What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-08 compared with 2020-03-09 · 637 added, 1083 removed, 451 unchanged (79% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CLARUS CORPORATION AND SUBSIDIARIES

1 unchanged sentence

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting

Consolidated Balance Sheets - December 31, 2020 and 2019

3 unchanged sentences

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

the Stockholders and the Board of Directors of Clarus Corporation:

on the Financial Statements

We have audited the accompanying consolidated

balance sheets of Clarus Corporation and subsidiaries (the "Company") as of December 31, 2019 and 2018, the related consolidated

statements of comprehensive income, stockholders' equity, and cash flows, for each of the two years in the period ended December

31, 2019, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and

the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity

with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with

the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial

reporting as of December 31, 2019, based on criteria established in Internal Control — Integrated Framework (2013)

issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 9, 2020, expressed an

unqualified opinion on the Company's internal control over financial reporting.

These financial statements are the responsibility

of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the

We conducted our audits in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures

to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures

in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made

by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a

reasonable basis for our opinion.

Deloitte & Touche LLP

Lake City, Utah

have served as the Company's auditor since 2018.

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

To the Stockholders and Board of Directors of Clarus

Opinion on the Consolidated Financial

We have audited the accompanying consolidated

statements of comprehensive income, stockholders’ equity, and cash flows of Clarus Corporation and subsidiaries (the Company)

for the year ended December 31, 2017, and the related notes (collectively, the consolidated financial statements).

opinion, the consolidated financial statements present fairly, in all material respects, the results of operations of the Company

and its cash flows for the year ended December 31, 2017, in conformity with U.S.

generally accepted accounting principles.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Clarus Corporation:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Clarus Corporation and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of comprehensive income, stockholders'

equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 8, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These consolidated financial statements

are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial

statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws

and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing

procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud,

and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial

We believe that our audit provides a reasonable basis for our opinion.

We served as the Company’s auditor

from 2000 to 2018.

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Acquisitions — Refer to Note 2 to the financial statements

Critical Audit Matter Description

On October 2, 2020, the Company completed the acquisition of certain assets and liabilities constituting the Barnes business (“Barnes”) for $30.5 million.

The Company accounted for this acquisition as a business combination.

Accordingly, the purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values, including trademarks of $5.6 million and customer relationships of $5.7 million.

The Company utilized a relief-from-royalty valuation methodology for trademarks and a multi-period excess earnings valuation methodology for customer relationships.

The determination of the fair value of these intangible assets required management to make significant estimates and assumptions related to forecasted sales growth rates, cash flows, market-based royalty rates, and estimated discount rates.

We identified the valuation of the trademarks and customer relationships acquired as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of these assets.

This required a high degree of auditor judgment and an increased extent of effort, including the involvement of our fair value specialists, when performing audit procedures to evaluate the reasonableness of forecasted sales growth rates, cash flows, market-based royalty rates, and estimated discount rates.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasted future sales growth rates, cash flows, market-based royalty rates, and estimated discount rates for the acquired Barnes trademarks and customer relationships included the following, among others:

 We tested the effectiveness of internal controls over the valuation of the intangible assets, including those over forecasted sales growth rates and cash flows, and the selection of market-based royalty rates and estimated discount rates.

 We assessed the reasonableness of management’s forecasted sales growth rates and cash flows by comparing the forecasts to historical results of Barnes, industry publications, and external data.

 With the assistance of our fair value specialists, we evaluated the reasonableness of the relief-from-royalty and multi-period excess earnings valuation methodologies, and the market-based royalty rates and estimated discount rates by:

– Evaluating whether the valuation methodologies are appropriate in the circumstances and in accordance with generally accepted valuation principles.

– Comparing the source information underlying the determination of the estimated discount rates to external data and testing the mathematical accuracy of the calculation.

– Developing a range of independent estimates for the discount rates and comparing those to the estimated discount rates selected by management.

– Comparing the selected market-based royalty rate to comparable licensing agreements.

 We evaluated whether the forecasted sales growth rates and cash flows were consistent with evidence obtained in other areas of the audit, including a retrospective review of actual post-acquisition financial results.

 We compared the estimated weighted average return on assets, internal rate of return, and the discount rates used in the valuation models and evaluated whether they were consistent with each other.

Income Taxes — Refer to Notes 1 and 15 to the financial statements

Critical Audit Matter Description

The Company accounts for income taxes using the asset and liability method.

The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards.

The majority of the Company’s deferred tax assets consist of net operating loss carryforwards (“NOLs”) for U.S.

Federal tax purposes, totaling $120.3 million as of December 31, 2020.

Valuation allowances are used to reduce deferred tax assets to amounts considered more-likely-than-not to be realized.

The Company believes its U.S.

Federal NOLs will substantially offset its future U.S.

Federal income taxes until their expiration, which begins in 2022.

The Company has provided a valuation allowance against its deferred tax assets as of December 31, 2020, primarily because the Company believes that a portion of U.S.

Federal NOLs will expire before their utilization.

The Company’s valuation allowance recorded on deferred tax assets as of December 31, 2020 was $22.3 million.

We identified the Company’s determination of the need for and amount of valuation allowance recorded on U.S.

Federal NOL deferred tax assets as a critical audit matter because of the significant estimates and judgments made by the Company to assess the realizability of its U.S.

Federal NOL deferred tax assets prior to expiration.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our income tax specialists, to evaluate the reasonableness of management’s estimates of future taxable income and the determination of whether it is more likely than not that the U.S.

Federal NOL deferred tax assets will be realized.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the valuation allowance for income taxes and the determination of whether it is more likely than not that the U.S.

Federal NOL deferred tax assets will be realized prior to expiration included the following, among others:

 We tested the effectiveness of controls over the valuation allowance for income taxes, including management’s controls over the estimates of future taxable income and the determination of whether it is more likely than not that the U.S.

Federal NOL deferred tax assets will be realized.

 With the assistance of income tax specialists, we evaluated the reasonableness of the methods, assumptions, and judgments used by management to determine whether a valuation allowance was necessary.

 We evaluated management’s ability to accurately estimate future taxable income available to realize its U.S.

Federal NOL deferred tax assets by comparing actual results to management’s historical estimates and evaluating whether there have been any changes that would affect management’s ability to accurately estimate future taxable income.

 We evaluated the reasonableness of management’s estimates of future taxable income available to realize U.S.

Federal NOL deferred tax assets by comparing the estimates to historical taxable income as adjusted for nonrecurring items.

 We evaluated whether the estimates of future taxable income were consistent with evidence obtained in other areas of the audit.

/s/ Deloitte & Touche LLP

Salt Lake City, Utah

March 8, 2021

We have served as the Company's auditor since 2018.

CLARUS CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands,

except per share amounts)

(In thousands, except per share amounts)

Current assets

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Other long-term assets

Liabilities and Stockholders' Equity

Liabilities and Stockholders'

Current liabilities

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Total liabilities

Stockholders' Equity

Preferred stock, $.0001 par value;

Stockholders'

Preferred stock, $ 0.0001 par value per share;

shares authorized;

Common stock, $.0001 par value;

Common stock, $ 0.0001 par value per share;

100,000 shares authorized;

3 unchanged sentences

Treasury stock, at cost

Accumulated other comprehensive (loss) income

Total stockholders' equity

Total liabilities and stockholders' equity

Accumulated other comprehensive income (loss)

Total stockholders'

Total liabilities and stockholders'

See accompanying notes to consolidated financial statements.

CLARUS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share amounts)

6 unchanged sentences

Restructuring charge

Merger and integration

Transaction costs

Total operating expenses

Operating income (loss)

Operating income

Other (expense) income

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Total other expense, net

Income (loss) before income tax

Income before income tax

Income tax benefit

Net income (loss)

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment

Unrealized (loss) income on hedging activities

Other comprehensive (loss) income

Unrealized (loss) gain on hedging activities

Other comprehensive income (loss)

Comprehensive income

Net income (loss) per share:

Net income per share:

Weighted average shares outstanding:

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Cash Flows From Operating Activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of property and equipment

Amortization of intangible assets

Accretion of notes payable

Amortization of other intangible assets

Amortization of debt issuance costs

1 unchanged sentence

Noncash lease expense

Loss (gain) from removal of accumulated translation adjustment

Loss from removal of accumulated translation adjustment

Stock-based compensation

4 unchanged sentences

Accounts payable and accrued liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash Flows From Investing Activities:

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Repayments on revolving credit facilities

Repayments of financing and capital leases

Repayments of long-term debt

Proceeds from issuance of long-term debt

Payment of debt issuance costs

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Cash dividends paid

Net cash used in financing activities

Proceeds from the sale of common stock

Common stock issuance costs

Net cash provided by (used in) financing activities

Effect of foreign exchange rates on cash

Change in cash

Cash, beginning of period

Cash, end of period

Cash, beginning of year

Cash, end of year

Supplemental Disclosure of Cash Flow Information:

5 unchanged sentences

Lease liabilities arising from obtaining right of use assets

Stock dividends

See accompanying notes to consolidated financial statements.

CLARUS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS'

(In thousands)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS'

(In thousands, except per share amounts)

Treasury Stock

Comprehensive

Stockholders'

Income (Loss)

Balance, December 31, 2017

Other comprehensive income

Purchase of treasury stock

Stock compensation plans, net

Balance, December 31, 2017

Other comprehensive loss

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Balance, December 31, 2019

Other comprehensive income

Cash dividends ($ 0.05 per share)

Stock dividends ($ 0.05 per share)

Purchase of treasury stock

Stock-based compensation expense

Proceeds from exercise of options

Issuance of common stock, net of issuance costs

Balance, December 31, 2020

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(in thousands, except per share amounts)

NATURE OF OPERATIONS AND SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying audited consolidated financial

statements of Clarus Corporation and subsidiaries (which may be referred to as the “Company,” “Clarus,”

“we,” “our” or “us”) have been prepared in accordance with accounting principles generally

accepted in the United States of America (“U.S.

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying audited consolidated financial statements of Clarus Corporation and subsidiaries (which may be referred to as the “Company,” “Clarus,” “we,” “our” or “us”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

Nature of Business

Headquartered in Salt Lake City, Utah,

Clarus, a company focused on the outdoor and consumer industries, is seeking opportunities to acquire and grow businesses that

can generate attractive shareholder returns.

The Company has net operating tax loss carryforwards which it is seeking to redeploy

to maximize shareholder value.

Clarus’ primary business is as a leading designer, developer, manufacturer and distributor

of outdoor equipment and lifestyle products focused on the climb, ski, mountain, sport and skincare markets.

The Company’s

products are principally sold under the Black Diamond®, Sierra®, PIEPS®

and SKINourishment®

brand names through

outdoor specialty and online retailers, distributors and original equipment manufacturers throughout the U.S.

Headquartered in Salt Lake City, Utah, Clarus, a company focused on the outdoor and consumer industries, is seeking opportunities to acquire and grow businesses that can generate attractive shareholder returns.

The Company has net operating tax loss carryforwards which it is seeking to redeploy to maximize shareholder value.

Clarus’ primary business is as a leading designer, developer, manufacturer and distributor of outdoor equipment and lifestyle products focused on the climb, ski, mountain, sport and skincare markets.

The Company’s products are principally sold under the Black Diamond®, Sierra®, Barnes®, PIEPS® and SKINourishment® brand names through outdoor specialty and online retailers, distributors and original equipment manufacturers throughout the U.S.

and internationally.

Through our Black Diamond, PIEPS, and SKINourishment

brands, we offer a broad range of products including:

high-performance, activity-based apparel (such as shells, insulation, midlayers,

pants and logowear);

rock-climbing footwear and equipment (such as carabiners, protection devices, harnesses, belay devices, helmets,

and ice-climbing gear);

Through our Black Diamond, PIEPS, and SKINourishment brands, we offer a broad range of products including:

high-performance, activity-based apparel (such as shells, insulation, midlayers, pants and logowear);

rock-climbing footwear and equipment (such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear);

technical backpacks and high-end day packs;

3 unchanged sentences

and skincare and other sport-enhancing products.

We also offer advanced skis, ski poles, ski skins, and snow safety products, including

avalanche airbag systems, avalanche transceivers, shovels, and probes.

Through our Sierra brand, we manufacture a wide range of

high-performance bullets and ammunition for both rifles and pistols that are used for precision target shooting, hunting and military

and law enforcement purposes.

Clarus Corporation, incorporated in Delaware

in 1991, acquired Black Diamond Equipment, Ltd.

(“Black Diamond Equipment”) in May 2010 and changed its name to Black

Diamond, Inc.

We also offer advanced skis, ski poles, ski skins, and snow safety products, including avalanche airbag systems, avalanche transceivers, shovels, and probes.

Through our Sierra and Barnes brands, we manufacture a wide range of high-performance bullets and ammunition for both rifles and pistols that are used for precision target shooting, hunting and military and law enforcement purposes.

Clarus Corporation, incorporated in Delaware in 1991, acquired Black Diamond Equipment, Ltd.

(“Black Diamond Equipment”) in May 2010 and changed its name to Black Diamond, Inc.

in January 2011.

In October 2012, we acquired PIEPS Holding GmbH and its subsidiaries (collectively, “PIEPS”).

On August 14, 2017, the Company changed

its name from Black Diamond, Inc.

to Clarus Corporation and its stock ticker symbol from “BDE” to “CLAR”

on the NASDAQ stock exchange.

On August 14, 2017, the Company changed its name from Black Diamond, Inc.

to Clarus Corporation and its stock ticker symbol from “BDE” to “CLAR” on the NASDAQ stock exchange.

On August 21, 2017, the Company acquired Sierra Bullets, L.L.C.

6, 2018, the Company acquired the assets of SKINourishment, Inc.

On November 6, 2018, the Company acquired the assets of SKINourishment, Inc.

(“SKINourishment”).

On May 7, 2018, the Company announced a

“modified Dutch auction” tender offer for Clarus’ common stock, as well as the preferred share purchase rights

associated with such shares (collectively, the “Shares”).

On July 11, 2018, the tender offer expired, following which

the Company announced it would accept 417,237 Shares for purchase at a price of $8.00 per Share, for an aggregate cost of approximately

$3,338, excluding fees and expenses.

The Company purchased shares of the Company’s common stock for $4,167 and $2,349 under

the Company’s authorized stock repurchase program during the years ended December 31, 2019 and 2018, respectively.

On August 6, 2018, the Company announced

that its Board of Directors approved the initiation of a quarterly cash dividend program of $0.025 per share of the Company’s

common stock (the “Quarterly Cash Dividend”) or $0.10 per share on an annualized basis.

In 2019 and 2018, our

total Quarterly Cash Dividends were $2,987 and $1,488, respectively.

On January 24, 2020, the Company announced that its Board

of Directors approved the payment on February 14, 2020 of the Quarterly Cash Dividend of $0.025 to the record holders of shares

of the Company’s common stock as of the close of business on February 3, 2020.

On October 2, 2020, the Company completed the acquisition of certain assets and liabilities constituting the Barnes business (“Barnes”) for a purchase price of $ 30,500 .

Impact of COVID-19

The global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S.

government in March 2020, with governments world-wide implementing safety measures restricting travel and requiring citizen lockdowns and self-confinements for quarantining purposes.

This has negatively affected the U.S.

and global economy, disrupted global supply chains, and resulted in significant transport restrictions and disruption of financial markets.

The impact of this pandemic has created significant uncertainty in the global economy and has affected our business, employees, retail and distribution partners, suppliers, and customers.

We experienced a decline in retail demand within our Black Diamond segment beginning in the second half of March 2020 through December 2020, which negatively impacted our sales and profitability.

We also expect a continued impact on the Company’s sales and profitability in future periods.

The duration of these trends and the magnitude of such impacts cannot be precisely estimated at this time, as they are affected by a number of factors (some of which are outside management’s control), including those presented in Item 1A.

Risk Factors.

We have mitigated some of the negative impacts to our operating results by taking significant actions to improve our current operating results and liquidity position, including drawing on the credit facility, suspending share repurchases, temporarily suspending cash dividends, postponing non-essential capital expenditures, reducing operating costs, modulating production in line with demand, and substantially reducing discretionary spending.

We will continue to adjust mitigation measures as needed related to health and safety.

Those measures have and might continue to include temporarily suspending manufacturing or retail operations, modifying workspaces, continuing social distancing policies, implementing new personal protective equipment or health screening policies at our facilities, or such other industry best practices needed to continue maintain a healthy and safe environment for our employees amidst the pandemic.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

These countermeasures partially mitigated the impacts of COVID-19 on our full year 2020 financial results.

As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess the impact on the Company and respond accordingly.

Sustained adverse impacts to the Company, certain of its suppliers, dealers or customers may also affect the Company’s future cash flows, liquidity, and valuation of certain assets and therefore may increase the likelihood of an impairment charge, write-off, or reserve associated with such assets, including goodwill, indefinite and finite-lived intangible assets, property and equipment, inventories, accounts receivable, net deferred tax assets, and other assets.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law.

The CARES Act established a program with provisions to allow U.S.

companies to defer the employer’s portion of social security taxes between March 27, 2020 and December 31, 2020 and pay such taxes in two installments in 2021 and 2022.

As permitted by the CARES Act, we have deferred payment of the employer’s portion of social security payroll tax payments.

Use of Estimates

The preparation of financial statements

in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and

liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue

and expenses during the reporting period.

The more significant estimates relate to purchase price allocation, excess or obsolete

inventory, and valuation of deferred tax assets.

We base our estimates on historical experience and other assumptions that are

believed to be reasonable under the circumstances.

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

The more significant estimates relate to the fair value of assets acquired in business combinations, excess or obsolete inventory, allowance for credit losses and doubtful accounts, and valuation of deferred tax assets.

We base our estimates on historical experience, projected future cash flows, and other assumptions that are believed to be reasonable under the circumstances.

Actual results could differ from these estimates.

1 unchanged sentence

Principles of Consolidation

The consolidated financial statements

include the accounts of Clarus Corporation and its wholly owned subsidiaries.

All intercompany balances and transactions have

been eliminated in consolidation.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The consolidated financial statements include the accounts of Clarus Corporation and its wholly owned subsidiaries.

All intercompany balances and transactions have been eliminated in consolidation.

Foreign Currency Transactions and Translation

The accounts of the Company’s international

subsidiaries’ financial statements which have functional currencies other than the U.S.

The accounts of the Company’s international subsidiaries’ financial statements which have functional currencies other than the U.S.

dollar are translated into U.S.

using the exchange rate at the balance sheet dates for assets and liabilities and average exchange rates for the periods for revenues,

expenses, gains and losses.

Foreign currency translation adjustments are recorded as a separate component of accumulated other

comprehensive (loss) income.

Foreign currency transaction gains and losses are included in other (expense) income in the consolidated

statements of comprehensive income.

dollars using the exchange rate at the balance sheet dates for assets and liabilities and average exchange rates for the periods for revenues, expenses, gains and losses.

Foreign currency translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss).

Foreign currency transaction gains and losses are included in other (expense) income in the consolidated statements of comprehensive income.

Cash Equivalents

The Company considers all highly liquid

investments purchased with an original maturity of three months or less to be cash equivalents.

At December 31, 2019 and 2018,

the Company did not hold any amounts that were considered to be cash equivalents.

Accounts Receivable and Allowance for

Doubtful Accounts

The Company records its trade receivables

at sales value and establishes a non-specific allowance for estimated doubtful accounts based on historical experience of collectability.

In addition, specific allowances are established for customer accounts as known collection problems occur due to insolvency, disputes

or other collection issues.

The amounts of these specific allowances are estimated by management based on the customer’s

financial position, the age of the customer’s receivables and the reasons for any disputes.

The allowance for doubtful accounts

is reduced by subsequent collections of the specific allowances or by any write-off of customer accounts that are deemed uncollectible.

The allowance for doubtful accounts was $494 and $392 at December 31, 2019 and 2018, respectively.

There were no significant write-offs

of the Company’s accounts receivable during the years ended December 31, 2019, 2018, and 2017.

Inventories are stated at the lower of

cost (using the first-in, first-out method “FIFO”) or net realizable value.

Elements of cost in the Company’s

manufactured inventories generally include raw materials, direct labor, manufacturing overhead and freight in.

The Company reviews

its inventories for excess, close-out, or slow-moving items and makes provisions as necessary to properly reflect inventory values.

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

At December 31, 2020 and 2019, the Company did not hold any amounts that were considered to be cash equivalents.

Accounts Receivable and Allowance for Credit Losses and Doubtful Accounts

The Company records its trade receivables at sales value.

The trade receivables do not bear interest.

The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information.

The Company evaluates the collectability of its accounts receivable and determines the appropriate allowance for credit losses and doubtful accounts based on a combination of factors.

A non-specific allowance for estimated doubtful accounts is recorded based on historical experience of collectability.

In addition, specific allowances are established for customer accounts as known collection problems occur due to insolvency, disputes or other collection issues.

The amounts of these specific allowances are estimated by management based on the customer’s financial position, the age of the customer’s receivables and the reasons for any disputes.

The allowance for credit losses and doubtful accounts is reduced by subsequent collections of the specific allowances or by any write-off of customer accounts that are deemed uncollectible.

The allowance for credit losses and doubtful accounts was $ 1,433 and $ 494 at December 31, 2020 and 2019, respectively.

There were no significant write-offs during the years ended December 31, 2020, 2019, and 2018.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Inventories are stated at the lower of cost (using the first-in, first-out method “FIFO”) or net realizable value.

Elements of cost in the Company’s manufactured inventories generally include raw materials, direct labor, manufacturing overhead and freight in.

The Company reviews its inventories for excess, close-out, or slow-moving items and makes provisions as necessary to properly reflect inventory values.

Property and Equipment

Property and equipment is stated at historical

cost, less accumulated depreciation.

Property and equipment is stated at historical cost, less accumulated depreciation.

Depreciation is computed using the straight-line method over the estimated useful lives.

principal estimated useful lives are:

The principal estimated useful lives are:

buildings, 30 years;

building improvements, 20 years;

computer hardware and software and

machinery and equipment, 3-10 years;

computer hardware and software and machinery and equipment, 3 - 15 years;

furniture and fixtures, 5 years.

Leasehold improvements are amortized over the lesser of the

estimated useful life of the improvement or the life of the lease.

Equipment under finance leases are stated at the present value

of minimum lease payments.

Major replacements, which extend the useful lives of equipment, are capitalized and depreciated over

the remaining useful life.

Leasehold improvements are amortized over the lesser of the estimated useful life of the improvement or the life of the lease.

Equipment under finance leases are stated at the present value of minimum lease payments.

Major replacements, which extend the useful lives of equipment, are capitalized and depreciated over the remaining useful life.

Normal maintenance and repair items are expensed as incurred.

Property and equipment are reviewed for

impairment whenever events or changes in circumstances exist that indicate the carrying amount of an asset may not be recoverable.

Property and equipment are reviewed for impairment whenever events or changes in circumstances exist that indicate the carrying amount of an asset may not be recoverable.

Long-lived assets located outside of the United States are not considered material.

Lease Accounting (Right-of-Use Assets)

Lease assets and lease liabilities are

recognized at the commencement of an arrangement where it is determined at inception that a lease exists.

Lease assets represent

the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments

arising from the lease.

These assets and liabilities are initially recognized based on the present value of lease payments

over the lease term calculated using our incremental borrowing rate.

Lease terms include options to extend or terminate the

lease when it is reasonably certain that those options will be exercised.

Variable lease payments are generally expensed

as incurred and include certain non-lease components, such as common area maintenance and other services provided by the lessor,

and other charges such as utilities, insurance and property taxes included in the lease.

Leases with an initial term of 12

months or less are not recorded on the balance sheet, and the expense for these short-term leases and for operating leases is recognized

on a straight-line basis over the lease term.

Non-lease components are excluded from the right-of-use (“ROU”) asset

and lease liability present value computations.

The Company’s lease agreements do not contain any material residual value

guarantees or material restrictive covenants.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Goodwill represents the excess of the purchase

price over the fair market value of identifiable net assets of acquired companies.

Goodwill is not amortized, but rather is tested

at the reporting unit level at least annually for impairment or more frequently if triggering events or changes in circumstances

indicate impairment.

Initially, qualitative factors are considered to determine whether it is more likely than not that the fair

value of a reporting unit is less than its carrying amount.

Some of these qualitative factors may include macroeconomic conditions,

industry and market considerations, a change in financial performance, entity-specific events, a sustained decrease in share price,

and consideration of the difference between the fair value and carrying amount of a reporting unit as determined in the most recent

quantitative assessment.

If, through this qualitative assessment, the conclusion is made that it is more likely than not that a

reporting unit's fair value is less than its carrying amount, a quantitative impairment analysis is performed.

The quantitative

impairment analysis involves estimating the fair value of the reporting unit based upon an acceptable valuation method under Accounting

Standards Codification (“ASC”) 820, Fair Value Measurement .

If the fair value of the reporting unit is less

than its carrying amount, an impairment loss is recognized for the excess carrying amount over the fair value computation.

on the results of the Company’s annual impairment tests completed during the fourth quarter, the Company determined that

goodwill was not impaired.

Lease assets and lease liabilities are recognized at the commencement of an arrangement where it is determined at inception that a lease exists.

Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease.

These assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate.

Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised.

Variable lease payments are generally expensed as incurred and include certain non-lease components, such as common area maintenance and other services provided by the lessor, and other charges such as utilities, insurance and property taxes included in the lease.

Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases and for operating leases is recognized on a straight-line basis over the lease term.

Non-lease components are excluded from the right-of-use (“ROU”) asset and lease liability present value computations.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Goodwill represents the excess of the purchase price over the fair market value of identifiable net assets of acquired companies.

Goodwill is not amortized, but rather is tested at the reporting unit level at least annually for impairment or more frequently if triggering events or changes in circumstances indicate impairment.

The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

Some of these qualitative factors may include macroeconomic conditions, industry and market considerations, a change in financial performance, entity-specific events, a sustained decrease in share price, and consideration of the difference between the fair value and carrying amount of a reporting unit as determined in the most recent quantitative assessment.

If, through this qualitative assessment, the conclusion is made that it is more likely than not that a reporting unit's fair value is less than its carrying amount, a quantitative impairment analysis is performed.

The quantitative impairment analysis involves estimating the fair value of the reporting unit based upon an acceptable valuation method under Accounting Standards Codification (“ASC”) 820, Fair Value Measurement .

If the fair value of the reporting unit is less than its carrying amount, an impairment loss is recognized for the excess carrying amount over the fair value computation.

Based on the results of the Company’s annual impairment tests completed during the fourth quarter, the Company determined that goodwill was not impaired.

No impairment was recorded during the years ended December 31, 2020, 2019, and 2018.

Intangible Assets

Intangible assets represent other intangible

assets and indefinite-lived intangible assets acquired.

The Company’s other intangible assets, such as certain customer lists

and relationships, product technologies, tradenames, trademarks and core technologies are amortized over their estimated useful

Other intangible assets are reviewed for impairment whenever events or changes in circumstances exist that indicate the

carrying amount of an asset may not be recoverable.

The Company’s indefinite lived intangible

assets consists of certain tradenames and trademarks that provide Black Diamond Equipment, PIEPS and Sierra with the exclusive

and perpetual rights to manufacture and sell their respective products.

Intangible assets represent other intangible assets and indefinite-lived intangible assets acquired.

The Company’s other intangible assets, such as certain customer lists and relationships, product technologies, tradenames, trademarks and core technologies are amortized over their estimated useful lives.

Other intangible assets are reviewed for impairment whenever events or changes in circumstances exist that indicate the carrying amount of an asset may not be recoverable.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The Company’s indefinite-lived intangible assets consists of certain tradenames and trademarks that provide Black Diamond Equipment, PIEPS, Sierra and Barnes with the exclusive and perpetual rights to manufacture and sell their respective products.

Indefinite-lived intangible assets are not amortized;

they are tested at least annually for impairment or more frequently if events or changes in circumstances exist that may indicate

Initially, qualitative factors are considered to determine whether it is more likely than not that the fair value of

an indefinite-lived intangible asset is less than its carrying amount.

If, through this qualitative assessment, the conclusion

is made that it is more likely than not that an indefinite-lived intangible asset's fair value is less than its carrying amount,

or the Company elects to bypass the qualitative assessment, a quantitative impairment analysis is performed by comparing the indefinite-lived

intangible asset's book value to its estimated fair value.

The fair value for indefinite-lived intangible assets is determined

through an income approach using the relief-from-royalty method.

The amount of any impairment is measured as the difference between

the carrying amount and the fair value of the impaired asset.

Based on the results of the Company’s annual impairment tests

during the years ended December 31, 2019, 2018, and 2017, no impairment of indefinite-lived intangible assets was recorded.

Accounts Payable and Accrued Liabilities

however, they are tested at least annually for impairment or more frequently if events or changes in circumstances exist that may indicate impairment.

The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount.

If, through this qualitative assessment, the conclusion is made that it is more likely than not that an indefinite-lived intangible asset's fair value is less than its carrying amount, or the Company elects to bypass the qualitative assessment, a quantitative impairment analysis is performed by comparing the indefinite-lived intangible asset's book value to its estimated fair value.

The fair value for indefinite-lived intangible assets is determined through an income approach using the relief-from-royalty method.

The amount of any impairment is measured as the difference between the carrying amount and the fair value of the impaired asset.

Based on the results of the Company’s annual impairment tests during the years ended December 31, 2020, 2019, and 2018, no impairment of indefinite-lived intangible assets was recorded.

Accounts Payable and Accrued Liabilities

include, but are not limited to, vendor trade payables, accrued payrolls, accrued interest, derivative instruments and other estimated

Accounts payable and accrued liabilities include, but are not limited to, vendor trade payables, accrued payrolls, accrued interest, derivative instruments and other estimated expenses.

Accrued liabilities as of December 31, 2020 and 2019 were $ 13,182 and $ 9,559 , respectively.

Derivative Financial Instruments

The Company uses derivative instruments

to hedge currency rate movements on foreign currency denominated sales.

The Company enters into forward contracts, option contracts

and non-deliverable forwards to manage the impact of foreign currency fluctuations on a portion of its forecasted foreign currency

These derivatives are carried at fair value on the Company’s consolidated balance sheets in prepaid and other current

assets, other long-term assets, accounts payable and accrued liabilities, and other long-term liabilities.

Changes in fair value

of the derivatives not designated as hedge instruments are included in the determination of net income.

For derivative contracts

designated as hedge instruments, the effective portion of gains and losses resulting from changes in fair value of the instruments

are included in accumulated other comprehensive (loss) income and reclassified to sales in the period the underlying hedged item

is recognized in earnings.

For all hedging relationships, the

Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge,

the hedging instrument, the hedged transaction, the nature of the risk being hedged, how the hedging instrument’s

effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the

method used to measure ineffectiveness.

The Company also formally assesses, both at the inception of the hedging relationship

and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in offsetting

changes in cash flows of hedged transactions.

The Company uses operating budgets and cash flow forecasts to estimate future

foreign currency cash flow exposures and to determine the level and timing of derivative transactions intended to mitigate

such exposures in accordance with its risk management policies.

The Company discontinues hedge accounting prospectively when

it determines that the derivative is no longer effective in offsetting cash flows attributable to the hedged risk, the

derivative expires or is sold, terminated, or exercised, the cash flow hedge is dedesignated because a forecasted transaction

is not probable of occurring, or management determines to remove the designation of the cash flow hedge.

The Company does not

enter into derivative instruments for any purpose other than cash flow hedging.

The Company does not speculate using

derivative instruments.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The Company uses derivative instruments to hedge currency rate movements on foreign currency denominated sales.

The Company enters into forward contracts, option contracts and non-deliverable forwards to manage the impact of foreign currency fluctuations on a portion of its forecasted foreign currency exposure.

These derivatives are carried at fair value on the Company’s consolidated balance sheets in prepaid and other current assets, other long-term assets, accounts payable and accrued liabilities, and other long-term liabilities.

Changes in fair value of the derivatives not designated as hedge instruments are included in the determination of net income.

For derivative contracts designated as 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 (loss) and reclassified to sales in the period the underlying hedged item is recognized in earnings.

For all hedging relationships, the Company formally documents the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging instrument, the hedged transaction, the nature of the risk being hedged, how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method used to measure ineffectiveness.

The Company also formally assesses, both at the inception of the hedging relationship and on an ongoing basis, whether the derivatives that are used in hedging relationships are highly effective in offsetting changes in cash flows of hedged transactions.

The Company uses operating budgets and cash flow forecasts to estimate future foreign currency cash flow exposures and to determine the level and timing of derivative transactions intended to mitigate such exposures in accordance with its risk management policies.

The Company discontinues hedge accounting prospectively when it determines that the derivative is no longer effective in offsetting cash flows attributable to the hedged risk, the derivative expires or is sold, terminated, or exercised, the cash flow hedge is dedesignated because a forecasted transaction is not probable of occurring, or management determines to remove the designation of the cash flow hedge.

The Company does not enter into derivative instruments for any purpose other than cash flow hedging.

The Company does not speculate using derivative instruments.

Stock-Based Compensation

The Company records compensation expense

for all share-based awards granted based on the fair value of the award at the time of the grant.

The fair value of each option

award is estimated on the date of grant using the Black-Scholes option pricing model that uses assumptions and estimates that the

Company believes are reasonable.

Stock-based compensation costs for stock awards and restricted stock awards is measured based

on the closing market value of the Company’s common stock on the date of the grant.

For restricted stock awards subject to

market conditions, the fair value of each restricted stock award has been estimated as of the date of grant using the Monte-Carlo

pricing model.

The Company recognizes the cost of the share-based awards on a straight-line basis over the requisite service period

of the award and recognizes forfeitures in the period they occur.

The Company records compensation expense for all share-based awards granted based on the fair value of the award at the time of the grant.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses assumptions and estimates that the Company believes are reasonable.

Stock-based compensation costs for stock awards and restricted stock awards is measured based on the closing market value of the Company’s common stock on the date of the grant.

For restricted stock awards subject to market conditions, the fair value of each restricted stock award has been estimated as of the date of grant using the Monte-Carlo pricing model.

The Company recognizes the cost of the share-based awards on a straight-line basis over the requisite service period of the award and recognizes forfeitures in the period they occur.

Stock options granted have contractual terms of up to ten years .

Upon exercise of stock options or vesting of restricted stock awards, the Company issues shares from those authorized and reserved

for issuance.

Upon exercise of stock options or vesting of restricted stock awards, the Company issues shares from those authorized and reserved for issuance.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Revenue Recognition

The Company recognizes revenue when a contract

exists with a customer that specifies the goods and services to be provided at an agreed upon sales price and when the performance

obligation is satisfied by transferring the goods or service to the customer.

The performance obligation is considered complete

when control transfers, which is determined when products are shipped or delivered to the customer depending on the terms of the

The Company recognizes revenue when a contract exists with a customer that specifies the goods and services to be provided at an agreed upon sales price and when the performance obligation is satisfied by transferring the goods or service to the customer.

The performance obligation is considered complete when control transfers, which is determined when products are shipped or delivered to the customer depending on the terms of the contract.

Sales are made on normal and customary short-term credit terms or upon delivery of point of sale transactions.

The Company enters into contractual arrangement

with customers in the form of individual customer orders which specify the goods, quantity, pricing, and associated order terms.

The Company enters into contractual arrangements with customers in the form of individual customer orders which specify the goods, quantity, pricing, and associated order terms.

The Company does not have long-term contracts that are satisfied over time.

Due to the nature of the contracts, no significant

judgment exists in relation to the identification of the customer contract, satisfaction of the performance obligation, or transaction

Due to the nature of the contracts, no significant judgment exists in relation to the identification of the customer contract, satisfaction of the performance obligation, or transaction price.

The Company expenses incremental costs of obtaining a contract due to the short-term nature of the contracts.

The Company’s contract terms or historical

business practices can give rise to variable consideration such as term discounts and customer cooperative payments.

the expected term discounts based on an analysis of historical experience and record cash discounts as a reduction to revenue.

Through cooperative advertising programs, the Company reimburses its wholesale customers for some of their costs of advertising

the Company’s products.

The Company records such costs as a reduction of revenue, where the fair value cannot be reasonably

estimated or where costs exceed the fair value of the services.

At the time of revenue recognition, we

also provide for estimated sales returns and miscellaneous claims from customers as reductions to revenues.

The estimates are based

on historical rates of product returns and claims.

The Company accrues for such estimated returns and claims with an estimated

accrual and associated reduction of revenue.

Additionally, the Company records inventory that it expects to be returned as an other

current asset, with a corresponding reduction of cost of goods sold.

The Company’s contract terms or historical business practices can give rise to variable consideration such as term discounts and customer cooperative payments.

We estimate the expected term discounts based on an analysis of historical experience and record cash discounts as a reduction to revenue.

Through cooperative advertising programs, the Company reimburses its wholesale customers for some of their costs of advertising the Company’s products.

The Company records such costs as a reduction of revenue, where the fair value cannot be reasonably estimated or where costs exceed the fair value of the services.

At the time of revenue recognition, we also provide for estimated sales returns and miscellaneous claims from customers as reductions to revenues.

The estimates are based on historical rates of product returns and claims.

The Company accrues for such estimated returns and claims with an estimated accrual and associated reduction of revenue.

Additionally, the Company records inventory that it expects to be returned as an other current asset, with a corresponding reduction of cost of goods sold.

Sales commissions are expensed as incurred.

as they are paid within a year.

These costs are recorded in selling, general and administrative.

Taxes collected from customers

and remitted to government authorities are reported on the net basis and are excluded from sales.

Contract liabilities are recorded as a

component of accounts payable and accrued liabilities when customers remit contractual cash payments in advance of us satisfying

performance obligations which are satisfied at a future point of time.

Contract liabilities totaled $141 and $90 at December 31,

2019 and 2018, respectively.

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

Deferred revenue is recorded as a component of accounts payable and accrued liabilities when customers remit cash payments in advance of us satisfying performance obligations which are satisfied at a future point of time.

Deferred revenue was not material at December 31, 2020 and totaled $ 141 at December 31, 2019.

Contract liabilities are derecognized when the performance obligation is satisfied.

Revenue recognized

from satisfaction of performance obligations relating to the advanced payments during the year ended December 31, 2019 and 2018

totaled $90 and $554, respectively.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Revenue recognized from satisfaction of performance obligations relating to the advanced payments during the year ended December 31, 2020 were not material and were $ 90 during the year ended December 31, 2019.

Cost of Sales

The expenses that are included in cost

of sales include all direct product costs and costs related to shipping, certain warehousing or handling, duties and importation

Product warranty costs and specific provisions for excess, close-out, or slow-moving inventory are also included in cost

Certain warehousing or handling costs which are not associated with the manufacturing of goods for sale are excluded

from cost of sales.

Selling, General and Administrative

The expenses that are included in cost of sales include all direct product costs and costs related to shipping, certain warehousing or handling, duties and importation fees.

Product warranty costs and specific provisions for excess, close-out, or slow-moving inventory are also included in cost of sales.

Certain warehousing or handling costs which are not associated with the manufacturing of goods for sale are excluded from cost of sales.

Selling, General and Administrative Expense

includes personnel-related costs, product development, selling, advertising, visual merchandise, depreciation and amortization,

and other general operating expenses.

Selling, general and administrative expense includes personnel-related costs, product development, selling, advertising, visual merchandise, depreciation and amortization, and other general operating expenses.

Advertising costs are expensed in the period incurred.

Total advertising expense, including

cooperative advertising costs, were $4,588, $4,016, and $3,951 for the years ended December 31, 2019, 2018, and 2017, respectively.

Through cooperative advertising programs,

the Company reimburses its wholesale customers for some of their costs of advertising the Company’s products based on various

criteria, including the value of purchases from the Company and various advertising specifications.

Cooperative advertising costs

were $287, $338, and $537 for the years ended December 31, 2019, 2018, and 2017, respectively, and were included in selling, general,

and administrative expense because the Company receives an identifiable benefit in exchange for the cost, the advertising may be

obtained from a party other than the customer, and the fair value of the advertising benefit can be reasonably estimated.

Total advertising expense, including cooperative advertising costs, were $ 3,833 , $ 4,588 , and $ 4,016 for the years ended December 31, 2020, 2019, and 2018, respectively.

Through cooperative advertising programs, the Company reimburses its wholesale customers for some of their costs of advertising the Company’s products based on various criteria, including the value of purchases from the Company and various advertising specifications.

Cooperative advertising costs were not material for the year ended December 31, 2020.

Cooperative advertising costs were $ 287 , and $ 338 for the years ended December 31, 2019 and 2018, respectively, and were included in selling, general, and administrative expense because the Company receives an identifiable benefit in exchange for the cost, the advertising may be obtained from a party other than the customer, and the fair value of the advertising benefit can be reasonably estimated.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Product Warranty

Some of the Company’s products carry

warranty provisions for defects in quality and workmanship.

Warranty repairs and replacements are recorded in cost of sales and

a warranty liability is established at the time of sale to cover estimated costs based on the Company’s history of warranty

repairs and replacements.

The Company recorded a liability for product warranties totaling $1,155 and $1,032 as of December 31,

2019 and 2018, respectively.

For the years ended December 31, 2019, 2018, and 2017, the Company experienced warranty claims on

its products of $1,123, $999, and $949, respectively.

Some of the Company’s products carry warranty provisions for defects in quality and workmanship.

Warranty repairs and replacements are recorded in cost of sales and a warranty liability is established at the time of sale to cover estimated costs based on the Company’s history of warranty repairs and replacements.

The Company recorded a liability for product warranties totaling $ 1,354 and $ 1,155 as of December 31, 2020 and 2019, respectively.

For the years ended December 31, 2020, 2019, and 2018, the Company experienced warranty claims on its products of $ 1,201 , $ 1,123 , and $ 999 , respectively.

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 consolidated statements

of comprehensive income.

Total research and development costs were $10,575, $9,471, and $7,984 for the years ended December 31,

2019, 2018, and 2017, respectively.

Income taxes are accounted for under the

asset and liability method.

Income taxes are based on amounts of taxes payable or refundable in the current year and on expected

future tax consequences of events that are recognized in the financial statements in different periods than they are recognized

in tax returns.

As a result of timing of recognition and measurement differences between financial accounting standards and income

tax laws, temporary differences arise between amounts of pre-tax financial statement income and taxable income and between reported

amounts of assets and liabilities in the consolidated balance sheets and their respective tax bases.

Deferred income tax assets

and liabilities reported in the consolidated balance sheets reflect estimated future tax effects attributable to these temporary

differences and to net operating loss and net capital loss carryforwards, based on enacted tax rates expected to be in effect for

years in which the differences are expected to be settled or realized.

The Company has netted these deferred tax assets and deferred

tax liabilities by jurisdiction.

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

Total research and development costs were $ 10,159 , $ 10,575 , and $ 9,471 for the years ended December 31, 2020, 2019, and 2018, respectively.

Transaction Costs

Transaction costs consists of expenses related to the Company’s various acquisition efforts and capital-raising activities, including acquiring Sierra and Barnes and completing a registered direct offering (the “Offering”).

Income taxes are accounted for under the asset and liability method.

Income taxes are based on amounts of taxes payable or refundable in the current year and on expected future tax consequences of events that are recognized in the financial statements in different periods than they are recognized in tax returns.

As a result of timing of recognition and measurement differences between financial accounting standards and income tax laws, temporary differences arise between amounts of pre-tax financial statement income and taxable income and between reported amounts of assets and liabilities in the consolidated balance sheets and their respective tax bases.

Deferred income tax assets and liabilities reported in the consolidated balance sheets reflect estimated future tax effects attributable to these temporary differences and to net operating loss and net capital loss carryforwards, based on enacted tax rates expected to be in effect for years in which the differences are expected to be settled or realized.

The Company has netted these deferred tax assets and deferred tax liabilities by jurisdiction.

Realization of deferred tax assets is dependent on future taxable income in specific jurisdictions.

Valuation allowances are used to reduce deferred tax assets to amounts considered more likely than not to be realized.

income taxes are not provided on undistributed income of foreign subsidiaries where such earnings are considered to be permanently

The Company releases residual tax effects

in accumulated other comprehensive income (loss) through continuing operations as the underlying asset matures or expires.

Company recognizes interest expense and penalties related to income tax matters in income tax (benefit) expense.

The Company recognizes tax benefits

from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the

taxing authorities based on the technical merits of the position.

The tax benefits recognized in the financial statements

from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being

realized upon ultimate resolution.

The Company recognizes interest and penalties related to unrecognized tax benefits in

income tax (benefit) expense.

Unrecognized tax benefits that reduce a net operating loss, similar tax loss or tax credit

carryforward, are presented as a reduction to deferred income taxes.

deferred income taxes are not provided on undistributed income of foreign subsidiaries where such earnings are considered to be permanently invested.

The Company releases residual tax effects in accumulated other comprehensive income (loss) through continuing operations as the underlying asset matures or expires.

The Company recognizes interest expense and penalties related to income tax matters in income tax benefit.

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.

The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax benefit.

Unrecognized tax benefits that reduce a net operating loss, similar tax loss or tax credit carryforward, are presented as a reduction to deferred income taxes.

Concentration of Credit Risk and Sales

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, accounts receivable, and aggregate unrealized gains (losses) on derivative contracts.

Risks associated with cash within the United States are mitigated by banking with federally insured, creditworthy institutions;

however, there are balances with these institutions that are greater than the Federal Deposit Insurance Corporation insurance limit.

The Company performs ongoing credit evaluations of its customers and maintains allowances for possible losses as considered necessary by management.

During the years ended December 31, 2020, 2019 and 2018, Recreational Equipment, Inc.

(“REI”) accounted for approximately 10 %, 14 % and 12 %, respectively, of the Company’s sales and is included in the Black Diamond segment.

No other single customer contributed more than 10% of our sales during those periods.

As of December 31, 2020 and 2019, REI accounted for approximately 11 % and 14 % of the Company’s accounts receivable, respectively.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Concentration of Credit Risk and Sales

Financial instruments that potentially

subject the Company to concentration of credit risk consist principally of cash, accounts receivable, and aggregate unrealized

gains (losses) on derivative contracts.

Risks associated with cash within the United States are mitigated by banking with federally

insured, creditworthy institutions;

however, there are balances with these institutions that are greater than the Federal Deposit

Insurance Corporation insurance limit.

The Company performs ongoing credit evaluations of its customers and maintains allowances

for possible losses as considered necessary by management.

During the years ended December 31, 2019,

2018 and 2017, Recreational Equipment, Inc.

(“REI”) accounted for approximately 14%, 12% and 14%, respectively, of

the Company’s sales and is included in the Black Diamond segment.

No other single customer contributed more than 10% of our

sales during those periods.

As of December 31, 2019 and 2018, REI accounted for approximately 14% and 15% of the Company’s

accounts receivable, respectively.

Fair Value Measurements

The carrying value of cash, accounts receivable,

accounts payable and accrued liabilities approximate their respective fair values due to the short-term nature and liquidity of

these financial instruments.

The carrying value of cash, accounts receivable, accounts payable and accrued liabilities approximate their respective fair values due to the short-term nature and liquidity of these financial instruments.

Derivative financial instruments are recorded at fair value based on current market pricing models.

The Company estimates that, due to the variable interest rates reflecting current market rates, the fair value of its long-term

debt obligations under its revolving credit facility approximates the carrying value at December 31, 2019 and 2018.

The Company estimates that, due to the variable interest rates reflecting current market rates, the fair value of its long-term debt obligations under its revolving credit facility and term note approximate the carrying value at December 31, 2020 and 2019.

Segment Information

We operate our business structure within

two segments.

These segments are defined based on the internal financial reporting used by management.

Certain significant selling

and general and administrative expenses are not allocated to the segments.

The accounting policies of the segments are the same

as those described above.

We operate our business structure within two segments.

These segments are defined based on the internal financial reporting used by our chief operating decision maker to allocate resources and assess performance.

Certain significant selling and general and administrative expenses are not allocated to the segments.

The accounting policies of the segments are the same as those described above .

Recent Accounting Pronouncements

Accounting Pronouncements adopted During

On January 1, 2019, the Company adopted

ASC Topic 842, Leases, and elected the prospective method which was applied to all leases in effect as of January 1, 2019.

Results for reporting periods beginning after January 1, 2019 are presented under the new guidance, while prior period amounts

are not adjusted and continue to be presented in accordance with ASC Topic 840, Leases .

Under the new guidance, lessees are required

to recognize a lease liability and a ROU asset for all leases with terms greater than 12 months.

Leases are now classified as either

finance or operating, with classification affecting the pattern of expense recognition in the income statement.

Classification

is based upon the underlying asset’s existence, nature and timing of ownership transfer in the related lease.

Leases previously

defined as operating leases record lease expense based upon the related ROU asset amortization and lease liability interest expense

using the interest method over the life of the lease.

Leases previously defined as capital leases are now classified as a finance

lease with no material changes to the accounting methodology.

Upon adoption of ASC 842, the Company recorded

the present value of ROU assets and related lease liabilities for the Company’s outstanding operating leases over the remaining

lease term at January 1, 2019 totaling $1,516.

Certain of the leases contain extension

options of one to five years.

At January 1, 2019, the Company is uncertain as to whether the extension options will be executed.

Accordingly, no extension options were considered in the present value computations of the ROU assets or related lease liabilities.

The Company elected the package of

practical expedients in transition for leases that commenced prior to January 1, 2019, whereby these contracts were not

reassessed or reclassified from their previous assessments as of December 31, 2018.

We also elected certain other practical

expedients in transition, including not reassessing existing land easements as lease contracts.

The Company has also elected

to not record the ROU assets and related liabilities for outstanding leases as of January 1, 2019 with a remaining term of 12

months or less.

In these cases, the Company recognizes a lease payment as an expense on a straight-line basis.

Leases for the financial position impact and additional disclosures.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

On January 1, 2019, the Company early adopted

Accounting Standards Update (“ASU”) 2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for

Goodwill Impairment as permitted.

The standard simplifies the accounting for goodwill impairment by requiring a goodwill impairment

to be measured using a single step impairment model, whereby the impairment equals the difference between the carrying amount and

the fair value of the specified reporting units in their entirety.

This eliminates the second step of the current impairment model

that requires companies to first estimate the fair value of all assets in a reporting unit and measure impairments based on those

fair values and a residual measurement approach.

It also specifies that any loss recognized should not exceed the total amount

of goodwill allocated to that reporting unit.

This ASU was adopted on a prospective basis with no impact to the Company’s

consolidated financial statements.

On January 1, 2019, the Company adopted

ASU 2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities .

adopted on a prospective basis.

This standard enables entities to better portray the economics of their risk management activities

in the financial statements and enhances the transparency and understandability of hedge results through improved disclosures.

The adoption of this guidance did not impact the Company’s consolidated financial statements and related disclosures.

On January 1, 2019, the Company adopted

ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from

Accumulated Other Comprehensive Income which allows for a reclassification from accumulated other comprehensive (loss) income

to retained earnings for stranded tax effects resulting from the Tax Act.

However, because the amendments only relate to the reclassification

of the income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates

be included in income from continuing operations is not affected.

Adoption of this ASU did not impact the beginning retained earnings

on January 1, 2019 or the Company’s consolidated financial statements and related disclosures.

On August 21, 2017, the Company acquired

100% of the outstanding membership interests of Sierra Bullets, L.L.C., a manufacturer of a wide range of bullets primarily for

both rifles and pistols, pursuant to the terms of the purchase and sale agreement dated August 21, 2017 (the “Purchase Agreement”).

Under the terms of the Purchase Agreement, the Company acquired Sierra for an aggregate purchase price of $79,000, plus or

minus a working capital adjustment, in accordance with and subject to the terms and conditions set forth in the Purchase Agreement.

During the measurement period, the Company finalized the working capital adjustment and adjusted the recorded purchase consideration

and goodwill by $345.

The Company believes the acquisition of

Sierra is expected to provide the Company with the following benefits:

greater combined global revenue base;

increased diversification and seasonal balance;

increased gross margins, profitability and free cash flows;

advance the development, marketing and distribution of products;

access to increased liquidity to further acquire and grow businesses.

The following table is a reconciliation

to the fair value of the purchase consideration and how the purchase consideration is 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.

Accounting Pronouncements not yet adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This ASU provides temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as the London Inter-Bank Offered Rate (“LIBOR”) which is being phased out in 2021, to alternate reference rates, such as the Secured Overnight Financing Rate (“SOFR”).

The standard is currently effective and upon adoption may be applied prospectively to contract modifications made on or before December 31, 2022.

The provisions have impact as contract modifications and other changes occur while LIBOR is phased out.

The Company is in the process of evaluating the optional relief guidance provided within this ASU.

Management will continue its assessment and monitor regulatory developments during the LIBOR transition period .

On September 30, 2020, Sierra entered into an Asset Purchase Agreement (the “Barnes Asset Purchase Agreement”) with Remington Outdoor Company, Inc.

and certain of its subsidiaries (the “Seller”), pursuant to which Sierra agreed to (i) acquire certain assets of the Seller constituting the Barnes business (“Barnes”), including equipment, inventory, intellectual property (including exclusive use of Barnes’ intellectual property in the all-copper and powdered metallurgy ammunition fields as well as its trademarks) and a leasehold interest in certain real property located in Mona, Utah (collectively, the “Barnes Purchased Assets”) and (ii) assume certain liabilities related to the Barnes Purchased Assets in a transaction to be effected in Seller’s bankruptcy proceeding under Chapter 11 of title 11 of the United States Code, §§ 101 et seq.

(the “Bankruptcy Code”) which commenced on July 27, 2020 in the United States Bankruptcy Court for the Northern District of Alabama (the “Bankruptcy Court”).

Pursuant to the Barnes Asset Purchase Agreement, the purchase price to be paid for the Barnes Purchased Assets is $ 30,500 (the “Barnes Purchase Price”).

On October 2, 2020, Sierra completed the acquisition of the Barnes Purchased Assets.

Acquisition-related costs for the Barnes acquisition, which were included in transaction costs during the year ended December 31, 2020 were $ 922 .

The acquisition was accounted for as a business combination.

The Company believes the acquisition of Barnes is expected to provide the Company with a greater combined global revenue base, increased gross margins, profitability and free cash flows, and access to increased liquidity to further acquire and grow businesses.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The following table is a reconciliation to the fair value of the purchase consideration and how the purchase consideration is 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.

Goodwill is included in the Sierra segment.

Estimated Fair Value

1 unchanged sentence

Assets Acquired and Liabilities Assumed

Accounts receivable

Prepaid and other current assets

Property and equipment

Amortizable other intangible assets

Identifiable indefinite lived intangible assets

Other intangible assets

Indefinite-lived intangible assets

Other long-term assets

Accounts payable and accrued liabilities

Other long-term liabilities

Total Liabilities

Net Book Value Acquired

The gross amount of accounts receivable is $2,732 of which $46

is deemed to be not collectible.

The estimated fair value of inventory was recorded at expected sales price less cost to sell plus

a reasonable profit margin for selling efforts.

In connection with the acquisition, the

Company acquired exclusive rights to Sierra’s trade names and trademarks, customer relationships, and product technologies.

The amounts assigned to each class of intangible asset, other than goodwill acquired, and the related weighted average useful lives

are as follows:

Weighted Average

The estimated fair value of inventory was recorded at expected sales price less cost to sell plus a reasonable profit margin for selling efforts.

In connection with the acquisition, the Company acquired exclusive rights to Barnes’ trademarks, customer relationships, and product technologies.

The amounts assigned to each class of intangible asset, other than goodwill acquired, and the related average useful lives are as follows:

Intangibles subject to amortization

1 unchanged sentence

Product technologies

Trade name / trademark

Intangibles not subject to amortization

Trade names and trademarks

The weighted-average period before the

next renewal of trade names and trademarks not subject to amortization is approximately 4.8 years.

The fair value of Sierra’s

assembled workforce and buyer-specific synergies has been included in goodwill.

According to Revenue Ruling 99-6, the acquisition

of a limited liability company is treated as a purchase of assets for tax purposes.

As such, the basis in the assets of Sierra

is equal for both book and tax, which results in no initial recognition of deferred tax assets or liabilities.

Furthermore, the

full amount of goodwill recorded of $17,745 is expected to be deductible for tax purposes.

No pre-existing relationships existed

between Clarus and the Sellers prior to the acquisition.

On November 6, 2018, the Company purchased

the assets of SKINourishment and was accounted for as a business combination.

The assets purchased were not significant to the

consolidated financial statements.

Pro forma results of SKINourishment have not been presented as the results are insignificant

to our consolidated financial statements.

Additionally, revenues and earnings of SKINourishment, since the acquisition date, are

insignificant to our consolidated financial statements.

The goodwill consists largely of the synergies expected from combining operations.

The acquisition of Barnes is treated as a purchase of assets for tax purposes.

As such, the basis in the assets of Barnes is equal for both book and tax, which results in no initial recognition of deferred tax assets or liabilities.

Furthermore, the full amount of goodwill recorded of $ 8,625 is expected to be deductible for tax purposes.

No pre-existing relationships existed between the Company and the Sellers prior to the acquisition.

Total revenue of $ 6,556 and net income of $ 871 of Barnes were included in the Company’s consolidated statements of comprehensive income from the date of acquisition to December 31, 2020.

Barnes revenue and operating income were included in the Sierra segment.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Pro Forma Results ( Unaudited )

The following pro forma results are based

on the individual historical results of the Company and Sierra, with adjustments to give effect as if the acquisition and borrowings

used to finance the acquisition had occurred on January 1, 2016, after giving effect to certain adjustments including the amortization

of intangible assets, depreciation of fixed assets, the Sellers’ management fees, interest expense and taxes and assumes

the purchase price was allocated to the assets purchased and liabilities assumed based on their fair market values at the date

The following unaudited pro forma results are based on the individual historical results of the Company and Barnes, with adjustments to give effect as if the acquisition and borrowings used to finance the acquisition had occurred on January 1, 2019, after giving effect to certain adjustments including the amortization of intangible assets, depreciation of fixed assets, interest expense and taxes and assumes the purchase price was allocated to the assets purchased and liabilities assumed based on their fair market values at the date of purchase.

Year Ended December 31,

1 unchanged sentence

Net income per share - diluted

The pro forma information is presented

for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred had the transaction

been consummated as of January 1, 2016.

Furthermore, such pro forma information is not necessarily indicative of future operating

results of the combined companies and should not be construed as representative of the operating results of the combined companies

for any future dates or periods.

Material nonrecurring adjustments excluded

from the pro forma financial information above consists of $2,170 transaction and merger and integration costs and the $3,147 step

up of Sierra inventory to its preliminary fair value, which was recorded as an unfavorable adjustment to cost of goods sold during

the six months following the acquisition date.

Inventories, as of December 31, 2019 and

2018, were as follows:

The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred had the transaction been consummated as of January 1, 2019.

Furthermore, such pro forma information is not necessarily indicative of future operating results of the combined companies and should not be construed as representative of the operating results of the combined companies for any future dates or periods.

Material nonrecurring adjustments excluded from the unaudited pro forma financial information above consists of $ 922 transaction costs and the $ 721 step up of Barnes’ inventory to its preliminary fair value, which is expected to be recorded as an unfavorable adjustment to cost of goods sold during the six months following the acquisition date.

SKINourishment

On November 6, 2018, the Company purchased the assets of SKINourishment and was accounted for as a business combination.

The assets purchased were not significant to the consolidated financial statements.

Pro forma results of SKINourishment have not been presented as the results are insignificant to our consolidated financial statements.

Additionally, revenues and earnings of SKINourishment, since the acquisition date, are insignificant to our consolidated financial statements .

Inventories, as of December 31, 2020 and 2019, were as follows:

December 31, 2020

December 31, 2019

Finished goods

1 unchanged sentence

Raw materials and supplies

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

PROPERTY AND EQUIPMENT

Property and equipment, net as of December

31, 2019 and 2018, were as follows:

Property and equipment, net as of December 31, 2020 and 2019, were as follows:

December 31, 2020

December 31, 2019

Building and improvements

4 unchanged sentences

Less accumulated depreciation

Depreciation expense was $4,550, $4,423,

and $2,883 for the years ended December 31, 2019, 2018, and 2017, respectively.

GOODWILL AND OTHER INTANGIBLE

The following table summarizes the changes

in goodwill by segment:

Depreciation expense was $ 4,801 , $ 4,550 , and $ 4,423 for the years ended December 31, 2020, 2019, and 2018, respectively.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes the changes in goodwill by segment:

Black Diamond

Balance at December 31, 2018

Increase due to working capital adjustment

Balance at December 31, 2019

Increase due to acquisition of Barnes

Balance at December 31, 2020

Indefinite-Lived Intangible Assets

The following table summarizes the changes

in indefinite lived intangible assets:

The following table summarizes the changes in indefinite-lived intangible assets:

Balance at December 31, 2019

Increase due to acquisition of Barnes

Impact of foreign currency exchange rates

Balance at December 31, 2020

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Other Intangible Assets, net

The following table summarizes the changes

in gross other intangible assets:

The following table summarizes the changes in gross other intangible assets:

Gross balance at December 31, 2019

Increase due to acquisition of Barnes

Impact of foreign currency exchange rates

Gross balance at December 31, 2020

Other intangible assets, net of amortization

as of December 31, 2019 and 2018, were as follows:

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Other intangible assets, net of amortization as of December 31, 2020 and 2019, were as follows:

December 31, 2020

Weighted Average

Accumulated Amortization

Weighted Average Useful Life

Intangibles subject to amortization

4 unchanged sentences

December 31, 2019

Weighted Average

Intangibles subject to amortization

Accumulated Amortization

Weighted Average Useful Life

Customer relationships

2 unchanged sentences

Core technologies

Amortization expense for the years ended

December 31, 2019, 2018, and 2017, was $3,552, $3,873, and $2,376, respectively.

Future amortization expense for other intangible

assets as of December 31, 2019 is as follows:

Amortization expense for the years ended December 31, 2020, 2019, and 2018, was $ 4,070 , $ 3,552 , and $ 3,873 , respectively.

Future amortization expense for other intangible assets as of December 31, 2020 is as follows:

Years Ending December 31,

Amortization Expense

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

LONG-TERM DEBT

Long-term debt as of December 31, 2019

and 2018, was as follows:

Long-term debt as of December 31, 2020 and 2019, was as follows:

December 31, 2020

December 31, 2019

Revolving credit facility (a)

Foreign credit facilities (b)

Term note (c)

Less current portion

(a) As of December 31, 2019, the Company had drawn $22,670 on the $60,000 revolving commitment that

was available under the credit agreement with JPMorgan Chase Bank, N.A., with a maturity date of May 3, 2024.

On May 3, 2019, the Company together

with certain of its direct and indirect domestic subsidiaries (the “Borrowers”) and the other loan parties party thereto

entered into a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party

thereto, for borrowings of up to $60,000 under a revolving credit facility (including up to $5,000 for letters of credit), and

borrowings of up to $40,000 under a term loan facility that is available to be drawn until May 3, 2020.

The Credit Agreement also

permits the Borrowers, subject to certain requirements, to arrange with lenders for an aggregate of up to $50,000 of additional

revolving and/or term loan commitments (both of which are currently uncommitted), for potential aggregate revolving and term loan

commitments under the Credit Agreement of up to $150,000.

The Credit Agreement matures on May 3, 2024.

The Borrowers may elect to have

the revolving and term loans under the Credit Agreement bear interest at an alternate base rate or a Eurodollar rate plus an applicable

The applicable rate for these borrowings will range from 0.50% to 1.25% per annum, in the case of alternate base rate borrowings,

and 1.50% to 2.25% per annum, in the case of Eurodollar borrowings.

The applicable rate was initially 0.875% per annum, in the

case of alternate base rate borrowings, and 1.875% per annum, in the case of Eurodollar borrowings, however, it may be adjusted

from time to time based upon the level of the Company’s consolidated total leverage ratio.

The Credit Agreement also requires

the Borrowers to pay a commitment fee on the unused portion of the revolving and term loan commitments.

Such commitment fee will

range between 0.15% and 0.25% per annum, and is also based upon the level of the Company’s consolidated total leverage ratio.

The Company pays interest monthly on any borrowings on the Credit Agreement.

As of December 31, 2019, the rate was 3.3125%.

All obligations under the Credit

Agreement are secured by 100% of our domestic, and 65% of our foreign, subsidiary equity interests, as well as accounts receivable,

inventory, intellectual property and certain other assets owned by the Company.

The Credit Agreement contains restrictions on the

Company’s ability to pay dividends or make distributions or other restricted payments if certain conditions in the Credit

Agreement are not fulfilled.

The Credit Agreement includes customary affirmative and negative covenants, including financial covenants

relating to the Company’s consolidated total leverage ratio and fixed charge coverage ratio.

The Company was in compliance

with the debt covenants set forth in the Credit Agreement as of December 31, 2019.

On May 3, 2019, concurrent with

entering into the Credit Agreement, the Company’s previous credit facility with JPMorgan Chase Bank, N.A.

Credit Agreement”), which provided for a revolving commitment of up to $75,000, was paid in full and terminated.

paid interest monthly on any borrowings on the 2018 Credit Agreement at London Inter-bank Offered Rate (“LIBOR”) plus

1.5% (3.8493% as of December 31, 2018), and an annual commitment fee of 0.25% on the unused portion of the commitment.

(a) As of December 31, 2020, the Company had drawn $ 15,579 on the $ 60,000 revolving commitment that was available under the credit agreement with JPMorgan Chase Bank, N.A., with a maturity date of May 3, 2024.

The Company pays interest monthly on any borrowings on the Credit Agreement (as defined below).

As of December 31, 2020 and 2019, the interest rate was 2.0625 % and 3.3125 %, respectively.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The aggregate maturities of the revolving

credit facility for the years subsequent to December 31, 2019 are as follows:

On November 12, 2020, the Borrowers entered into Amendment No.

2 (the “Amendment No.

2”) to that certain Credit Agreement, dated May 3, 2019 and as amended by Amendment No.

1 dated May 28, 2019 (the “Amendment No.

1”), with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto (collectively, the “Credit Agreement”).

The Credit Agreement as amended by Amendment No.

2, increased the maximum consolidated total leverage ratio permitted under the Credit Agreement to 4.00 :1.00 from 3.00 :1.00.

In addition, Amendment No.

2 permits, among other things, the issuance by the Company of debt securities, that may be convertible into equity interests of the Company, in an aggregate principal amount of up to $ 125,000 (the “Notes”), and eliminates the requirement that the proceeds therefrom be used to prepay any revolving loans or term loans under the Credit Agreement.

All obligations under the Credit Agreement are secured by 100 % of our domestic, and 65 % of our foreign, subsidiary equity interests, as well as accounts receivable, inventory, intellectual property and certain other assets owned by the Company.

The Credit Agreement contains restrictions on the Company’s ability to pay dividends or make distributions or other restricted payments if certain conditions in the Credit Agreement are not fulfilled .

The Credit Agreement includes customary affirmative and negative covenants, including financial covenants relating to the Company’s consolidated total leverage ratio and fixed charge coverage ratio.

The Company was in compliance with the debt covenants set forth in the Credit Agreement as of December 31, 2020.

(b) A foreign subsidiary of the Company has a revolving credit facility with a financial institution which matures on March 31, 2022.

The foreign subsidiary pays interest monthly on any borrowings on the credit facility.

As of December 31, 2020, the rate was 1.3387 %.

(c) Under the Credit Agreement, the Company had access to a term loan facility that was available for drawdown until May 3, 2020.

On April 30, 2020, the Company borrowed $ 20,000 under such term loan facility.

The Company is required to repay the term loan through quarterly payments of $ 1,000 each beginning with September 30, 2020, and any remaining obligations will be repaid in full on the maturity date of the Credit Agreement of May 3, 2024.

The Company pays interest monthly on any borrowings on the Credit Agreement.

As of December 31, 2020, the rate was 2.0625 %.

The aggregate maturities of the revolving credit facility for the years subsequent to December 31, 2020 are as follows:

Total future long-term debt payments

2 unchanged sentences

DERIVATIVE FINANCIAL INSTRUMENTS

The Company’s primary exchange rate

risk management objective is to mitigate the uncertainty of anticipated cash flows attributable to changes in foreign currency

exchange rates.

The Company primarily focuses on mitigating changes in cash flows resulting from sales denominated in currencies

other than the U.S.

The Company’s primary exchange rate risk management objective is to mitigate the uncertainty of anticipated cash flows attributable to changes in foreign currency exchange rates.

The Company primarily focuses on mitigating changes in cash flows resulting from sales denominated in currencies other than the U.S.

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 cash flow hedges.

The Company accounts

for these contracts as cash flow hedges and tests effectiveness by determining whether changes in the expected cash flow of the

derivative offset, within a range, changes in the expected cash flow of the hedged item.

At December 31, 2019, the Company’s

derivative contracts had remaining maturities of less than one and one-half years.

The counterparty to these transactions had both

long-term and short-term investment grade credit ratings.

The maximum net exposure of the Company’s credit risk to the counterparty

is generally limited to the aggregate unrealized loss of all contracts with that counterparty.

At December 31, 2019, there was

no such exposure to the counterparty.

The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized

gain of $45 on all contracts at December 31, 2019.

The Company’s derivative counterparty has strong credit ratings and as

a result, the Company does not require collateral to facilitate transactions.

The Company held the following contracts

designated as hedged instruments as of December 31, 2019 and 2018:

If the anticipated transactions are deemed probable, the resulting relationships are formally designated as cash flow hedges.

The Company accounts for these contracts as cash flow hedges and tests effectiveness by determining whether changes in the expected cash flow of the derivative offset, within a range, changes in the expected cash flow of the hedged item.

At December 31, 2020, the Company’s derivative contracts had remaining maturities of less than one and one-half years.

The counterparties to these transactions had both long-term and short-term investment grade credit ratings.

The maximum net exposure of the Company’s credit risk to the counterparties is generally limited to the aggregate unrealized loss of all contracts with that counterparty, which is $ 1,629 as of December 31, 2020.

The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain on all contracts.

At December 31, 2020, there was no such exposure to the counterparties.

The Company’s derivative counterparties have strong credit ratings and as a result, the Company does not require collateral to facilitate transactions.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The Company held the following contracts designated as hedged instruments as of December 31, 2020 and 2019:

December 31, 2020

3 unchanged sentences

February 2022

Foreign exchange contracts - Swiss Francs

December 31, 2019

Foreign exchange contracts - Canadian Dollars

February 2021

Foreign exchange contracts - Euros

February 2021

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 (loss) income and reclassified to sales in the period the underlying hedged transaction is recognized.

Gains of $1,017 and $256 were reclassified to sales during the years ended December 31, 2019 and 2018, respectively.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The following table presents the balance

sheet classification and fair value of derivative instruments as of December 31, 2019 and 2018:

Foreign exchange contracts - Swiss Francs

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 (loss) and reclassified to sales in the period the underlying hedged transaction is recognized.

Gains (losses) of $( 139 ) and $ 1,017 were reclassified to sales during the years ended December 31, 2020 and 2019, respectively.

The following table presents the balance sheet classification and fair value of derivative instruments as of December 31, 2020 and 2019:

Classification

9 unchanged sentences

Other long-term liabilities

ACCUMULATED OTHER COMPREHENSIVE

(LOSS) INCOME

Accumulated other comprehensive (loss)

income (“AOCI”) primarily consists of foreign currency translation adjustments and changes in our forward foreign exchange

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) (“AOCI”) primarily consists of foreign currency translation adjustments and changes in our forward foreign exchange contracts.

The components of AOCI, net of tax, were as follows:

2 unchanged sentences

Balance as of December 31, 2019

Other comprehensive (loss) income before reclassifications

Other comprehensive income (loss) before reclassifications

Amounts reclassified from other comprehensive income (loss)

Net current period other comprehensive (loss) income

Net current period other comprehensive income (loss)

Balance as of December 31, 2020

Other comprehensive (loss) income before reclassifications

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Foreign Currency Translation Adjustments

Unrealized Gains (Losses) on Cash Flow Hedges

Balance as of December 31, 2018

Other comprehensive income (loss) before reclassifications

Amounts reclassified from other comprehensive income (loss)

1 unchanged sentence

Balance as of December 31, 2019

The effects on net income of amounts reclassified

from unrealized gains (losses) on cash flow hedges for foreign exchange contracts and foreign currency translation adjustments

for the years ended December 31, 2019 and 2018 were as follows:

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The effects on net income of amounts reclassified from unrealized gains (losses) on cash flow hedges for foreign exchange contracts and foreign currency translation adjustments for the years ended December 31, 2020 and 2019 were as follows:

Gains (losses) reclassified from AOCI to the Consolidated Statements of Comprehensive Income

Affected line item in the Consolidated

Year ended December 31,

Twelve Months Ended

Statements of Comprehensive Income

December 31, 2020

December 31, 2019

Foreign exchange contracts:

Income tax expense (benefit)

Income tax (benefit) expense

Amount reclassified, net of tax

Foreign currency translation adjustments:

Total reclassifications from AOCI

The Company’s policy is to classify

reclassifications of cumulative foreign currency translation from AOCI to Other, net.

The Company’s policy is to classify reclassifications of cumulative foreign currency translation from AOCI to Other, net.

FAIR VALUE MEASUREMENTS

We measure certain financial assets and

liabilities at fair value on a recurring basis.

Fair value is defined as an exit price, representing the amount that would be received

to sell an asset or paid to transfer a liability in an orderly transaction between market participants, under a three-tier fair

value hierarchy 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.

Assets and liabilities measured

at fair value on a recurring basis at December 31, 2019 and 2018 were as follows:

We measure certain financial assets and liabilities at fair value on a recurring basis.

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy 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.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Assets and liabilities measured at fair value on a recurring basis at December 31, 2020 and 2019 were as follows:

December 31, 2020

4 unchanged sentences

Forward exchange contracts

Derivative financial instruments are recorded at fair value based on current market pricing models.

No nonrecurring fair value measurements existed at December 31, 2020 and 2019.

STOCKHOLDERS’ EQUITY

On August 6, 2018, the Company announced that its Board of Directors approved the initiation of a quarterly cash dividend program of $ 0.025 per share of the Company’s common stock (the “Quarterly Cash Dividend”) or $ 0.10 per share on an annualized basis.

The declaration and payment of future Quarterly Cash Dividends is subject to the discretion of and approval of the Company’s Board of Directors.

On May 1, 2020, the Company announced that, in light of the operational impact of the COVID-19 pandemic, its Board of Directors temporarily replaced its Quarterly Cash Dividend with a stock dividend (the “Quarterly Stock Dividend”).

In 2020, 2019 and 2018, our total Quarterly Cash Dividends were $ 1,520 , $ 2,987 and $ 1,488 , respectively.

In 2020, our total Quarterly Stock Dividends were $ 1,533 .

On January 29, 2021 , the Company announced that its Board of Directors approved the payment on February 19, 2021 of the Quarterly Cash Dividend of $ 0.025 to the record holders of shares of the Company’s common stock as of the close of business on February 8, 2021 .

During the year ended December 31, 2020, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with three existing stockholders of the Company.

Pursuant to the Purchase Agreement, the Company sold 900,000 shares of its common stock in a registered direct offering (the “Offering”).

The proceeds to the Company from the Offering were $ 11,476 .

On May 7, 2018, the Company announced a “modified Dutch auction” tender offer for Clarus’ common stock, as well as the preferred share purchase rights associated with such shares (collectively, the “Shares”).

On July 11, 2018, the tender offer expired, following which the Company announced it would accept 417,237 Shares for purchase at a price of $ 8.00 per Share, for an aggregate cost of approximately $ 3,338 , excluding fees and expenses.

The Company purchased shares of the Company’s common stock for $ 4,167 and $ 2,349 under the Company’s authorized stock repurchase program during the years ended December 31, 2019 and 2018, respectively.

EARNINGS PER SHARE

Basic earnings per share is computed by dividing earnings by the weighted average number of common shares outstanding during each period.

Diluted earnings per share is computed by dividing earnings by the total of the weighted average number of shares of common stock outstanding during each period, plus the effect of dilutive outstanding stock options and unvested restricted stock grants.

Potentially dilutive securities are excluded from the computation of diluted earnings per share if their effect is anti-dilutive to the loss from continuing operations.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Derivative financial instruments are recorded

at fair value based on current market pricing models.

No nonrecurring fair value measurements existed at December 31, 2019 and

EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed

by dividing earnings (loss) by the weighted average number of common shares outstanding during each period.

Diluted earnings (loss)

per share is computed by dividing earnings (loss) by the total of the weighted average number of shares of common stock outstanding

during each period, plus the effect of dilutive outstanding stock options and unvested restricted stock grants.

Potentially dilutive

securities are excluded from the computation of diluted earnings per share if their effect is anti-dilutive to the loss from continuing

The following table is a reconciliation

of basic and diluted shares of common stock outstanding used in the calculation of earnings per share:

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

Year Ended December 31,

2 unchanged sentences

Weighted average shares outstanding - diluted

Net income (loss) per share:

For the years ended December 31, 2019,

2018, and 2017, equity awards of 702, 1,164, and 3,009, respectively, were outstanding and anti-dilutive and therefore not included

in the calculation of net income (loss) per share for these periods.

Net income per share:

For the years ended December 31, 2020, 2019, and 2018, equity awards of 868 , 702 , and 1,164 , respectively, were outstanding and anti-dilutive and therefore not included in the calculation of net income per share for these periods.

STOCK-BASED COMPENSATION PLAN

Under the Company’s current 2015

Stock Incentive Plan (the “2015 Plan”), the Company’s Board of Directors (the “Board of Directors”)

has flexibility to determine the type and amount of awards to be granted to eligible participants, who must be employees, directors,

officers or consultants of the Company or its subsidiaries.

The 2015 Plan allows for grants of incentive stock options, nonqualified

stock options, restricted stock awards, stock appreciation rights, and restricted units.

The aggregate number of shares of common

stock that may be granted through awards under the 2015 Plan to any employee in any calendar year may not exceed 500 shares.

2015 Plan will continue in effect until December 2025 unless terminated sooner.

As of December 31, 2019, the number of shares

authorized and reserved for issuance under the 2015 Plan is 6,655 shares, subject to automatic annual increase equal to 5% of the

total number of shares of the Company’s outstanding common stock.

Under the Company’s current 2015 Stock Incentive Plan (the “2015 Plan”), the Company’s Board of Directors (the “Board of Directors”) has flexibility to determine the type and amount of awards to be granted to eligible participants, who must be employees, directors, officers or consultants of the Company or its subsidiaries.

The 2015 Plan allows for grants of incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, and restricted units.

The aggregate number of shares of common stock that may be granted through awards under the 2015 Plan to any employee in any calendar year may not exceed 500 shares.

The 2015 Plan will continue in effect until December 2025 unless terminated sooner.

As of December 31, 2020, the number of shares authorized and reserved for issuance under the 2015 Plan is 6,800 shares, subject to automatic annual increase equal to 5 % of the total number of shares of the Company’s outstanding common stock.

Options Granted:

During the year ended December 31, 2019,

the Company issued stock options for an aggregate of 188 shares under the 2015 Plan to directors and employees of the Company.

Of the 188 options issued, 38 options vest in four equal consecutive quarterly tranches from the date of grant.

The remaining 150

options issued vest in three equal tranches on June 5, 2020, 2021 and 2022.

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:

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

During the year ended December 31, 2020, the Company issued stock options for an aggregate of 1,098 shares under the 2015 Plan to directors and employees of the Company.

The options issued during the year ended December 31, 2020 generally vest and become exercisable over a period of one year to five years and expire ten years from the date of the grant.

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:

Number of options

Option vesting period

Grant price (per share)

$ 9.99 - $ 16.93

2 unchanged sentences

0.59 % - 1.00 %

0.00 % - 1.09 %

Expected volatility (a)

5 unchanged sentences

1.88 % - 1.93 %

2.65 % - 3.09 %

Expected life (years) (b)

Weighted average fair value

Weighted average fair value (per share)

$ 3.72 - $ 6.89

2 unchanged sentences

(a) Expected volatility is based upon the Company’s historical volatility.

(b) Because the Company does not have sufficient

historical exercise data to provide a reasonable basis upon which to estimate the expected term for these grants, the Company utilized

the simplified method in developing an estimate of the expected term of these options .

Using these assumptions, the fair value

of the stock options granted during the years ended December 31, 2019, 2018, and 2017 was $952, $6,059, and $1,020, respectively,

which will be amortized as stock-based compensation expense over the vesting period of the options.

Market Condition Restricted Shares Granted:

On January 7, 2019, the Company issued

and granted to an employee a restricted stock award of 350 restricted shares under the 2015 Plan, that will vest as follows:

the stock award will vest and become nonforfeitable if, on or before January 7, 2024, the closing price of the Company’s

common stock shall have equaled or exceeded $15.00 per share for twenty consecutive trading days (such 20th day being the “Price

Trigger Date”);

and (B) once the Price Trigger Date occurs, (i) 117 shares of the Company’s common stock shall vest

on each of the first and second anniversary of the Price Trigger Date;

and (ii) 116 shares of the Company’s common stock

shall vest on the third anniversary of the Price Trigger Date.

For computing the fair value of the 350 restricted shares with a

market condition, 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 assumptions below.

On January 7, 2019, the Company issued

and granted to an employee a restricted stock award of 150 restricted shares under the 2015 Plan, that will vest as follows:

the stock award will vest and become nonforfeitable if, on or before January 7, 2024, the closing price of the Company’s

common stock shall have equaled or exceeded $15.00 per share for twenty consecutive trading days (such 20th day being the Price

Trigger Date);

and (B) once the Price Trigger Date occurs, the shares shall equally vest on each of the first, second, third and

fourth anniversary of the Price Trigger Date.

For computing the fair value of the 150 restricted shares with a market condition,

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 assumptions below.

On June 1, 2017, the Company issued and

granted to an employee a restricted stock award of 500 restricted shares under the 2015 Plan, of which (i) 250 restricted shares

will vest if, on or before June 1, 2022, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall

have equaled or exceeded $10.00 per share for twenty consecutive trading days;

and (ii) 250 restricted shares will vest if, on

or before June 1, 2022, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or

exceeded $12.00 per share for twenty consecutive trading days.

For computing the fair value of the 500 restricted shares with a

market condition, 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 assumptions below.

(b) Because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for these grants, the Company utilized the simplified method in developing an estimate of the expected term of these options .

Using these assumptions, the fair value of the stock options granted during the years ended December 31, 2020, 2019, and 2018 was $ 5,310 , $ 952 , and $ 6,059 , respectively, which will be amortized as stock-based compensation expense over the vesting period of the options.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Stock Award Granted:

On September 14, 2020, the Company issued and granted to the Executive Chairman a stock award of 244 shares under the 2015 Plan which vested immediately.

The fair value of the stock award was calculated as of the date of grant using the closing market price.

The grant date fair value of the stock award granted during the year ended December 31, 2020 was $ 3,314 , which was immediately recognized to selling, general and administrative expenses.

Market Condition Restricted Shares Granted:

On August 27, 2020, the Company issued and granted to an employee a restricted stock award of 100 restricted shares under the 2015 Plan, of which 100 restricted shares will vest if, on or before August 27, 2023, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $ 15.00 per share for twenty consecutive trading days.

For computing the fair value of the 100 restricted shares with a market condition, the fair value of the restricted stock award grant has been estimated as of the date of grant using the Monte-Carlo pricing model with the assumptions below.

Subsequent to year end, the market-based condition was met and the restricted shares became fully vested.

On January 7, 2019, the Company issued and granted to an employee a restricted stock award of 350 restricted shares under the 2015 Plan, that will vest as follows:

(A) the stock award will vest and become nonforfeitable if, on or before January 7, 2024, the closing price of the Company’s common stock shall have equaled or exceeded $ 15.00 per share for twenty consecutive trading days (such 20th day being the “Price Trigger Date”);

and (B) once the Price Trigger Date occurs, (i) 117 shares of the Company’s common stock shall vest on each of the first and second anniversary of the Price Trigger Date;

and (ii) 116 shares of the Company’s common stock shall vest on the third anniversary of the Price Trigger Date.

For computing the fair value of the 350 restricted shares with a market condition, 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 assumptions below.

Subsequent to year end, the market-based condition was met and the Price Trigger Date occurred.

On January 7, 2019, the Company issued and granted to an employee a restricted stock award of 150 restricted shares under the 2015 Plan, that will vest as follows:

and (B) once the Price Trigger Date occurs, the shares shall equally vest on each of the first, second, third and fourth anniversary of the Price Trigger Date.

For computing the fair value of the 150 restricted shares with a market condition, 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 assumptions below.

Subsequent to year end, the market-based condition was met and the Price Trigger Date occurred.

August 27, 2020

January 7, 2019

3 unchanged sentences

$ 15.00 stock price target

$12.00 stock price target

Grant price (per share)

Dividend yield

Expected volatility

1 unchanged sentence

Expected term (years)

Weighted average fair value

Using these assumptions, the fair value

of the market condition restricted stock awards granted on January 7, 2019 was approximately $3,753 and June 1, 2017 was approximately

The total non-cash stock compensation expense

related to stock options and restricted stock awards recorded by the Company was as follows:

Weighted average fair value (per share)

Using these assumptions, the fair value of the market condition restricted stock awards granted on August 27, 2020 was approximately $ 991 and January 7, 2019 was approximately $ 3,753 .

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The total non-cash stock compensation expense related to stock options and restricted stock awards recorded by the Company was as follows:

Year Ended December 31,

1 unchanged sentence

Stock options

For the years ended December 31, 2019,

2018, and 2017, the majority of stock-based compensation costs were classified as selling, general and administrative expense.

For the years ended December 31, 2020, 2019, and 2018, the majority of stock-based compensation costs were classified as selling, general and administrative expense.

A summary of changes in outstanding options and restricted stock awards during the year ended December 31, 2020 is as follows:

Average Exercise

Intrinsic Value

Restricted Stock

Weighted Average Exercise Price

Aggregate Intrinsic Value

Restricted Stock Awards

Outstanding at December 31, 2019

2 unchanged sentences

Options exercisable at December 31, 2020

The following table summarizes the exercise

price range, weighted average exercise price, and remaining contractual lives by significant ranges for options outstanding and

exercisable as of December 31, 2019:

The following table summarizes the exercise price range, weighted average exercise price, and remaining contractual lives by significant ranges for options outstanding and exercisable as of December 31, 2020:

Remaining Life In Years

Weighted Average

Exercise Price Range

2 unchanged sentences

$ 12.51 - $ 16.93

The intrinsic value of options

exercised was $607, $315, and $28 during the years ended December 31, 2019, 2018, and 2017, respectively.

The intrinsic value

of restricted stock awards vested was $3,252, $2,720, and $0 during the years ended December 31, 2019, 2018, and 2017,

respectively.

Total fair value of options vested during the years ended December 31, 2019, 2018, and 2017 was $1,610, $1,757,

and $1,123, respectively.

Total fair value of restricted stock awards vested during the years ended December 31, 2019, 2018,

and 2017 was $919, $1,076, and $0, respectively.

The intrinsic value of options exercised was $ 2,006 , $ 607 , and $ 315 during the years ended December 31, 2020, 2019, and 2018, respectively.

The intrinsic value of restricted stock awards vested was $ 0 , $ 3,252 , and $ 2,720 during the years ended December 31, 2020, 2019, and 2018, respectively.

Total fair value of options vested during the years ended December 31, 2020, 2019, and 2018 was $ 1,722 , $ 1,610 , and $ 1,757 , respectively.

Total fair value of restricted stock awards vested during the years ended December 31, 2020, 2019, and 2018 was $ 0 , $ 919 , and $ 1,076 , respectively.

The fair value of unvested restricted stock awards is determined based on the market price of our shares of common stock on the grant date or using the Monte-Carlo pricing model.

As of December 31, 2020, there were 1,814 unvested stock options and unrecognized compensation cost of $ 7,413 related to unvested stock options, as well as 600 unvested restricted stock awards and unrecognized compensation cost of $ 2,430 related to unvested restricted stock awards.

Unrecognized compensation cost of unvested stock options and restricted stock awards are expected to be recognized over the weighted average period of 2.6 years and 2.3 years, respectively.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The fair value of unvested restricted stock

awards is determined based on the market price of our shares of common stock on the grant date or using the Monte-Carlo pricing

As of December 31, 2019, there were 1,209 unvested stock options and unrecognized compensation cost of $4,092 related to

unvested stock options, as well as 600 unvested restricted stock awards and unrecognized compensation cost of $2,928 related to

unvested restricted stock awards.

Unrecognized compensation cost of unvested stock options and restricted stock awards are expected

to be recognized over the weighted average period of 2.9 years and 3.6 years, respectively.

RESTRUCTURING

As part of the conclusion of the Company’s

review of strategic alternatives, the Company initiated restructuring activities in efforts to further realign resources within

the organization (the “2015 Restructuring Plan”) and completed the plan in 2018 with a final payment in 2019.

the year ended December 31, 2019, 2018 and 2017, we incurred $13, $137 and $160, respectively, of restructuring charges related

to the 2015 Restructuring Plan.

We have incurred $2,694 of cumulative restructuring charges since the commencement of the 2015

Restructuring Plan.

As part of the conclusion of the Company’s review of strategic alternatives, the Company initiated restructuring activities in efforts to further realign resources within the organization (the “2015 Restructuring Plan”) and completed the plan in 2018 with a final payment in 2019.

During the year ended December 31, 2019 and 2018, we incurred $ 13 and $ 137 , respectively, of restructuring charges related to the 2015 Restructuring Plan.

We have incurred $ 2,694 of cumulative restructuring charges since the commencement of the 2015 Restructuring Plan.

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 it is reasonably possible 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.

There is a reasonable possibility of loss from contingencies in excess

of the amounts accrued by the Company in the accompanying consolidated balance sheets;

however, the actual amounts of such possible

losses cannot currently be reasonably estimated by the Company at this time.

It is possible that, as additional information becomes

available, the impact on the Company could have a different effect.

On December 22, 2017, the U.S.

enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”).

The Company recognized

the income tax effects of the Tax Act in its 2017 financial statements in accordance with SEC Staff Accounting Bulletin No.

(“SAB 118”), which provides guidance for the application of ASC 740, Income Taxes , in the reporting period in

which the Tax Act was signed into law.

SAB 118 provides a measurement period that should not extend beyond one year from

the Tax Act enactment date for companies to complete the accounting under ASC 740.

In accordance with SAB 118, a company must reflect

the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

The Company finalized

all tax positions associated with SAB 118 by filing the 2017 tax return during the year ended December 31, 2018.

The Company’s foreign operations

that are considered to be permanently reinvested have statutory tax rates of approximately 25%.

Consolidated income (loss) before income

taxes consists of the following:

As a consumer goods manufacturer and distributor, the Company faces the risk of product liability and related lawsuits involving claims for substantial money damages, product recall actions and higher than anticipated rates of warranty returns or other returns of goods.

The Company is therefore vulnerable to various personal injury and property damage lawsuits relating to its products and incidental to its business.

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 it is reasonably possible 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.

There is a reasonable possibility of loss from contingencies in excess of the amounts accrued by the Company in the accompanying consolidated balance sheets;

however, the actual amounts of such possible losses cannot currently be reasonably estimated by the Company at this time.

It is possible that, as additional information becomes available, the impact on the Company could have a different effect.

Consolidated income before income taxes consists of the following:

Year Ended December 31,

Foreign operations

Income (loss) before income tax

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The components of the (benefit) provision

for income taxes consist of the following:

Income before income tax

The components of the benefit for income taxes consist of the following:

Year Ended December 31,

3 unchanged sentences

Income tax benefit

The following is a reconciliation of the

statutory federal income tax rate to the effective rate reported in the Company’s financial statements:

The Company’s foreign operations that are considered to be permanently reinvested have statutory tax rates of approximately 25 %.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The following is a reconciliation of the statutory federal income tax rate to the effective rate reported in the Company’s financial statements:

Year Ended December 31,

Statutory income tax expense (benefit)

Statutory income tax expense

Increase (decrease) in income taxes resulting from:

4 unchanged sentences

Change in effective state rate

Deferred tax asset write-off

Translation loss

Impact of tax reform

Deferred tax asset write-offs

Executive compensation limitation

Change in valuation allowance

Income tax benefit

The deferred tax asset write-off represents

a write-off of a historical investment that is fully offset by a release in the valuation allowance.

Deferred income tax assets and liabilities

are determined based on the difference between the financial reporting carrying amounts and tax bases of existing assets and liabilities

and operating loss and tax credit carryforwards.

Significant components of the Company’s existing deferred income tax assets

and liabilities as of December 31, 2019 and 2018 are as follows:

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The deferred tax asset write-offs relate to historical research and development tax credits and certain investments that were fully offset by a release in the valuation allowance.

Deferred income tax assets and liabilities are determined based on the difference between the financial reporting carrying amounts and tax bases of existing assets and liabilities and operating loss and tax credit carryforwards.

Significant components of the Company’s existing deferred income tax assets and liabilities as of December 31, 2020 and 2019 are as follows:

Deferred tax assets:

6 unchanged sentences

Deferred tax liabilities:

The Company has provided a valuation allowance

against a portion of the deferred tax assets as of December 31, 2019, because the ultimate realization of those assets does not

meet the more likely than not criteria.

The majority of the Company’s deferred tax assets consist of net operating loss carryforwards

for federal tax purposes.

If a change in control were to occur, these could be limited under Section 382 of the Internal Revenue

Code of 1986 (“Code”), as amended.

In assessing the realizability of deferred

income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax

assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable

income during the periods in which those temporary differences become deductible and net operating loss and credit carryforwards

The estimates and judgments associated with the Company’s valuation allowance on deferred tax assets are considered

critical due to the amount of deferred tax assets recorded by the Company on its consolidated balance sheet and the judgment required

in determining the Company’s potential for future taxable income.

The need for a valuation allowance is reassessed at each

reporting period.

As a result of the Tax Act, the U.S.

corporate tax rate was reduced to 21 percent, effective January 1, 2018.

In addition, the corporate Alternative Minimum Tax (“AMT”)

was repealed and taxpayers with AMT credit carryovers in excess of their regular tax liability may have credits refunded over multiple

years from 2018 to 2022.

For tax years beginning January 1, 2018,

net operating losses generated will be carried forward indefinitely, thus creating an indefinite-lived deferred tax asset.

only 80% of the net operating losses generated after January 1, 2018 may be used to offset future taxable income.

changes in the tax law, management has scheduled out the reversal of deferred tax assets and liabilities to determine the generation

of future net operating loss carryforwards with an indefinite reversal period.

The resultant indefinite lived net operating loss

can only offset 80% of future taxable income generated by indefinite lived deferred tax liabilities.

The net change in the valuation allowance

for deferred income tax assets was ($13,490), ($3,689), and ($21,851) during the years ended December 31, 2019, 2018, and 2017,

respectively.

A roll forward of our valuation allowance for deferred income tax assets for the years ended December 31, 2019, 2018,

and 2017 is as follows:

Certain deferred income tax balances are not netted as they represent deferred amounts applicable to different taxing jurisdictions.

The Company has provided a valuation allowance against a portion of the deferred tax assets as of December 31, 2020, because the ultimate realization of those assets does not meet the more-likely-than-not criteria.

The majority of the Company’s deferred tax assets consist of net operating loss carryforwards for federal tax purposes.

If a change in control were to occur, these could be limited under Section 382 of the Internal Revenue Code of 1986 (“Code”), as amended.

In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and net operating loss and credit carryforwards expire.

The estimates and judgments associated with the Company’s valuation allowance on deferred tax assets

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

are considered critical due to the amount of deferred tax assets recorded by the Company on its consolidated balance sheets and the judgment required in determining the Company’s potential for future taxable income.

The need for a valuation allowance is reassessed at each reporting period.

The net change in the valuation allowance for deferred income tax assets was ($ 6,284 ), ($ 13,490 ), and ($ 3,689 ) during the years ended December 31, 2020, 2019, and 2018, respectively.

A roll forward of our valuation allowance for deferred income tax assets for the years ended December 31, 2020, 2019, and 2018 is as follows:

Balance at Beginning of Year

Charged to Costs and Expenses

Other Adjustments (a)

Other Adjustments

Balance at End of Year

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(a) During the year ended December 31, 2017, the decrease in valuation allowance is due to the Tax

As of December 31, 2019, the Company had

net operating loss and research and experimentation credit for U.S.

As of December 31, 2020, the Company has net operating loss carryforwards (“NOLs”) and research and experimentation credit for U.S.

federal income tax purposes of $ 120,309 and $ 1,889 , respectively.

The Company believes its U.S.

Federal net operating loss (“NOL”) will substantially offset its future U.S.

income taxes until expiration.

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.

Federal NOLs will substantially offset its future U.S.

Federal income taxes until expiration.

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.

NOLs available to offset taxable income,

subject to compliance with Section 382 of the Code, begin to expire based upon the following schedule:

income and will be offset with the NOLs.

NOLs available to offset taxable income, subject to compliance with Section 382 of the Code, begin to expire based upon the following schedule:

Net Operating Loss Carryforward Expiration Dates

3 unchanged sentences

2025 and beyond

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.

conducts its business globally.

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.

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 in the U.S.

federal and state

jurisdictions of 2014-2018 and in the foreign jurisdictions of 2006-2018.

The Company recognizes interest and penalties related

to unrecognized tax benefits in income tax expense.

A reconciliation of the beginning and ending

amount of total unrecognized tax benefits for the years ended December 31, 2019, 2018 and 2017 are follows:

federal jurisdiction and various state and foreign jurisdictions and are subject to examination for the open tax years in the U.S.

federal and state jurisdictions of 2015-2019 and in the foreign jurisdictions of 2007-2019.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense.

A reconciliation of the beginning and ending amount of total unrecognized tax benefits for the years ended December 31, 2020, 2019 and 2018 are follows:

Balance, beginning of year

2 unchanged sentences

Reductions for prior year tax positions

Payments in settlement

Balance, end of year

Included in the balance of total unrecognized

tax benefits at December 31, 2019 and 2018, are potential benefits of $561 and $545, respectively, that if recognized, would affect

the effective rate, subject to impact of valuation allowance, on income from continuing operations.

Unrecognized tax benefits that

reduce a net operating loss, similar tax loss or tax credit carryforward are presented as a reduction to deferred income taxes.

As a result, the Company classified $462 and $384 of its unrecognized tax benefit as a reduction to deferred tax assets as of December

31, 2019 and 2018, respectively.

Interest and penalty expense recognized

related to uncertain tax positions amounted to $0, $0, and $13 during the years ending December 31, 2019, 2018, and 2017, respectively.

Total accrued interest and penalties as of December 31, 2019 and 2018 were $4 and $9, respectively, and were included in accounts

payable and accrued liabilities.

Included in the balance of total unrecognized tax benefits at December 31, 2020 and 2019, are potential benefits of $ 427 and $ 561 , respectively, that if recognized, would affect the effective rate, subject to impact of valuation allowance, on income from continuing operations.

Unrecognized tax benefits that reduce a net operating loss, similar tax loss or tax credit carryforward are presented as a reduction to deferred income taxes.

As a result, the Company classified $ 292 and $ 462 of its unrecognized tax benefit as a reduction to deferred tax assets as of December 31, 2020 and 2019, respectively.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Interest and penalty expense recognized related to uncertain tax positions were not significant during the years ending December 31, 2020, 2019, and 2018, respectively.

Total accrued interest and penalties as of December 31, 2020 were not significant and $ 4 as of December 31, 2019 and were included in accounts payable and accrued liabilities.

SEGMENT INFORMATION

We operate our business structure within

two segments.

These segments are defined based on the internal financial reporting used by management.

Certain significant selling

and general and administrative expenses are not allocated to the segments including non-cash stock compensation expense.

is described below:

Our Black Diamond segment, which includes Black Diamond Equipment, PIEPS, and SKINourishment, is

a global leader in designing, manufacturing, and marketing innovative outdoor engineered equipment and apparel for climbing, mountaineering,

trail running, backpacking, skiing, and a wide range of other year-round outdoor recreation activities.

Our Black Diamond segment

offers a broad range of products including:

high-performance, activity-based apparel (such as shells, insulation, midlayers, pants

and logowear);

rock-climbing footwear and equipment (such as carabiners, protection devices, harnesses, belay devices, helmets,

and ice-climbing gear);

We operate our business structure within two segments.

These segments are defined based on the internal financial reporting used by our chief operating decision maker to allocate resources and assess performance .

Certain significant selling and general and administrative expenses are not allocated to the segments including non-cash stock compensation expense.

Each segment is described below:

 Our Black Diamond segment, which includes Black Diamond Equipment, PIEPS, and SKINourishment, is a global leader in designing, manufacturing, and marketing innovative outdoor engineered equipment and apparel for climbing, mountaineering, trail running, backpacking, skiing, and a wide range of other year-round outdoor recreation activities.

Our Black Diamond segment offers a broad range of products including:

high-performance, activity-based apparel (such as shells, insulation, midlayers, pants and logowear);

rock-climbing footwear and equipment (such as carabiners, protection devices, harnesses, belay devices, helmets, and ice-climbing gear);

technical backpacks and high-end day packs;

3 unchanged sentences

and skincare and other sport-enhancing products.

We also offer advanced skis, ski poles, ski skins, and snow safety products, including

avalanche airbag systems, avalanche transceivers, shovels, and probes.

Our Sierra segment, which includes Sierra, is an iconic American manufacturer of a wide range of

high-performance bullets and ammunition for both rifles and pistols.

These bullets are used for precision target shooting, hunting

and military and law enforcement purposes.

As noted above, the Company has a wide

variety of technical outdoor equipment and lifestyle products focused on the climb, ski, mountain and sport product categories

that are sold to a variety of customers in multiple end markets.

While there are multiple products sold, the terms and nature of

revenue recognition policy is similar for all segments.

We also offer advanced skis, ski poles, ski skins, and snow safety products, including avalanche airbag systems, avalanche transceivers, shovels, and probes.

 Our Sierra segment, which includes Sierra and Barnes, includes two iconic American manufacturers of a wide range of high-performance bullets and ammunition for both rifles and pistols.

These bullets are used for precision target shooting, hunting and military and law enforcement purposes.

As noted above, the Company has a wide variety of technical outdoor equipment and lifestyle products focused on the climb, ski, mountain and sport product categories that are sold to a variety of customers in multiple end markets.

While there are multiple products sold, the terms and nature of revenue recognition policy is similar for all segments.

The sport product category represents the Sierra segment revenue.

We divide our product offerings into four

primary categories of climb, mountain, ski and sport.

During the year ended December 31, 2019, revenue for the categories

of climb, mountain, ski and sport was 31%, 34%, 22% and 13%, respectively.

During the year ended December 31, 2018, revenue for

the categories of climb, mountain, ski and sport was 30%, 34%, 19% and 17%, respectively.

Financial information for our segments

is as follows:

We divide our product offerings into four primary categories of climb, mountain, ski and sport.

Revenue by category as a percentage of total consolidated revenues is as follows:

Year Ended December 31,

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

Financial information for our segments is as follows:

Year Ended December 31,

Sales to external customers:

10 unchanged sentences

Restructuring charge

Merger and integration

Transaction costs

1 unchanged sentence

Interest expense, net

Income (loss) before income tax

There were no intercompany sales between

the Black Diamond and Sierra segments for the periods presented.

Restructuring charges for the periods presented relate to the

Black Diamond segment.

Total assets by segment, as of December

31, 2019 and 2018, were as follows:

Income before income tax

There were no intercompany sales between the Black Diamond and Sierra segments for the periods presented.

Restructuring charges for the periods presented relate to the Black Diamond segment.

Total assets by segment, as of December 31, 2020 and 2019, were as follows:

Black Diamond

Capital expenditures, depreciation and

amortization by segment is as follows.

Capital expenditures, depreciation and amortization by segment is as follows.

Year Ended December 31,

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Total amortization

The Company has entered into leases for

certain facilities, vehicles and other equipment.

Our operating leases have remaining contractual terms of up to six years, some

of which include options to extend the leases for up to five years.

Our operating lease costs are primarily related to facility

leases for inventory warehousing, administration offices and vehicles.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

The Company has entered into leases for certain facilities, vehicles and other equipment.

Our operating leases have remaining contractual terms of up to nine years , some of which include options to extend the leases for up to ten years .

Our operating lease costs are primarily related to facility leases for inventory warehousing, administration offices and vehicles.

The Company’s finance leases are immaterial.

Operating lease ROU assets and liabilities

as of December 31, 2019 are as follows:

Operating lease ROU assets and liabilities as of December 31, 2020 and 2019, were as follows:

Balance Sheet Classification

December 31, 2020

December 31, 2019

Operating lease ROU assets

4 unchanged sentences

Other long-term liabilities

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Operating lease costs are as follows:

Affected line item in the

Operating lease costs were as follows:

Affected line item in the Consolidated

Statements of Comprehensive Income

December 31, 2020

December 31, 2019

Cost of goods sold, Selling, general and administrative

3 unchanged sentences

Cost of goods sold, Selling, general and administrative

The maturity of operating lease liabilities

as of December 31, 2019 are as follows:

The maturity of operating lease liabilities as of December 31, 2020 are as follows:

Years Ending December 31,

6 unchanged sentences

Long-term lease obligations

As of December 31, 2019, our operating

leases have a weighted-average remaining lease term of 2.0 years and a weighted-average discount rate of 3.97%.

Total rent expense

of the Company for the years ended December 31, 2018 and 2017 was $838 and $865, respectively, as determined prior to the adoption

Future minimum lease payments required under noncancelable operating leases that have initial or remaining noncancelable

lease term in excess of one year at December 31, 2018 as determined prior to the adoption of ASC 842 are as follows:

Years Ending December 31,

Future Minimum Lease

RELATED PARTY TRANSACTIONS

5% Unsecured Subordinated Notes due

As part of the consideration payable to

the stockholders of a formerly acquired entity, the Company issued 5% Unsecured Subordinated Notes due May 28, 2017 (the “Merger

Consideration Subordinated Notes”) to members of the Board of Directors and five former employees.

Given the below market

interest rate for comparably secured notes and the relative illiquidity of the Merger Consideration Subordinated Notes, we discounted

the notes at the date of acquisition.

We were accreting the discount on the Merger Consideration Subordinated Notes to interest

expense using the effective interest method over the term of the Merger Consideration Subordinated Notes.

In February 2017, the

Board of Directors approved the repayment of the Merger Consideration Subordinated Notes.

On February 13, 2017, the entire principal

amount and all accrued interest were paid in full.

The note discount of $814 was expensed and recognized as interest expense during

the year ended December 31, 2017.

Upon the Company’s acquisition of

Sierra, on August 21, 2017, the Company paid a fee in the amount of $1,000 to Kanders & Company, Inc.

Company”), which is included in transaction costs, in consideration of the significant support received by the Company from

Kanders & Company in sourcing, structuring, performing due diligence and negotiating the acquisition.

the Company’s Executive Chairman of the Board of Directors and a member of its Board of Directors, is the sole stockholder

of Kanders & Company.

As of December 31, 2020, our operating leases have a weighted-average remaining lease term of 4.32 years and a weighted-average discount rate of 2.24 %.

Total rent expense of the Company for the year ended December 31, 2018 was $ 838 , as determined prior to the adoption of ASC 842.

CLARUS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(in thousands, except per share amounts)

SUPPLEMENTARY DATA – QUARTERLY

FINANCIAL DATA (Unaudited)

The following table sets forth selected

quarterly data for the years ended December 31, 2019 and 2018.

The operating results are not indicative of results for any future

RELATED PARTY TRANSACTIONS

During the year ended December 31, 2020, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with three existing stockholders of the Company.

Pursuant to the Purchase Agreement, the Company sold its common stock in a registered direct offering (the “Offering”).

Upon the Company’s closing of the Offering, the Company paid a fee in the amount of $ 250 to Kanders & Company, Inc.

(“Kanders & Company”), which were deducted from the net proceeds, in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, and negotiating the Offering.

Kanders, the Company’s Executive Chairman of the Board of Directors is a member of the Board of Directors and sole stockholder of Kanders & Company.

Upon the Company’s acquisition of Barnes, on October 2, 2020, the Company paid a fee in the amount of $ 500 to Kanders & Company, which is included in transaction costs, in consideration of the significant support received by the Company from Kanders & Company in sourcing, structuring, performing due diligence and negotiating the acquisition of Barnes.

SUPPLEMENTARY DATA – QUARTERLY FINANCIAL DATA (Unaudited)

The following table sets forth selected quarterly data for the years ended December 31, 2020 and 2019.

The operating results are not indicative of results for any future period.

Year Ended December 31, 2020

16 unchanged sentences

Net income (loss) per share:

Basic and diluted net income (loss) per share are computed independently for each of the quarters presented.

Therefore, the sum of the quarterly amounts may not equal the total computed for the year.

CLARUS CORPORATION

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data