and restricted stock recorded by the Company during the three months ended March 31, 2011 and 2010, respectively, is as ~~follows:~~
follows.

THREE MONTHS ENDED
PREDECESSOR COMPANY
(NOTE 1)

THREE MONTHS
ENDED
September 30, 2010 September 30, 2009 September 30, 2009

Restricted stock/deferred compensation $ 572 $ 67 $ (4 )
Stock options 151 (38 ) 24

Total $ 723 $ 29 $ 20

2413

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

~~The following table summarizes information about stock options outstanding as of September 30, 2010:~~

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in~~(in thousands, except ~~share and~~ per share amounts)

NINE MONTHS ENDED PREDECESSOR COMPANY (NOTE 1)
FIVE MONTHS NINE MONTHS
ENDED ENDED
September 30, 2010 September 30, 2009 May 28, 2010 September 30, 2009

Restricted stock/deferred compensation $ 1,721 $ 201 $ 15 $ 4
Restricted stock units 683 - - -
Stock options 1,874 170 360 40
Stock subscription expense (see Note 15) 145 - - -

Total $ 4,423 $ 371 $ 375 $ 44

	THREE MONTHS ENDED
	March 31, 2011		March 31, 2010

Restricted stock	$	766	$	67
Stock options		133		51
Total	$	899	$	118

Options Weighted Average Exercise Price Restricted Stock Restricted Stock Units

Outstanding at December 31, 2009 1,968,750 $ 7.01 500,000 -
Granted 590,000 6.83 500,000 92,401
Exercised (181,250 ) 5.55 (500,000 ) -
Forfeited -
Outstanding at September 30, 2010 2,377,500 $ 7.08 500,000 92,401

Options exercisable at September 30, 2010 1,887,500 $ 7.15

Exercise Price Range Outstanding Exercisable Remaining Life In Years Weighted Average Exercise Price
$3.85 - $5.33 162,500 162,500 3.2 $ 4.39
$5.34 - $10.00 2,215,000 1,725,000 4.0 $ 7.40
2,377,500 1,887,500 3.6 $ 7.15

The fair value of unvested shares is determined based on the market price of our shares on the grant date. As of ~~September 30, 2010,~~March 31, 2011, there were ~~490,000~~560 unvested stock options and unrecognized compensation cost of ~~$1,701~~approximately $1,775 related to unvested stock ~~options.~~options, as well as 750 unvested restricted stock awards and unrecognized compensation cost of approximately $2,436 related to unvested restricted stock awards.

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in thousands, except share and per share amounts)~~

NOTE 12. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) primarily consists of net income (loss), ~~unrealized gains and losses from available-for-sale marketable securities,~~foreign currency translation adjustments, and changes in our forward foreign exchange contracts. The components of comprehensive income (loss) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2011 and 2010 ~~and 2009~~ were as follows:

THREE MONTHS ENDED
PREDECESSOR COMPANY
(NOTE 1)

THREE MONTHS
ENDED
September 30, 2010 September 30, 2009 September 30, 2009

Net income/(loss) $ (3,294 ) $ (850 ) $ 2,761
Unrealized gain/(loss) on marketable securities - 4 -
Decrease in hedge foreign exchange contact (205 ) - -

Total $ (3,499 ) $ (846 ) $ 2,761

	THREE MONTHS ENDED
	March 31, 2011			March 31, 2010

Net income (loss)	$	1,168		$	(2,355	)
Unrealized loss on marketable securities, net		-			(4	)
Foreign currency translation adjustment, net		372			-
Unrealized loss on hedging activities, net		(153	)		-
Comprehensive income (loss)	$	1,387		$	(2,359	)

NINE MONTHS ENDED PREDECESSOR COMPANY (NOTE 1)
FIVE MONTHS NINE MONTHS
ENDED ENDED
September 30, 2010 September 30, 2009 May 28, 2010 September 30, 2009

Net income/(loss) $ 51,644 $ (2,372 ) $ 2,315 $ 2,777
Unrealized gain/(loss) on marketable securities (6 ) (395 ) - -
Decrease in hedge foreign exchange contact (205 ) - - (461 )

Total $ 51,433 $ (2,767 ) $ 2,315 $ 2,316

NOTE 13. COMMITMENTS AND CONTINGENCIES

The Company is involved in various legal disputes and other legal proceedings that arise from time to time in the ordinary course of business. Based on currently available information, the Company does not believe that the disposition of any of the legal disputes the Company or its subsidiaries is currently involved in will have a material adverse effect upon the Company’s consolidated financial condition, results of operations or cash flows. It is possible that, as additional information becomes available, the impact on the Company of an adverse determination could have a different effect.

~~Operating~~The Company leases office space, warehouse and distribution space under noncancelable operating leases. As leases expire, it can be expected that, in the normal course of business, certain leases will be renewed or replaced. Certain lease agreements include escalating rents over the lease terms. The Company expenses rent on a straight-line basis over the lease term which commences on the date the Company has the right to control the property. The cumulative expense recognized on a straight-line basis in excess of the cumulative payments is included in accounts payable and accrued liabilities and other long-term liabilities in the accompanying consolidated balance sheets.

Total rent expense of the Company for the ~~years subsequent to September 30,~~three months ended March 31, 2011 and 2010 ~~are as follows:~~was $438 and $100, respectively.

Remainder of 2010 $ 326
2011 1,100
2012 766
2013 506
2014 39
Thereafter 66
Total operating lease payments $ 2,803

2614

BLACK DIAMOND, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

As of December 31, 2010, the Company’s gross deferred tax asset was $91,031. The Company has recorded a valuation allowance, resulting in a net deferred tax asset of $69,527, excluding deferred tax liabilities.

NOTE 14. INCOME TAXES

As of December 31, 2010, the Company had net operating loss, research and experimentation credit and alternative minimum tax credit carryforwards for U.S. federal income tax purposes of $226,837, $1,501 and $56, respectively. 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, as amended (the “Code”), due to a prior ownership change of greater than 50%. The Company believes its U.S. Federal net operating loss (“NOL”) will substantially offset its future U.S. Federal income taxes, excluding the amount subject to U.S. Federal Alternative Minimum Tax (“AMT”). AMT is calculated as 20% of AMT income. For purposes of AMT, a maximum of 90% of income is offset by available NOLs. The majority of the Company’s pre-tax income is currently earned and expected to be earned in the U.S., or taxed in the U.S. as Subpart F. income and will be offset with the NOL.

Of the $225,786 of net operating losses available to offset taxable income, $214,160 does not expire until 2020 or later, subject to compliance with Section 382 of the Code as indicated by the following schedule:

Net Operating Carryforward Expiration Dates
December 31, 2010

Expiration Dates December 31,	Net Operating Loss Amount
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		4,074
2030		2,302
Total		226,837
Section 382 Limitation		(1,051	)
After Limitations	$	225,786

~~CLARUS CORPORATION~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED~~

~~(UNAUDITED)~~

~~(in thousands, except share and per share amounts)~~

~~NOTE 14. NEW ACCOUNTING PRONOUNCEMENTS~~

~~There were no new accounting pronouncements for the three months ended September 30, 2010 that materially impacted the financial results or disclosures of the Company.~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED