xQuarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

¨Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨ Nox

As of ~~October 30, 2019,~~May 6, 2020, there were 29,759,620 shares of common stock, par value $0.0001, outstanding.

Nine Months Ended
September 30, 2019 September 30, 2018
Sales
Domestic sales $ 87,805 $ 79,667
International sales 80,610 75,167
Total sales 168,415 154,834

Cost of goods sold 109,810 101,290
Gross profit 58,605 53,544

Operating expenses
Selling, general and administrative 51,215 48,692
Restructuring charge 13 86
Transaction costs 124 383

Total operating expenses 51,352 49,161

Operating income 7,253 4,383

Other (expense) income
Interest expense (978 ) (1,020 )
Other, net (260 ) 31

Total other expense, net (1,238 ) (989 )

Income before income tax 6,015 3,394
Income tax benefit (570 ) (359 )
Net income 6,585 3,753

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment (869 ) (546 )
Unrealized income on hedging activities 171 721
Other comprehensive (loss) income (698 ) 175
Comprehensive income $ 5,887 $ 3,928

Net income per share:
Basic $ 0.22 $ 0.13
Diluted 0.21 0.12

Weighted average shares outstanding:
Basic 29,841 29,939
Diluted 30,999 30,162

The accompanying unaudited condensed consolidated financial statements of Clarus Corporation and subsidiaries (which may be referred to as the “Company,” “Clarus,” “we,” “us” or “our”) as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 and for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments, except otherwise disclosed) necessary for a fair presentation of the unaudited condensed consolidated financial statements have been included. The results offor the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 are not necessarily indicative of the results to be obtained for the year ending December 31, ~~2019.~~2020. These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018,~~2019, filed with the Securities and Exchange Commission (the “SEC”). on March 9, 2020.

Clarus, incorporated in Delaware in 1991, acquired Black Diamond Equipment, Ltd. (“Black Diamond Equipment”) ~~and Gregory Mountain Products, LLC (“Gregory Mountain Products”)~~ in May 2010 and changed its name to Black Diamond, Inc. in January 2011. In ~~July 2012, we acquired POC Sweden AB and its subsidiaries (collectively, “POC”) and in~~ October 2012, we acquired PIEPS Holding GmbH and its subsidiaries (collectively, “PIEPS”).

~~On July 23, 2014, the Company completed the sale of certain assets to Samsonite LLC comprising Gregory Mountain Products’ business. On October 7, 2015, the Company sold its equity interests in POC.~~

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. (“Sierra”). On November 6, 2018, the Company acquired the assets of SKINourishment, Inc. (“SKINourishment”).

~~On November 6, 2018,~~May 11, 2020 (the “Record Date”) will be entitled to receive 0.00234 of a share of the Company’s common stock for each share of common stock held on the Record Date. The Company ~~acquired~~will distribute the ~~assets~~stock dividend on May 22, 2020, the distribution date. No fractional shares will be issued, and stockholders will receive cash for such fractional interests based on the closing market price of ~~SKINourishment, Inc. (“SKINourishment”).~~the Company’s common stock on the Record Date. The quarterly stock dividend will have a value of $0.025 per share, based on the closing market price on April 30, 2020. The dividend reflects an aggregate distribution of approximately 70 shares with a market value of approximately $744.

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. and internationally.

Through our Black Diamond, PIEPS, and SKINourishment brands, we offer a broad range of products including: ~~high performance~~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; trekking poles; headlamps and lanterns; gloves and mittens; 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.

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 and has negatively affected the U.S. and global economy, disrupted global supply chains, and resulted in significant travel and 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.

The decline in retail demand over the second half of March 2020 negatively impacted our sales and profitability for the first quarter of 2020. We also expect an adverse 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 of this Quarterly Report.

We are mitigating some of the negative impacts to our operating results by taking significant actions, including postponing non-essential capital expenditures, reducing operating costs, modulating production in line with demand, initiating workforce reductions and furloughs, and substantially reducing discretionary spending. We will continue to adjust mitigation measures as needed related to health and safety. Those measures might 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.

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 suppliers, dealers or customers may also affect the Company’s future 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, tax assets, and other assets.

The preparation of financial statements in conformity with 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~~Estimates are used to ~~purchase price allocation,~~record the allowance for credit losses and doubtful accounts, liabilities for product warranties, excess or obsolete inventory, valuation of deferred tax assets, and valuation of ~~goodwill,~~ long-lived assets, goodwill and other intangible assets. We base our estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.

OnIn 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 was effective upon issuance and allowed application to contract changes as early as January 1, ~~2019,~~2020. The provisions have impact as contract modifications and other changes occur while LIBOR is phased out. The Company is in the ~~Company adopted Accounting Standards Codification (“ASC”) Topic 842,~~~~Leases,~~process of evaluating the optional relief guidance provided within this ASU. Management will continue its assessment and ~~elected~~monitor regulatory developments during the ~~prospective method which was applied to all leases in effect~~LIBOR transition period.

Inventories, as of ~~January 1, 2019. Results for reporting periods beginning after January 1,~~March 31, 2020 and December 31, 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~~.were as follows:

Under the new guidance, lessees are required to recognize a lease liability and a right-of-use (“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.

ASC 842 provides new guidance that resulted in recording 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.

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 nonlease 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. Nonlease components are excluded from the 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.

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. See Note 14. Leases for the financial position impact and additional disclosures.

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

~~Inventories, as of September 30, 2019 and December 31, 2018, were as follows:~~

Property and equipment, net, as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, were as follows:

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

~~There were no changes in the balances in goodwill from the prior period. The following table summarizes the balances in goodwill by segment:~~

The Company’s indefinite lived intangible assets consist 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. Tradenames and trademarks are not amortized, but reviewed annually for impairment or upon the existence of a triggering event. The following table summarizes the changes in indefinite lived intangible assets:

The Company’s other intangible assets, such as certain customer lists and relationships, product technologies, tradenames, trademarks and core technologies, are amortizable over their estimated useful lives. The following table summarizes the changes in gross other intangible assets:

Other intangible assets, net of amortization as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, were as follows:

Long-term debt as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, was as follows:

~~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~~The Credit Agreement ~~with JPMorgan Chase Bank, N.A., as administrative agent, and~~contains restrictions on the ~~lenders from time~~Company’s ability 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.pay dividends or make distributions or other restricted payments if certain conditions in the Credit Agreement are not fulfilled. The Credit Agreement also ~~permits the Borrowers, subject~~includes other customary affirmative and negative covenants, including financial covenants relating 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 rate. 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~~ratio 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~~fixed charge coverage ratio. The Company ~~pays interest monthly on any borrowings on~~was in compliance with the ~~Credit Agreement. As of September 30, 2019, the rate was 3.5625%.~~

~~On May 3, 2019, concurrent with entering into~~debt covenants set forth in the Credit Agreement the Company’s previous credit facility with JPMorgan Chase Bank, N.A. (the “2018 Credit Agreement”), which provided for a revolving commitment of up to $75,000, was paid in full and terminated. The Company 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~~March 31, ~~2018), and an annual commitment fee of 0.25% on the unused portion of the commitment.~~2020.

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. dollar. The Company manages this risk primarily by using currency forward and option contracts. If the anticipated transactions are deemed probable, the resulting relationships are formally designated as 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 ~~September 30, 2019,~~March 31, 2020, the Company’s derivative contracts had remaining maturities of approximately one year or less. 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 ~~September 30, 2019,~~March 31, 2020, there was no such exposure to the counterparty. The Company’s exposure of counterparty credit risk is limited to the aggregate unrealized gain of ~~$885~~$1,361 on all contracts at ~~September 30, 2019.~~March 31, 2020. 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~~hedging instruments as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

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 in earnings. Gains ~~(losses)~~ of ~~$261~~$288 and ~~$255~~$281 were reclassified to sales during the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $844 and $(75) were reclassified to sales during the nine months ended September 30, 2019 and 2018,~~ respectively.

The following table presents the balance sheet classification and fair value of derivative instruments as of ~~September 30,~~March 31, 2019 and December 31, ~~2018:~~2019:

Accumulated other comprehensive income (“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:

The effects on net income of amounts reclassified from unrealized gains ~~(losses)~~ on cash flow hedges for foreign exchange contracts for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, were as follows:

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

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 that 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 ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 were as follows:

Derivative financial instruments are recorded at fair value based on current market pricing models. No nonrecurring fair value measurements existed at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

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.

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

For the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ equity awards of 798 and ~~986, respectively, and for the nine months ended September 30, 2019 and 2018, equity awards of 669 and 1,408,~~860, respectively, were outstanding and anti-dilutive and therefore not included in the calculation of earnings per share for these periods.

Under the Company’s current 2015 Stock Incentive Plan (the “2015 Plan”), the Company’s 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.

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company issued stock options for an aggregate of ~~188~~125 shares under the 2015 Plan to ~~directors and~~ employees of the Company. ~~Of the 188~~The 125 options issued ~~38 options~~ vest in four equal ~~consecutive quarterly tranches from the date of grant. 150 vest in three equal~~ tranches on ~~June 5,~~December 31, 2020, 2021, 2022 and ~~2022.~~2023.

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:

~~Using these assumptions, the~~The grant date fair value of the stock options granted during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 was ~~$952,~~$543, which will be recognized over the vesting period of the options.

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.

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: (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, 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.

~~Using these assumptions, the fair value of the market condition restricted stock awards granted on January 7, 2019 was approximately $3,962.~~

The total non-cash stock compensation expense related to restricted stock, stock options and stock awards recorded by the Company for the three months ended ~~September 30,~~March 31, 2020 and 2019 was $613 and ~~2018 was $678 and $912, respectively, and for the nine months ended September 30, 2019 and 2018 was $2,246 and $2,067,~~$785, respectively. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ the majority of stock-based compensation costs were classified as selling, general and administrative expenses.

As of ~~September 30, 2019,~~March 31, 2020, there were ~~1,685~~1,325 unvested stock options and unrecognized compensation cost of ~~$4,587~~$4,228 related to unvested stock options, as well as 600 unvested restricted stock awards and unrecognized compensation costs of ~~$3,136~~$2,724 related to unvested restricted stock awards.

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 condensed 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. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). As a result of the Tax Act, the~~The Company’s U.S. federal ~~corporate~~statutory tax rate ~~was reduced to~~of 21%~~, 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.~~

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

The difference between the Company’s estimated effective tax rate and the U.S. federal statutory tax rate of 21% for the three months ended September 30, 2019, was primarily attributed to a discrete benefit related to stock compensation. For the nine months ended September 30, 2019, the difference between the Company’s estimated effective tax rate and the U.S. federal statutory tax rate was primarily attributed to the release of an additional portion of the Company’s valuation allowance based on the Company’s forecasted pre-tax earnings for the year.

As of December 31, ~~2018,~~2019, the Company’s gross deferred tax asset was ~~$47,922.~~$43,945. The Company had recorded a valuation allowance of ~~$42,122,~~$28,632, resulting in a net deferred tax asset of ~~$5,800,~~$15,313, before deferred tax liabilities of ~~$8,719.~~$8,633. The Company has provided a valuation allowance against a portion of the deferred tax assets as of March 31, 2020 and December 31, ~~2018,~~2019, because the ultimate realization of those assets did not meet the more likely than not criteria. The majority of the Company’s deferred tax assets consist of net operating loss (“NOL”) 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 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 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 future taxable income. The need for a valuation allowance is reassessed at each interim reporting period.

As of December 31, ~~2018,~~2019, the Company had ~~net operating loss (“NOL”)~~NOL and research and experimentation credit for U.S. federal income tax purposes of ~~$141,067~~$131,621 and ~~$3,791,~~$4,250, respectively. The Company believes its NOL will offset some of its future U.S. federal income taxes. 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:

~~As a result of our August 21, 2017 acquisition of Sierra, we~~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. Each segment is described below:

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 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 at point of sale transactions. 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. Revenue by category as a percentage of total consolidated revenues is as follows:

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 were not material at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~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 three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~was~~were not material. No other material remaining performance obligations exist at ~~September 30, 2019.~~March 31, 2020.

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 September 30, 2019 and December 31, 2018, were as follows:~~

CLARUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

(in thousands, except per share amounts)

September 30, 2019 December 31, 2018

Black Diamond $ 149,414 $ 138,029
Sierra 72,249 72,796
Corporate 3,285 2,303
$ 224,948 $ 213,128

Total assets by segment, as of March 31, 2020 and December 31, 2019, were as follows:

	March 31, 2020		December 31, 2019

Black Diamond	$	140,282	$	147,261
Sierra		74,579		72,104
Corporate		20,255		10,900
	$	235,116	$	230,265

Capital expenditures, depreciation and amortization by segment is as follows.

	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018		March 31, 2020		March 31, 2019
Capital expenditures:
Black Diamond	$	673	$	279	$	1,863	$	1,495	$	989	$	764
Sierra		171		57		975		359		313		282
Total capital expenditures	$	844	$	336	$	2,838	$	1,854	$	1,302	$	1,046
Depreciation:
Black Diamond	$	610	$	617	$	1,852	$	1,837	$	685	$	611
Sierra		480		489		1,480		1,477		432		492
Total depreciation	$	1,090	$	1,106	$	3,332	$	3,314	$	1,117	$	1,103
Amortization:
Black Diamond	$	278	$	272	$	834	$	822	$	276	$	279
Sierra		610		693		1,831		2,080		496		610
Total amortization	$	888	$	965	$	2,665	$	2,902	$	772	$	889

NOTE 14. ~~LEASES~~SUBSEQUENT EVENT

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. The Company’s finance leases are immaterial.Purchase Agreement

~~Operating lease ROU assets and liabilities as of September 30, 2019 are as follows:~~

Balance Sheet Classification September 30, 2019
Assets
Operating lease ROU assets Other long-term assets $ 1,343

Liabilities
Current operating lease liabilities Accounts payable and accrued liabilities $ 704
Noncurrent operating lease liabilities Other long-term liabilities $ 625

~~Operating lease costs are as follows:~~

Affected line item in the Condensed Consolidated Three Months Ended Nine Months Ended
Statements of Comprehensive Income September 30, 2019 September 30, 2019
Lease costs Cost of goods sold, Selling, general and administrative $ 197 $ 560
Variable lease costs Cost of goods sold, Selling, general and administrative 41 156
Short-term lease costs Cost of goods sold, Selling, general and administrative 56 165
$ 294 $ 881

~~CLARUS CORPORATION~~

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

~~(Unaudited)~~

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

~~The maturity of operating lease liabilities as of September 30, 2019 are as follows:~~

Years Ending December 31, Operating Lease Payments
2019 (excluding the nine months ended September 30, 2019) $ 193
2020 725
2021 339
2022 86
2023 and thereafter 59
Total future lease payments 1,402
Less: amount representing interest (73 )
Present value of future lease payments 1,329
Less: current lease obligations (704 )
Long-term lease obligations $ 625

As ~~of September 30, 2019, our operating leases have~~previously disclosed, on March 10, 2020, Everest/Sapphire Acquisition, LLC, a ~~weighted-average remaining lease term of 2.2 years~~Delaware limited liability company and ~~a weighted-average discount rate of 3.98%. Total rent expense~~wholly owned subsidiary of the Company, entered into a Stock Purchase Agreement (the “Purchase Agreement”) to acquire S.K.B. Corporation, a California corporation.

Given the recent events surrounding the COVID-19 global pandemic, and the economic uncertainties in the United States and globally as a result thereof, each of the parties to the Purchase Agreement entered into a letter agreement dated April 30, 2020, mutually agreeing that the Purchase Agreement had expired on April 30, 2020 and was no longer effective.

Credit Agreement

Under the Credit Agreement, the Company had access to a term loan facility that would be available for drawdown until May 3, 2020. On April 30, 2020, the ~~three~~Company borrowed $20,000 under such term loan facility and ~~nine months ended~~used the proceeds to pay down amounts outstanding under the revolving portion of the Credit Agreement. The Company is required to repay the term loan through quarterly payments of $1,000 each beginning with September 30, ~~2018 was $193~~2020, and ~~$614, respectively, as determined prior to~~any remaining obligations will be repaid in full on the ~~adoption~~maturity date of ~~ASU 842. Future minimum lease payments required under noncancelable operating leases that have initial or remaining noncancelable lease term in excess~~the Credit Agreement of ~~one year at December 31, 2018 as determined prior to the adoption of ASU 842 are as follows:~~May 3, 2024.

Years Ending December 31, Future Minimum Lease
Payments
2019 $ 687
2020 634
2021 243
2022 24
2023 -
Thereafter -
$ 1,588

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Please note that in this Quarterly Report on Form 10-Q Clarus Corporation (which may be referred to as the “Company,” “Clarus,” “we,” “our” or “us”) may use words such as “appears,” “anticipates,” “believes,” “plans,” “expects,” “intends,” “future” and similar expressions which constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting the Company and therefore involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.

Potential risks and uncertainties that could cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied by forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, the overall level of consumer demand on our products; general economic conditions and other factors affecting consumer confidence, preferences, and behavior; disruption and volatility in the global currency, capital and credit markets; the financial strength of the Company’s customers; the Company’s ability to implement its business strategy; the ability of the Company to execute and integrate acquisitions; changes in governmental regulation, legislation or public opinion relating to the manufacture and sale of bullets and ammunition by our Sierra segment, and the possession and use of firearms and ammunition by our customers; the Company’s exposure to product liability or product warranty claims and other loss contingencies; disruptions and other impacts to the Company’s business, as a result of the COVID-19 global pandemic and government actions and restrictive measures implemented in response; stability of the Company’s manufacturing facilities and ~~suppliers;~~suppliers, as well as consumer demand for our products, in light of disease epidemics and health-related concerns such as the COVID-19 global pandemic; the impact that global climate change trends may have on the Company and its suppliers and customers; the Company’s ability to protect patents, trademarks and other intellectual property rights; any breaches of, or interruptions in, our information systems; fluctuations in the price, availability and quality of raw materials and contracted products as well as foreign currency fluctuations; our ability to utilize our net operating loss carryforwards; changes in tax laws and liabilities, tariffs, legal, regulatory, political and economic risks; and the Company’s ability to maintain a quarterly dividend. More information on potential factors that could affect the Company’s financial results is included from time to time in the Company’s public reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. All forward-looking statements included in this Quarterly Report on Form 10-Q are based upon information available to the Company as of the date of this Quarterly Report on Form 10-Q, and speak only as of the date hereof. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.

Overview

Clarus, ~~Corporation,~~ incorporated in Delaware in 1991, acquired Black Diamond Equipment, Ltd. (“Black Diamond Equipment”) ~~and Gregory Mountain Products, LLC (“Gregory Mountain Products”)~~ in May 2010 and changed its name to Black Diamond, Inc., in January 2011. In ~~July 2012, we acquired POC Sweden AB and its subsidiaries (collectively, “POC”) and in~~ October 2012, we acquired PIEPS Holding GmbH and its subsidiaries (collectively, “PIEPS”).

~~On July 23, 2014, the Company completed the sale of certain assets to Samsonite LLC comprising Gregory Mountain Product’s business. On October 7, 2015, the Company sold its equity interests in POC.~~

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

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 ~~October 28, 2019,~~May 1, 2020, the Company announced that, in light of the COVID-19 pandemic, its Board of Directors ~~approved the payment on November 15, 2019 of the~~had temporarily replaced its Quarterly Cash Dividend ~~to the~~with a stock dividend. Each record ~~holders~~holder of shares of the Company’s common stock as of the close of business on ~~November 8, 2019.~~May 11, 2020 (the “Record Date”) will be entitled to receive 0.00234 of a share of the Company’s common stock for each share of common stock held on the Record Date. The Company will distribute the stock dividend on May 22, 2020, the distribution date. No fractional shares will be issued, and stockholders will receive cash for such fractional interests based on the closing market price of the Company’s common stock on the Record Date. The quarterly stock dividend will have a value of $0.025 per share, based on the closing market price on April 30, 2020. The dividend reflects an aggregate distribution of approximately 70 shares with a market value of approximately $744.

~~On November 6, 2018,~~Impact of COVID-19

These countermeasures are expected to partially mitigate 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 ~~acquired~~and respond accordingly.

Sustained adverse impacts to the Company, certain suppliers, dealers or customers may also affect the Company’s future valuation of certain assets and therefore may increase the likelihood of ~~SKINourishment, Inc.~~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, tax assets, and other assets.

Critical Accounting Policies and Use of Estimates

Management’s discussion of our financial condition and results of operations is based on the condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of the condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting periods. We continually evaluate our estimates and assumptions including those related to purchase price allocation, excess or obsolete inventory, valuation of deferred tax assets, and valuation of goodwill, long-lived assets and other intangible assets. We base our estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.

See “Significant Accounting Policies” in Note 1 to the notes to the unaudited condensed consolidated financial statements for discussion related to changes to our critical accounting policies including leases from the adoption of Accounting Standards Codification Topic 842. There have been no ~~other~~ significant changes to our critical accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~

~~Accounting Pronouncements Issued Not Yet Adopted~~

~~None.~~2019.

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

Accounting Pronouncements Issued Not Yet Adopted

See “Accounting Pronouncements Not Yet Adopted” in Note 1 to the notes to the unaudited condensed consolidated financial statements.

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

Results of Operations

Condensed Consolidated Three Months Ended ~~September 30, 2019~~March 31, 2020 Compared to Condensed Consolidated Three Months Ended ~~September 30, 2018~~March 31, 2019

The following presents a discussion of condensed consolidated operations for the three months ended ~~September 30, 2019,~~March 31, 2020, compared with the condensed consolidated three months ended ~~September 30, 2018.~~March 31, 2019.

							Three Months Ended
	Three Months Ended						March 31, 2020			March 31, 2019
	September 30, 2019			September 30, 2018
Sales
Domestic sales	$	28,794		$	26,168		$	28,548		$	30,589
International sales		31,409			29,518			25,007			30,629
Total sales		60,203			55,686			53,555			61,218

Cost of goods sold		39,646			35,829			35,043			39,162
Gross profit		20,557			19,857			18,512			22,056

Operating expenses
Selling, general and administrative		16,443			15,773			17,370			17,580
Restructuring charge		-			22			-			13
Transaction costs		37			50			250			46

Total operating expenses		16,480			15,845			17,620			17,639

Operating income		4,077			4,012			892			4,417

Other (expense) income
Interest expense		(353	)		(303	)
Other expense
Interest expense, net								(311	)		(310	)
Other, net		(420	)		102			(531	)		(23	)

Total other expense, net		(773	)		(201	)		(842	)		(333	)

Income before income tax		3,304			3,811			50			4,084
Income tax benefit		(188	)		(316	)
Income tax expense								14			297
Net income	$	3,492		$	4,127		$	36		$	3,787

Sales

Consolidated sales ~~increased $4,517,~~decreased $7,663, or ~~8.1%~~12.5%, to ~~$60,203~~$53,555 during the three months ended ~~September 30, 2019,~~March 31, 2020, compared to consolidated sales of ~~$55,686~~$61,218 during the three months ended ~~September 30, 2018. The increase in sales was attributable~~March 31, 2019. We believe lower consumer demand related to the ~~increase~~COVID-19 pandemic drove a decrease in the quantity of new and existing climb, mountain, and ski products sold during the ~~period. These increases were partially offset by~~period, resulting in a $6,168 decrease in sales. We also experienced a decrease in the quantity of new and existing sport products sold ~~during the period~~ and a decrease in sales of ~~$773~~$438 due to the strengthening of the U.S. dollar against foreign currencies during the three months ended ~~September 30, 2019~~March 31, 2020 compared to the prior period.

Consolidated domestic sales ~~increased $2,626,~~decreased $2,041, or ~~10.0%~~6.7%, to ~~$28,794~~$28,548 during the three months ended ~~September 30, 2019,~~March 31, 2020, compared to consolidated domestic sales of ~~$26,168~~$30,589 during the three months ended ~~September 30, 2018. The increase~~March 31, 2019. We believe the decrease in domestic sales was attributable to an increase in the quantity of new and existing climb and ski products sold during the three months ended September 30, 2019. These increases were partially offset by a decrease in the quantity of new and existing sport products sold during the period.

Consolidated international sales increased $1,891, or 6.4%, to $31,409 during the three months ended September 30, 2019, compared to consolidated international sales of $29,518 during the three months ended September 30, 2018. The increase in international sales was attributablelower consumer demand related to the ~~increase~~COVID-19 pandemic, which drove a decrease in the quantity of new and existing climb, mountain, and ski products sold during the ~~period. These increases were partially offset by~~period, resulting in a $1,844 decrease in sales. We also experienced a decrease in the quantity of new and existing sport products sold.

Consolidated international sales decreased $5,622, or 18.4%, to $25,007 during the three months ended March 31, 2020, compared to consolidated international sales of $30,629 during the three months ended March 31, 2019. We believe the decrease in international sales was attributable to lower consumer demand related to the COVID-19 pandemic, which drove a decrease in the quantity of new and existing climb, mountain, and ski products sold during the period, resulting in a $4,323 decrease in sales. We also experienced a decrease in the quantity of new and existing sport products sold ~~during the period~~ and a decrease in sales of ~~$773~~$438 due to the strengthening of the U.S. dollar against foreign currencies during the three months ended ~~September 30, 2019~~March 31, 2020 compared to the prior period.

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

Cost of Goods Sold

Consolidated cost of goods sold ~~increased $3,817,~~decreased $4,119, or ~~10.7%~~10.5%, to ~~$39,646~~$35,043 during the three months ended ~~September 30, 2019,~~March 31, 2020, compared to consolidated cost of goods sold of ~~$35,829~~$39,162 during the three months ended ~~September 30, 2018.~~March 31, 2019. The ~~increase~~decrease in cost of goods sold was primarily attributable to ~~an increase~~a decrease in the number of units sold ~~and~~due to lower consumer demand related to the ~~mix of higher cost products sold.~~COVID-19 pandemic.

Gross Profit

Consolidated gross profit ~~increased $700,~~decreased $3,544 or ~~3.5%~~16.1%, to ~~$20,557~~$18,512 during the three months ended ~~September 30, 2019,~~March 31, 2020, compared to consolidated gross profit of ~~$19,857~~$22,056 during the three months ended ~~September 30, 2018.~~March 31, 2019. Consolidated gross margin was ~~34.1%~~34.6% during the three months ended ~~September 30, 2019,~~March 31, 2020, compared to a consolidated gross margin of ~~35.7%~~36.0% during the three months ended ~~September 30, 2018.~~March 31, 2019. Consolidated gross margin during the three months ended ~~September 30, 2019~~March 31, 2020, decreased compared to the prior year due to an unfavorable ~~mix in lower margin channel distribution~~impacts on our supply chain and logistic activities due to the COVID-19 pandemic, along with negative impacts offrom foreign ~~currency.~~currency and tariffs.

Selling, General and Administrative

Consolidated selling, general, and administrative expenses ~~increased $670,~~decreased $210, or ~~4.2%~~1.2%, to ~~$16,443~~$17,370 during the three months ended ~~September 30, 2019,~~March 31, 2020, compared to consolidated selling, general and administrative expenses of ~~$15,773~~$17,580 during the three months ended ~~September 30, 2018.~~March 31, 2019. The ~~increase~~decrease in selling, general and administrative expenses was attributable to ~~the Company’s continued investment~~a decrease in ~~the brand related activities of research~~amortization and ~~development and direct-to-consumer and increased costs incurred associated with our warehousing activities. Stock~~stock-based compensation ~~also decreased $234~~ during the three months ended ~~September 30, 2019~~March 31, 2020 compared to the prior year.

Restructuring Charges

Consolidated restructuring expense decreased to $0 during the three months ended ~~September 30, 2019,~~March 31, 2020, compared to consolidated restructuring expense of ~~$22~~$13 during the three months ended ~~September 30, 2018.~~March 31, 2019. Restructuring expenses incurred during the three months ended ~~September 30, 2018,~~March 31, 2019, related to costs associated with the formal closure and liquidation of the Company’s Black Diamond Equipment manufacturing operations in Zhuhai, China.

Transaction Costs

Consolidated transaction expense ~~decreased~~increased to ~~$37~~$250 during the three months ended ~~September 30, 2019,~~March 31, 2020, compared to consolidated transaction costs of ~~$50~~$46 during the three months ended ~~September 30, 2018,~~March 31, 2019, which consisted of expenses related to the Company’s ~~acquisition of Sierra.~~efforts to acquire S.K.B. Corporation.

Interest Expense, net

Consolidated interest expense, net ~~increased $50, or 16.5%, to $353~~ during the three months ended ~~September 30, 2019, compared to~~March 31, 2020 remained consistent with consolidated interest expense, net, ~~of $303~~ during the three months ended ~~September 30, 2018. Interest expense recognized during the three months ended September 30, 2019 was primarily associated with the average outstanding debt amounts during the period.~~March 31, 2019.

Other, net

Consolidated other, net, ~~decreased $522,~~increased $508, or ~~511.8%~~2,208.7%, to expense of ~~$420~~$531 during the three months ended ~~September 30, 2019,~~March 31, 2020, compared to consolidated other, net ~~income~~expense of ~~$102~~$23 during the three months ended ~~September 30, 2018.~~March 31, 2019. The ~~decrease~~increase in other, net, was primarily attributable to an increase in remeasurement losses recognized on the Company’s foreign denominated accounts receivable and accounts payable. This decrease was partially offset by gains on mark-to-market adjustments on non-hedged foreign currency contracts. During the three months ended September 30, 2018, the income was primarily attributable to an increase in remeasurement gains recognized on the Company’s foreign denominated accounts receivable and accounts payable.

~~CLARUS CORPORATION~~

~~MANAGEMENT DISCUSSION AND ANALYSIS~~

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

Income Taxes

Consolidated income tax ~~benefit~~expense decreased $283, or 95.3%, to ~~$188~~$14 during the three months ended ~~September 30, 2019,~~March 31, 2020, compared to a consolidated income tax ~~benefit~~expense of ~~$316~~$297 during the same period in 2018. The tax expense recorded during the three months ended September 30, 2019 includes a release of certain valuation allowances on the deferred tax assets due to projected taxable income for the current year.

2019. Our effective income tax rate was ~~5.7%~~28.0% for the three months ended ~~September 30, 2019,~~March 31, 2020, and was higher compared to ~~8.3% for~~ the ~~same period~~statutory tax rates due to an increase in ~~2018. The primary reasons for~~ the valuation allowance related to the current year R&D tax credits. For the three months ended March 31, 2019, our effective income tax rate ~~changes are~~was 7.3% and is lower compared to the statutory tax rates due to ~~differing levels of income before income tax, partial~~a discrete benefit associated with a release of ~~the valuation allowance on the deferred~~a tax assets due to current year income, and discrete charges recorded during the respective periods. Factors that could cause our annual effective tax rate to differ materially from our quarterly effective tax rates include changes in the geographic mix of taxable income and discrete events that may occur.reserve.

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

~~Results of Operations~~

~~Condensed Consolidated Nine Months Ended September 30, 2019 Compared to Condensed Consolidated Nine Months Ended September 30, 2018~~

~~The following presents a discussion of condensed consolidated operations for the nine months ended September 30, 2019, compared with the condensed consolidated nine months ended September 30, 2018.~~

~~Sales~~

Consolidated sales increased $13,581, or 8.8%, to $168,415 during the nine months ended September 30, 2019, compared to consolidated sales of $154,834 during the nine months ended September 30, 2018. The increase in sales was attributable to the increase in the quantity of new and existing climb, mountain, and ski products sold during the period. These increases were partially offset by a decrease in the quantity of new and existing sport products sold during the period and a decrease in sales of $1,906 due to the strengthening of the U.S. dollar against foreign currencies during the nine months ended September 30, 2019 compared to the prior period.

Consolidated domestic sales increased $8,138, or 10.2%, to $87,805 during the nine months ended September 30, 2019, compared to consolidated domestic sales of $79,667 during the nine months ended September 30, 2018. The increase in domestic sales was attributable to an increase in the quantity of new and existing climb, mountain, and ski products sold during the nine months ended September 30, 2019. These increases were partially offset by a decrease in the quantity of new and existing sport products sold during the period.

Consolidated international sales increased $5,443, or 7.2%, to $80,610 during the nine months ended September 30, 2019, compared to consolidated international sales of $75,167 during the nine months ended September 30, 2018. The increase in international sales was attributable to the increase in the quantity of new and existing climb, mountain, ski, and sport products sold during the period. These increases were partially offset by a decrease in sales of $1,906 due to the strengthening of the U.S. dollar against foreign currencies during the nine months ended September 30, 2019 compared to the prior period.

~~CLARUS CORPORATION~~

~~MANAGEMENT DISCUSSION AND ANALYSIS~~

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

~~Cost of Goods Sold~~

Consolidated cost of goods sold increased $8,520, or 8.4%, to $109,810 during the nine months ended September 30, 2019, compared to consolidated cost of goods sold of $101,290 during the nine months ended September 30, 2018. The increase in cost of goods sold was attributable to an increase in the number of units sold and the mix of higher cost products sold.

~~Gross Profit~~

Consolidated gross profit increased $5,061, or 9.5%, to $58,605 during the nine months ended September 30, 2019, compared to consolidated gross profit of $53,544 during the nine months ended September 30, 2018. Consolidated gross margin was 34.8% during the nine months ended September 30, 2019, compared to a consolidated gross margin of 34.6% during the nine months ended September 30, 2018. Consolidated gross margin during the nine months ended September 30, 2019, increased compared to the prior year due to a favorable product mix in higher margin products. Gross margin during the nine months ended September 30, 2018 included a decrease in gross margin of 0.7% due to the sale of inventory that was recorded at its fair value in purchase accounting.

~~Selling, General and Administrative~~

Consolidated selling, general, and administrative expenses increased $2,523, or 5.2%, to $51,215 during the nine months ended September 30, 2019, compared to consolidated selling, general and administrative expenses of $48,692 during the nine months ended September 30, 2018. The increase in selling, general and administrative expenses was attributable to the Company’s continued investment in the brand related activities of sales, marketing and research and development in supporting its strategic initiatives around new product introduction and increasing brand equity. Stock compensation also increased $179 during the nine months ended September 30, 2019 compared to the prior year.

~~Restructuring Charges~~

Consolidated restructuring expense decreased $73, or 84.9%, to $13 during the nine months ended September 30, 2019, compared to consolidated restructuring expense of $86 during the nine months ended September 30, 2018. Restructuring expenses incurred during the nine months ended September 30, 2019 and 2018, related to costs associated with the formal closure and liquidation of the Company’s Black Diamond Equipment manufacturing operations in Zhuhai, China.

~~Transaction Costs~~

Consolidated transaction expense decreased to $124 during the nine months ended September 30, 2019, compared to consolidated transaction costs of $383 during the nine months ended September 30, 2018, which consisted of expenses related to the Company’s acquisition of Sierra.

~~Interest Expense, net~~

Consolidated interest expense, net decreased $42, or 4.1%, to $978 during the nine months ended September 30, 2019, compared to consolidated interest expense, net, of $1,020 during the nine months ended September 30, 2018. Interest expense recognized during the nine months ended September 30, 2019 was primarily associated with the average outstanding debt amounts during the period. Interest expense recognized during the nine months ended September 30, 2018 was primarily attributable to the write-off of previously capitalized origination costs and interest expense associated with the average outstanding debt amounts during the period.

~~Other, net~~

Consolidated other, net, decreased $291, or 938.7%, to expense of $260 during the nine months ended September 30, 2019, compared to consolidated other, net income of $31 during the nine months ended September 30, 2018. The decrease in other, net, was primarily attributable to an increase in remeasurement losses recognized on the Company’s foreign denominated accounts receivable and accounts payable. This decrease was partially offset by gains on mark-to-market adjustments on non-hedged foreign currency contracts. During the nine months ended September 30, 2018, the income was offset by losses related to recognition of cumulative translation adjustments due to the substantial liquidation of a foreign entity.

~~CLARUS CORPORATION~~

~~MANAGEMENT DISCUSSION AND ANALYSIS~~

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

~~Income Taxes~~

Consolidated income tax benefit increased $211, or 58.8%, to $570 during the nine months ended September 30, 2019, compared to a consolidated income tax benefit of $359 during the same period in 2018. The tax expense recorded during the nine months ended September 30, 2019 includes a discrete benefit associated with a release of a tax reserve of $63, a release of certain valuation allowances of $1,300, and a discrete benefit associated with stock compensation windfall for $590.

Our effective income tax rate was 9.5% for the nine months ended September 30, 2019, compared to 10.6% for the same period in 2018. The primary reasons for the effective income tax rate changes are due to differing levels of income before income tax, release of a partial valuation allowance of the deferred tax assets due to current year taxable income, and discrete charges recorded during the respective periods. Factors that could cause our annual effective tax rate to differ materially from our quarterly effective tax rates include changes in the geographic mix of taxable income and discrete events that may occur.

Liquidity and Capital Resources

Condensed Consolidated ~~Nine~~Three Months Ended ~~September 30, 2019~~March 31, 2020 Compared to Condensed Consolidated ~~Nine~~Three Months Ended ~~September 30, 2018~~March 31, 2019

~~The following presents a discussion of cash flows for the condensed consolidated nine months ended September 30, 2019 compared with the condensed consolidated nine months ended September 30, 2018.~~ Our primary ongoing funding requirements are for working capital, expansion of our operations (both organically and through acquisitions) and general corporate needs, as well as investing activities associated with the expansion into new product categories. We plan to fund these activities through a combination of our future operating cash flows and revolving credit ~~facility.~~facility which had approximately $27,900 available to borrow at March 31, 2020. We believe that our liquidity requirements for at least the next 12 months will be adequately covered by cash provided by operations and our existing revolving credit facility. AtHowever, as the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. The COVID-19 pandemic has negatively affected the U.S. and global economies, disrupted global supply chains, and resulted in significant travel and transport restrictions and disruption of financial markets. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, ability to meet debt covenants, access to sources of liquidity and financial condition. Given the economic uncertainty as a result of the pandemic, we have taken actions to improve our current liquidity position, including drawing on the credit facility, suspending share repurchases and cash dividends, postponing nonessential capital expenditures, and reducing operating costs. Further, subsequent to the balance sheet date, we borrowed $20,000 under the term loan portion of the Credit Agreement to increase our overall liquidity. The proceeds borrowed on the term loan were used to pay down amounts outstanding on our revolving loan commitment. The Company is required to repay the term loan through quarterly payments of $1,000 each beginning with September 30, ~~2019,~~2020, and any remaining obligations will be repaid in full on the maturity date of the Credit Agreement of May 3, 2024.

At March 31, 2020, we had total cash of ~~$1,851,~~$12,796, compared to a cash balance of ~~$2,486~~$1,703 at December 31, ~~2018,~~2019, which was substantially controlled by the Company’s U.S. entities. At ~~September 30, 2019,~~March 31, 2020, the Company had ~~$1,606~~$2,971 of the ~~$1,851~~$12,796 in cash held by foreign entities, of which ~~$385~~$763 is considered permanently reinvested.

Nine Months Ended
September 30, 2019 September 30, 2018
Net cash provided by operating activities $ 5,635 $ 7,612
Net cash used in investing activities (2,818 ) (2,194 )
Net cash used in financing activities (3,379 ) (4,285 )
Effect of foreign exchange rates on cash (73 ) 16
Change in cash (635 ) 1,149
Cash, beginning of period 2,486 1,856
Cash, end of period $ 1,851 $ 3,005

The following presents a discussion of cash flows for the condensed consolidated three months ended March 31, 2020 compared with the condensed consolidated three months ended March 31, 2019.

	Three Months Ended
	March 31, 2020			March 31, 2019

Net cash provided by operating activities	$	3,499		$	5,705
Net cash used in investing activities		(1,299	)		(1,045	)
Net cash provided by (used in) financing activities		8,649			(4,568	)
Effect of foreign exchange rates on cash		244			(56	)
Change in cash		11,093			36
Cash, beginning of period		1,703			2,486
Cash, end of period	$	12,796		$	2,522

Net Cash From Operating Activities

Consolidated net cash provided by operating activities was ~~$5,635~~$3,499 during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$7,612~~$5,705 during the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. The decrease in net cash provided by operating activities during ~~2019~~2020 is primarily due to a decrease in net income partially offset by an increase in net operating assets, net of assets acquired or non-cash working capital of ~~$4,972, partially offset by an increase in net income~~$1,987, during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, compared to the same period in ~~2018.~~2019.

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

Free cash flow, defined as net cash provided by operating activities less capital expenditures, of ~~$2,797~~$2,197 was generated during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$5,758~~$4,659 generated during the same period in ~~2018.~~2019. The Company believes that the non-GAAP measure, free cash flow, provides an understanding of the capital required by the Company to expand its asset base. A reconciliation of free cash flows to comparable GAAP financial measures is set forth below:

~~CLARUS CORPORATION~~

~~MANAGEMENT DISCUSSION AND ANALYSIS~~

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

							Three Months Ended
	Nine Months Ended						March 31, 2020			March 31, 2019
	September 30, 2019			September 30, 2019
Net cash provided by operating activities	$	5,635		$	7,612		$	3,499		$	5,705
Purchase of property and equipment		(2,838	)		(1,854	)		(1,302	)		(1,046	)
Free cash flow	$	2,797		$	5,758		$	2,197		$	4,659

Net Cash From Investing Activities

Consolidated net cash used in investing activities was ~~$2,818~~$1,299 during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$2,194~~$1,045 during the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. The increase in cash used during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 is due to an increase in purchases of property and equipment, compared to the same period in ~~2018.~~2019.

Net Cash From Financing Activities

Consolidated net cash ~~used in~~provided by financing activities was ~~$3,379~~$8,649 during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$4,285~~consolidated net cash used of $4,568 during the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. The ~~decrease~~increase in cash ~~used~~provided during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to the same period in ~~2018~~2019 was primarily due to net proceeds from the revolving line of ~~credit and was partially offset by dividend payments.~~credit.

Net Operating Loss

As of December 31, ~~2018,~~2019, the Company had net operating loss ~~(“NOL”)~~ and research and experimentation credit for U.S. federal income tax purposes of ~~$141,067~~$131,621 and ~~$3,791,~~$4,250, respectively. The Company believes its U.S. Federal NOL will offset some of its future U.S. Federal income taxes. 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. ~~None~~$131,621 of ~~the NOL~~net operating losses available to offset taxable income ~~will~~does not expire until ~~2021~~2022 or later, subject to compliance with Section 382 of the Internal Revenue Code of 1986, as amended.

As of December 31, ~~2018,~~2019, the Company’s gross deferred tax asset was ~~$47,922.~~$43,945. The Company has recorded a valuation allowance of ~~$42,122,~~$28,632, resulting in a net deferred tax asset of ~~$5,800,~~$15,313, before deferred tax liabilities of ~~$8,719.~~$8,633. The Company has provided a valuation allowance against a portion of the net deferred tax assets as of March 31, 2020 and December 31, ~~2018,~~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.

Credit Agreement

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 rate. 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.

As of ~~September 30, 2019,~~March 31, 2020, the Company had drawn approximately ~~$24,908~~$32,063 of the $60,000 revolving loan commitment, and none of the $40,000 term loan commitment, that was available for borrowing under the Credit Agreement. As of ~~September 30, 2019,~~March 31, 2020, the interest rate for such loans was ~~3.5625%~~2.4375%. On April 30, 2020, which was subsequent to the balance sheet date, the Company borrowed $20,000 under the term loan facility and used the proceeds to pay down amounts outstanding under the revolving portion of the Credit Agreement. 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.

CLARUS CORPORATION

MANAGEMENT DISCUSSION AND ANALYSIS

(in thousands, except per share amounts)

~~On May 3, 2019, concurrent with entering into~~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 also includes other customary affirmative and negative covenants, including financial covenants relating to the Company’s ~~previous credit facility~~consolidated total leverage ratio and fixed charge coverage ratio. The Company was in compliance with ~~JPMorgan Chase Bank, N.A., which provided for a revolving commitment~~the debt covenants set forth in the Credit Agreement as of ~~up to $75,000, was paid in full and terminated.~~March 31, 2020.

Off-Balance Sheet Arrangements

We do not engage in any transactions or have relationships or other arrangements with unconsolidated entities. These include special purpose and similar entities or other off-balance sheet arrangements. We also do not engage in energy, weather or other commodity-based contracts.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has not been any material change in the market risk disclosure contained in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management carried out an evaluation, under the supervision and with the participation of the Company’s Executive Chairman and Chief Administrative Officer/Chief Financial Officer, its principal executive officer and principal financial officer, respectively, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15I and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of ~~September 30, 2019,~~March 31, 2020, pursuant to Exchange Act Rule 13a-15. Such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the appropriate management on a basis that permits timely decisions regarding disclosure. Based upon that evaluation, the Company’s Executive Chairman and Chief Administrative Officer/Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of ~~September 30, 2019,~~March 31, 2020, were effective.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

CLARUS CORPORATION

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Legal Proceedings

Litigation

The Company is involved in various lawsuits arising from time to time that the Company considers ordinary routine litigation incidental to its business. Amounts accrued for litigation matters represent the anticipated costs (damages and/or settlement amounts) in connection with pending litigation and claims and related anticipated legal fees for defending such actions, which legal fees are expensed as incurred. The costs are accrued when it is both probable that a liability has been incurred and the amount can be reasonably estimated. The accruals are based upon the Company’s assessment, after consultation with counsel (if deemed appropriate), of probable loss based on the facts and circumstances of each case, the legal issues involved, the nature of the claim made, the nature of the damages sought and any relevant information about the plaintiffs and other significant factors that vary by case. When it is not possible to estimate a specific expected cost to be incurred, the Company evaluates the range of probable loss and records the minimum end of the range. 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 condensed 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.

Product Liability

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.

Based on current information, there are no pending product liability claims and lawsuits of the Company, which the Company believes in the aggregate, will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

~~There~~Except for the risk factors discussed below, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~Our business, financial condition and results of operations and cash flows, as well as the trading price of our common stock may be negatively impacted by the effects of a disease outbreak, epidemic, pandemic, or similar widespread public health concern, such as travel restrictions or recommendations or mandates from governmental authorities to avoid large gatherings or to self-quarantine, whether as a result of the COVID-19 or coronavirus global pandemic or otherwise.

~~Unregistered Sales of Equity Securities~~

~~The Company did~~These impacts include, but are not ~~sell any securities during the quarter ended September 30, 2019 that were not registered under the Securities Act of 1933, as amended.~~

~~Issuer Repurchases of Equity Securities~~

On November 9, 2015, the Company announced that its Board of Directors authorized a stock repurchase program that allows the repurchase of up to $30,000,000 of the Company’s outstanding common stock. During the third quarter of 2019, the Company purchased 243,873 shares of the Company’s common stock for $2,662,123 under the Company’s authorized stock repurchase program.limited to:

Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, financial hardship or adverse economic conditions, or the closure of retail stores that market our products;

~~CLARUS CORPORATION~~

Total Number of Shares Maximum Dollar Value
Purchased as Part of of Shares that May Yet
Total Number of Average Price Paid Publicly Announced Be Purchased Under
Shares Purchased per Share Plans or Programs the Plans or Programs
Period
July 1 to 31, 2019 - $ - - $ 13,455,710
August 1 to 31, 2019 243,873 $ 10.92 243,873 $ 10,793,587
September 1 to 30, 2019 - $ - - $ 10,793,587
Total 243,873

33
26

CLARUS CORPORATION
Disruptions in our manufacturing and supply arrangements caused by constrained workforce capacity or the loss or disruption of other essential manufacturing and supply elements such as raw materials or other finished product components, transportation, or other manufacturing and distribution capability;
Failure of third parties on which we rely, including our suppliers, manufacturers, distributors, customers, retailers or other service providers to meet their obligations to the Company;
Significant changes in the political conditions in the markets in which we operate and/or manufacture, sell or distribute our products, including quarantines, import/export restrictions, price controls, or governmental or regulatory actions, closures or travel restrictions; or
Our ability to maintain adequate liquidity and/or meet debt covenants contained in the Company’s credit agreement if the Company is unable to resume normal operations in a timely fashion.
Our failure to effectively manage and remedy these impacts on the Company, could have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as the trading price of our common stock.
27
CLARUS CORPORATION

ITEM 6. EXHIBITS

Exhibit Description
2.1 Stock Purchase Agreement dated March 10, 2020, by and among Everest/Sapphire Acquisition, LLC, the Company, S.K.B. Corporation, David Sanderson and Steven Kottman (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2020 and incorporated herein by reference).
10.1 Letter to TT Investimentos Ltda. dated March 23, 2020 (filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 24, 2020 and incorporated herein by reference).
10.2 Letter Agreement dated April 30, 2020, by and among Everest/Sapphire Acquisition, LLC, the Company, S.K.B. Corporation, David Sanderson, Steven Kottman and Steven Kottman, as Sellers’ Representative (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2020 and incorporated herein by reference).

31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

101.INS XBRL Instance Document *

101.SCH XBRL Taxonomy Extension Schema Document *

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF XBRL Taxonomy Extension Definition Linkbase Document *

101.LAB XBRL Taxonomy Extension Label Linkbase Document *

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *

* Filed herewith

** Furnished herewith

28
CLARUS CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CLARUS CORPORATION

Date: ~~November 4, 2019~~May 11, 2020 By: ~~/s/~~ /s/ Warren B. Kanders
Name: Warren B. Kanders
~~Title:~~ ~~Executive Chairman~~

Title:
Executive Chairman
(Principal Executive Officer)

By: ~~/s/~~ /s/ Aaron J. Kuehne
Name: Aaron J. Kuehne
~~Title:~~ ~~Chief Administrative Officer and~~

Title:
Chief Administrative Officer and
Chief Financial Officer
(Principal Financial Officer)
(Principal Accounting Officer)

29

Large accelerated filer	¨		Non-accelerated filer	¨

Accelerated filer	x		Smaller reporting company	x¨

		Emerging growth company	¨

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, par value $.0001 per share		CLAR		NASDAQ Global Select Market

PART I	FINANCIAL INFORMATION	Page

~~PART I~~	~~FINANCIAL INFORMATION~~

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets – ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019	3

	Condensed Consolidated Statements of Comprehensive Income – Three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	4

	~~Condensed Consolidated Statements of Comprehensive Income – Nine months ended September 30, 2019 and 2018~~	5

	Condensed Consolidated Statements of Cash Flows – ~~Nine~~Three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	65

	Condensed Consolidated Statements of Stockholders’ Equity – ~~Nine~~Three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	76

	Notes to Condensed Consolidated Financial Statements	87

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2218

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3125

Item 4.	Controls and Procedures	3125

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	3226

Item 1A.	Risk Factors	32

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	3226

Item 6.	Exhibits	3428

Signature Page		3529

	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Assets
Current assets
Cash	$	1,851		$	2,486		$	12,796		$	1,703
Accounts receivable, less allowance for doubtful accounts of $528 and $392, respectively		41,717			35,943
Accounts receivable, less allowance for credit losses and
doubtful accounts of $889 and $494, respectively								38,834			41,628
Inventories		73,535			64,933			69,084			73,432
Prepaid and other current assets		5,171			5,115			5,881			3,787
Income tax receivable		-			24			326			322
Total current assets		122,274			108,501			126,921			120,872

Property and equipment, net		22,640			23,401			22,781			22,919
Other intangible assets, net		16,649			19,416			15,006			15,816
Indefinite lived intangible assets		41,547			41,694			41,570			41,630
Goodwill		18,090			18,090			18,090			18,090
Deferred income taxes								7,648			7,904
Other long-term assets		3,748			2,026			3,100			3,034
Total assets	$	224,948		$	213,128		$	235,116		$	230,265

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities	$	28,275		$	21,489		$	19,817		$	24,304
Income tax payable		-			210			88			260
Current portion of long-term debt		-			41
Total current liabilities		28,275			21,740			19,905			24,564

Long-term debt		24,908			22,105			32,063			22,670
Deferred income taxes		2,144			2,919			1,188			1,224
Other long-term liabilities		797			159			451			615
Total liabilities		56,124			46,923			53,607			49,073

Stockholders' Equity
Preferred stock, $.0001 par value; 5,000 shares authorized; none issued		-			-
Common stock, $.0001 par value; 100,000 shares authorized; 33,605 and 33,244 issued and 29,750 and 29,748 outstanding, respectively		3			3
Preferred stock, $.0001 par value; 5,000
shares authorized; none issued								-			-
Common stock, $.0001 par value; 100,000 shares authorized;
33,615 and 33,615 issued and 29,760 and 29,760 outstanding, respectively								3			3
Additional paid in capital		491,546			488,404			492,966			492,353
Accumulated deficit		(300,235	)		(304,577	)		(289,300	)		(288,592	)
Treasury stock, at cost		(22,269	)		(18,102	)		(22,269	)		(22,269	)
Accumulated other comprehensive (loss) income		(221	)		477
Accumulated other comprehensive income (loss)								109			(303	)
Total stockholders' equity		168,824			166,205			181,509			181,192
Total liabilities and stockholders' equity	$	224,948		$	213,128		$	235,116		$	230,265

	Nine Months Ended						Three Months Ended
	September 30, 2019			September 30, 2018			March 31, 2020			March 31, 2019
Cash Flows From Operating Activities:
Net income	$	6,585		$	3,753		$	36		$	3,787
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property and equipment		3,332			3,314			1,117			1,103
Amortization of intangible assets		2,665			2,902			772			889
Amortization of debt issuance costs		206			371			77			64
Loss on disposition of property and equipment		62			11
(Gain) loss on disposition of property and equipment								(3	)		31
Noncash lease expense		501			-			171			159
Loss from removal of accumulated translation adjustment		-			172
Stock-based compensation		2,246			2,067			613			785
Deferred income taxes		(551	)		(539	)		4			162
Changes in operating assets and liabilities, net of acquisition:
Changes in operating assets and liabilities:
Accounts receivable		(6,480	)		(4,007	)		2,568			(1,921	)
Inventories		(9,310	)		(3,182	)		4,061			2,589
Prepaid and other assets		3			443			(1,103	)		(295	)
Accounts payable and accrued liabilities		6,559			2,421			(4,675	)		(1,655	)
Income taxes		(183	)		(114	)		(139	)		7
Net cash provided by operating activities		5,635			7,612			3,499			5,705

Cash Flows From Investing Activities:
Purchase of business, net of cash received		-			(345	)
Proceeds from disposition of property and equipment		20			5			3			1
Purchase of property and equipment		(2,838	)		(1,854	)		(1,302	)		(1,046	)
Net cash used in investing activities		(2,818	)		(2,194	)		(1,299	)		(1,045	)

Cash Flows From Financing Activities:
Proceeds from revolving credit facilities		106,934			101,331			20,160			51,941
Repayments on revolving credit facilities		(104,088	)		(99,572	)		(10,767	)		(55,732	)
Repayments of financing and capital leases		(31	)		(29	)		-			(31	)
Payment of debt issuance costs		(680	)		(1,032	)
Purchase of treasury stock		(4,167	)		(4,709	)
Proceeds from exercise of stock options		896			467
Cash dividends paid		(2,243	)		(741	)		(744	)		(746	)
Net cash used in financing activities		(3,379	)		(4,285	)
Net cash provided by (used in) financing activities								8,649			(4,568	)

Effect of foreign exchange rates on cash		(73	)		16			244			(56	)

Change in cash		(635	)		1,149			11,093			36
Cash, beginning of period		2,486			1,856			1,703			2,486
Cash, end of period	$	1,851		$	3,005		$	12,796		$	2,522

Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes	$	131		$	296		$	182		$	75
Cash paid for interest	$	781		$	700		$	252		$	258
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
Property and equipment purchased with accounts payable	$	133		$	155		$	94		$	145
Property and equipment acquired through a capital lease	$	-		$	123
Lease liabilities arising from obtaining right of use assets	$	1,855		$	-		$	80		$	1,516

																Accumulated
					Additional											Other			Total
	Common Stock				Paid-In		Accumulated			Treasury Stock						Comprehensive			Stockholders'
	Shares		Amount		Capital		Deficit			Shares			Amount			Income (Loss)			Equity
Balance, December 31, 2017		32,917	$	3	$	485,285	$	(310,390	)		(2,875	)	$	(12,415	)	$	499		$	162,982
Net income		-		-		-		403			-			-			-			403
Other comprehensive income		-		-		-		-			-			-			714			714
Stock-based compensation expense		-		-		499		-			-			-			-			499
Balance, March 31, 2018		32,917	$	3	$	485,784	$	(309,987	)		(2,875	)	$	(12,415	)	$	1,213		$	164,598
Net loss		-		-		-		(777	)		-			-			-			(777	)
Other comprehensive loss		-		-		-		-			-			-			(292	)		(292	)
Purchase of treasury stock		-		-		-		-			-			(217	)		-			(217	)
Stock-based compensation expense		-		-		656		-			-			-			-			656
Balance, June 30, 2018		32,917	$	3	$	486,440	$	(310,764	)		(2,875	)	$	(12,632	)	$	921		$	163,968
Net income		-		-		-		4,127			-			-			-			4,127
Other comprehensive loss		-		-		-		-			-			-			(247	)		(247	)
Cash dividends ($0.025 per share)		-		-		-		(741	)		-			-			-			(741	)
Purchase of treasury stock		-		-		-		-			(519	)		(4,492	)		-			(4,492	)
Stock-based compensation expense		-		-		912		-			-			-			-			912
Proceeds from exercise of options		327		-		467		-			-			-			-			467
Balance, September 30, 2018		33,244	$	3	$	487,819	$	(307,378	)		(3,394	)	$	(17,124	)	$	674		$	163,994

	March 31, 2020		December 31, 2019

Finished goods	$	55,380	$	59,452
Work-in-process		6,885		7,474
Raw materials and supplies		6,819		6,506
	$	69,084	$	73,432

Balance at December 31, 2019	$	41,630

Impact of foreign currency exchange rates		(60	)

Balance at March 31, 2020	$	41,570

Gross balance at December 31, 2019	$	32,917

Impact of foreign currency exchange rates		(86	)

Gross balance at March 31, 2020	$	32,831

Balance at December 31, 2018	$	41,694

Impact of foreign currency exchange rates		(147	)

Balance at September 30, 2019	$	41,547

Gross balance at December 31, 2018	$	33,010

Impact of foreign currency exchange rates		(213	)

Gross balance at September 30, 2019	$	32,797

	September 30, 2019			December 31, 2018
Customer lists and relationships	$	25,928		$	26,047
Product technologies		4,659			4,753
Tradename / trademark		1,263			1,263
Core technologies		947			947
		32,797			33,010
Less accumulated amortization		(16,148	)		(13,594	)
	$	16,649		$	19,416

		~~September 30, 2019~~			March 31, 2020
		Notional			Latest
		Amount		Maturity
	~~Maturity~~
Foreign exchange contracts - Canadian Dollars		$	~~11,344~~13,762			~~August 2020~~	February 2021
Foreign exchange contracts - Euros		€	~~18,064~~23,555			~~August 2020~~	February 2021
Foreign exchange contracts - Swiss Francs		CHF 580	661	August 2020

						Classification	March 31, 2020		December 31, 2019
	Classification	September 30, 2019		December 31, 2018
Derivative instruments in asset positions:
Forward exchange contracts	Prepaid and other current assets	$	909	$	729	Prepaid and other current assets	$	1,385	$	226

Derivative instruments in liability positions:
Forward exchange contracts	Accounts payable and accrued liabilities	$	24	$	-	Accounts payable and accrued liabilities	$	24	$	152
Forward exchange contracts	Other long-term liabilities	$	-	$	5	Other long-term liabilities	$	-	$	29

	Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Cash Flow Hedges			Total
Balance as of December 31, 2018	$	73		$	404		$	477
Other comprehensive (loss) income before reclassifications		(869	)		954			85
Amounts reclassified from other comprehensive income (loss)		-			(783	)		(783	)
Net current period other comprehensive (loss) income		(869	)		171			(698	)
Balance as of September 30, 2019	$	(796	)	$	575		$	(221	)

							March 31, 2020			December 31, 2019
	September 30, 2019			December 31, 2018
Land	$	3,160		$	3,160		$	3,160		$	3,160
Building and improvements		6,939			6,870			6,964			6,964
Furniture and fixtures		4,955			4,376			5,486			5,255
Computer hardware and software		5,030			4,863			5,408			5,298
Machinery and equipment		21,622			21,004			22,536			21,578
Construction in progress		1,694			1,761			1,334			1,690
		43,400			42,034			44,888			43,945
Less accumulated depreciation		(20,760	)		(18,633	)		(22,107	)		(21,026	)
	$	22,640		$	23,401		$	22,781		$	22,919

	Foreign Currency Translation Adjustments			Unrealized Gains (Losses) on Cash Flow Hedges			Total

Balance as of December 31, 2018	$	73		$	404		$	477
Other comprehensive (loss) income before reclassifications		(373	)		168			(205	)
Amounts reclassified from other comprehensive income (loss)		-			(257	)		(257	)
Net current period other comprehensive loss		(373	)		(89	)		(462	)
Balance as of March 31, 2019	$	(300	)	$	315		$	15

Balance as of December 31, 2019	$	(286	)	$	(17	)	$	(303	)
Other comprehensive (loss) income before reclassifications		(401	)		1,032			631
Amounts reclassified from other comprehensive income (loss)		-			(219	)		(219	)
Net current period other comprehensive (loss) income		(401	)		813			412
Balance as of March 31, 2020	$	(687	)	$	796		$	109

	Gains reclassified from AOCI to the Condensed Consolidated Statements of Comprehensive Income
Affected line item in the Condensed Consolidated Statements of Comprehensive Income	For the Three Months Ended September 30, 2019			For the Nine Months Ended September 30, 2019
Foreign exchange contracts:
Sales	$	261		$	844
Less: Income tax expense		(95	)		61
Amount reclassified, net of tax	$	356		$	783

Total reclassifications from AOCI	$	356		$	783

	Gains reclassified from AOCI to the Consolidated Statements of Comprehensive Income
Affected line item in the Consolidated	Three Months Ended
Statements of Comprehensive Income	March 31, 2020		March 31, 2019
Foreign exchange contracts:
Sales	$	288	$	281
Less: Income tax expense		69		24
Amount reclassified, net of tax	$	219	$	257

Total reclassifications from AOCI	$	219	$	257

	September 30, 2019
	Level 1		Level 2		Level 3		Total
Assets
Forward exchange contracts	$	-	$	909	$	-	$	909
	$	-	$	909	$	-	$	909

Liabilities
Forward exchange contracts	$	-	$	24	$	-	$	24
	$	-	$	24	$	-	$	24

Options Granted During the Three Months Ended March 31, 2020

Number of options		~~188~~125
Option vesting period		~~1 - 3~~4 Years
Grant price		$~~13.21~~11.84
Dividend yield		~~0.76%~~0.84%
Expected volatility (a)		~~41.0% - 41.2%~~40.9%
Risk-free interest rate		~~1.88% - 1.93%~~0.65%
Expected life (years) (b)		~~5.31 - 6.00~~6.25
Weighted average fair value		$~~4.87 - $5.13~~4.35

		~~January 7, 2019~~
~~Number issued~~		~~500~~
~~Vesting period~~		~~$15.00 stock price target~~
~~Grant price~~		~~$10.21~~
~~Expected volatility~~		~~42.4%~~
~~Risk-free interest rate~~		~~2.53%~~
~~Expected term (years)~~		~~4.28 - 5.28~~
~~Weighted average fair value~~		~~$7.92~~

Net Operating Loss Carryforward Expiration Dates
December 31, 2018

Expiration Dates December 31,	Net Operating Loss Amount
2021	$	5,495
2022		115,000
2023		5,712
2024		3,566
2025 and beyond		11,294
Total	$	141,067

	Balance Sheet Classification	September 30, 2019
Assets
Operating lease ROU assets	Other long-term assets	$	1,343

Liabilities
Current operating lease liabilities	Accounts payable and accrued liabilities	$	704
Noncurrent operating lease liabilities	Other long-term liabilities	$	625

Years Ending December 31,	Operating Lease Payments
2019 (excluding the nine months ended September 30, 2019)	$	193
2020		725
2021		339
2022		86
2023 and thereafter		59
Total future lease payments		1,402
Less: amount representing interest		(73	)
Present value of future lease payments		1,329
Less: current lease obligations		(704	)
Long-term lease obligations	$	625

Years Ending December 31,	Future Minimum Lease Payments
2019	$	687
2020		634
2021		243
2022		24
2023		-
Thereafter		-
	$	1,588

					Total Number of Shares		Maximum Dollar Value
					Purchased as Part of		of Shares that May Yet
	Total Number of		Average Price Paid		Publicly Announced		Be Purchased Under
	Shares Purchased		per Share		Plans or Programs		the Plans or Programs
Period
July 1 to 31, 2019		-	$	-		-	$	13,455,710
August 1 to 31, 2019		243,873	$	10.92		243,873	$	10,793,587
September 1 to 30, 2019		-	$	-		-	$	10,793,587
Total		243,873

Exhibit	Description

2.1	Stock Purchase Agreement dated March 10, 2020, by and among Everest/Sapphire Acquisition, LLC, the Company, S.K.B. Corporation, David Sanderson and Steven Kottman (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 13, 2020 and incorporated herein by reference).

10.1	Letter to TT Investimentos Ltda. dated March 23, 2020 (filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 24, 2020 and incorporated herein by reference).

10.2	Letter Agreement dated April 30, 2020, by and among Everest/Sapphire Acquisition, LLC, the Company, S.K.B. Corporation, David Sanderson, Steven Kottman and Steven Kottman, as Sellers’ Representative (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2020 and incorporated herein by reference).

31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

101.INS	XBRL Instance Document *

101.SCH	XBRL Taxonomy Extension Schema Document *

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document *

101.LAB	XBRL Taxonomy Extension Label Linkbase Document *

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document *

*	Filed herewith

**	Furnished herewith

	CLARUS CORPORATION

Date: ~~November 4, 2019~~May 11, 2020	By:	~~/s/~~ /s/ Warren B. Kanders
		Name:	Warren B. Kanders
		~~Title:~~	~~Executive Chairman~~
		Title:	Executive Chairman (Principal Executive Officer)

By:	~~/s/~~ /s/ Aaron J. Kuehne
	Name:	Aaron J. Kuehne
	~~Title:~~	~~Chief Administrative Officer and~~
	Title:	Chief Administrative Officer and Chief Financial Officer
		(Principal Financial Officer)
		(Principal Accounting Officer)