Clarus Corp - FORM 10-K - March 15, 2011

Attached files

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EX-4.2 - Clarus Corp	v214265_ex4-2.htm
EX-32.1 - Clarus Corp	v214265_ex32-1.htm
EX-31.1 - Clarus Corp	v214265_ex31-1.htm
EX-23.2 - Clarus Corp	v214265_ex23-2.htm
EX-23.3 - Clarus Corp	v214265_ex23-3.htm
EX-32.2 - Clarus Corp	v214265_ex32-2.htm
EX-23.1 - Clarus Corp	v214265_ex23-1.htm
EX-31.2 - Clarus Corp	v214265_ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 0-24277

BLACK DIAMOND, INC.

(Exact name of Registrant as specified in its Charter)

Delaware	58-1972600
(State or Other Jurisdiction	(I.R.S. Employer Identification No.)
of Incorporation or Organization)

2084 East 3900 South, Salt Lake City, Utah	84124
(Address of Principal Executive Offices)	(Zip Code)

(801) 278-5552

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ¨ NOx

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. YES ¨ NOx

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES ¨ NO ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Small reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES ¨ NO x

The aggregate market value of the voting stock and non-voting common equity held by non-affiliates of the Registrant at June 30, 2010 was approximately $97.8 million based on $6.90 per share, the closing price of the common stock as quoted on the NASDAQ Global Select Market.

The number of shares of the Registrant's common stock outstanding at March 8, 2011 was 21,738,484 shares.

DOCUMENT INCORPORATED BY REFERENCE

Portions of our Proxy Statement for the 2011 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the Registrant's 2010 fiscal year end are incorporated by reference into Part III of this report.

TABLE OF CONTENTS

		PAGE

PART I
ITEM 1.	BUSINESS	1
ITEM 1A.	RISK FACTORS	7
ITEM 1B.	UNRESOLVED STAFF COMMENTS	17
ITEM 2.	PROPERTIES	18
ITEM 3.	LEGAL PROCEEDINGS	18
ITEM 4.	(REMOVED AND RESERVED)	18

PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	19
ITEM 6.	SELECTED FINANCIAL DATA	21
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	32
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	33
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	70
ITEM 9A.	CONTROLS AND PROCEDURES	70
ITEM 9B	OTHER INFORMATION	71

PART III
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	72
ITEM 11.	EXECUTIVE COMPENSATION	72
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	72
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	72
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	72

PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	73

SIGNATURES		77
EXHIBIT INDEX		78

PART I

ITEM 1. BUSINESS

Overview

Black Diamond, Inc. (“Black Diamond” or the “Company,” which may be referred to as “we,” “us,” or “our”) is a leading provider of outdoor recreation equipment and active lifestyle products. The Company’s principal brands are Black Diamond® and Gregory®. The Company develops, manufactures and globally distributes a broad range of products including: rock-climbing equipment (such as carabiners, protection devices, harnesses, belay and devices, helmets, and ice-climbing gear), technical backpacks and high-end day packs, tents, trekking poles, headlamps and lanterns, gloves and mittens, skis, ski bindings, ski boots, ski skins and avalanche safety equipment. Headquartered in Salt Lake City, Utah, the Company has more than 475 employees worldwide, with ISO 9001 manufacturing facilities both in Salt Lake City and Southeast China, as well as a sewing plant in Calexico, California, distribution centers in Utah and Southeast China, a marketing office in Yokohama, Japan, and a fully-owned sales, marketing and distribution operation for Europe, located near Basel, Switzerland.

On January 21, 2011, we changed our name from Clarus Corporation to Black Diamond, Inc., which we believe more accurately reflects our current business.

Operating History

Since the 2002 sale of our e-commerce solutions business, we have engaged in a strategy of seeking to enhance stockholder value by pursuing opportunities to redeploy our assets through an acquisition of, or merger with, an operating business or businesses that would serve as a platform company. On May 28, 2010, we acquired Black Diamond Equipment, Ltd. (which may be referred to as “Black Diamond Equipment” or “BDEL”) and Gregory Mountain Products, LLC (which may be referred to as “Gregory” or “GMP”). Because the Company had no operations at the time of our acquisition of Black Diamond Equipment, Black Diamond Equipment is considered to be our predecessor company (the “Predecessor” or “Predecessor Company”) for financial reporting purposes (see Note 2 of our consolidated financial statements for a more detailed explanation of the acquisition). The Predecessor does not include Gregory.

Market Overview

Our primary target customers are outdoor-oriented consumers and adventurers who understand the importance of quality equipment for those involved in active and adventurous lifestyles. The users of our products are made up of a wide range of outdoor athletes and enthusiasts, including rock, ice and mountain climbers, skiers, backpackers, river runners, campers, cyclists, and endurance trail runners, among others. We believe that our brand is iconic among the devoted outdoor adventurers with a strong reputation for innovation, style, quality, design, and durability in each of our core product lines that facilitate the needs of rock and ice climbers, alpinists, backcountry and freeride skiers, day hikers, backpackers, and campers.

As the variety of outdoor sports activities continues to grow and proliferate and existing outdoor sports evolve and become ever more specialized, we believe other outdoor sports and athletic equipment companies are failing to address the unique aesthetics, fit and technical and performance needs of athletes and enthusiasts involved in such specialized activities. We believe we have been able to help address this void in the marketplace by leveraging our user intimacy and improving on our existing product lines, by expanding our product offerings into new niche categories, and by incorporating innovative industrial design and engineering, along with comfort and functionality into our products. Although we were founded to address the needs of core rock and ice climbers, backcountry skiers, and alpinists, we are also successfully designing products for more casual outdoor enthusiasts who also appreciate the technical rigor and premium quality of our products. We believe the credibility and authenticity of our brands expand our potential market beyond committed outdoor athletes to those outdoor generalist consumers who desire to lead active, healthy and balanced lives.

Growth Strategies

Our growth strategies are to achieve sustainable, profitable growth organically and to expand the business through targeted, strategic acquisitions. We intend to create innovative new products, increase consumer and retailer awareness and demand for our products, and build stronger brand connections with consumers over time across a growing number of geographic markets, including Asia and South America.

New Product Development

To drive organic growth within our existing businesses, we intend to leverage our strong brand names, customer relationships and proven capacity for innovation to develop new products and product extensions in each of our existing product categories, and to expand into new product groups. Since 1989, our brands have introduced over 200 new products. We have also invested resources to develop processes for developing internally hot-forged carabiners and closed loop anodizing and to manufacture other products in our managed facility in Asia, which we expect to increase our competitiveness. We have also recently developed a new line of harnesses based on our Kinetic Core and Dual Core construction technologies and a new line of freeride ski boots featuring unprecedented FIT, FLEX, and ACCESS technologies including revolutionary ski/walk performance, as well as a new line of freeride Power series skis featuring 3D Metal Sandwich construction and unparalleled torsion stiffness. In 2009, we introduced two via ferrata protection kits with safety technologies previously unavailable to climbers. In addition, we have introduced a number of new packs featuring our BioSync™, ErgoACTIV™, ReACTIV™, Fusion™, JetStream™, and Response™ suspension systems, which provide backpackers with superior comfort, movement and load transfer characteristics.

We intend to expand our business into both adjacent and complementary product categories, such as outdoor technical apparel and footwear.

Innovation and New Technology

We have a long history of technical innovation, and in recent years have introduced innovations such as the first plastic telemark boot, the AvaLung® backpack, which helps adventurers survive an avalanche, and FlickLock® and Control Shock Technology for our adjustable trekking poles. Our products have introduced many firsts in the backpack market, including being the first to build backpacks in different frame, harness and waist belt sizes; the first (and still only) pack manufacturer to develop a waistbelt system that adjusts to fit different hip angles, automatically improving load transfer; and the first to develop the center-locking bar tack, a stitch that ends and locks off on the center of a seam instead of the side for increased strength at major stress points. Our new technologies are generally inspired by our continuing commitment to maximize the enjoyment and safety of the outdoor sports for which we design our products.

Acquisition of Complementary Businesses

We expect to target acquisitions as a viable opportunity to gain access to new product groups and customer channels and increase penetration of existing markets, while taking advantage of our existing operational platform that we expect will enable us to leverage global resources of our business in North America, Europe and Asia, including product commercialization, supply chain, distribution, inventory management, manufacturing, IT, quality and global compliance.

To the extent we pursue future acquisitions, we intend to focus on businesses with product offerings that provide geographic or product diversification, or that expand our business into related categories that can be marketed through our existing distribution channels or that provide us access to new distribution channels for our existing products, thereby increasing marketing and distribution efficiencies. We are particularly interested in companies with category-leading brands, recurring revenue, sustainable margins and strong cash flow. We anticipate financing future acquisitions prudently through a combination of cash on hand, operating cash flow, bank financings and new capital markets offerings.

Competitive Strengths

Experienced Management

Our management team has been involved in the successful operation, acquisition and integration of a substantial number of companies. Throughout his 30 year business career, our Executive Chairman, Warren B. Kanders, has established a track record of building public companies through strategic acquisitions to enhance organic growth. Peter Metcalf, the co-founder of Black Diamond Equipment and our President and Chief Executive Officer, boasts a lifetime of active participation in outdoor sports and a compelling track record in the outdoor/ski products industry. During the last 22 years, Mr. Metcalf has led Black Diamond Equipment through a period of consistent growth and steady diversification, and Black Diamond Equipment has emerged as a global brand. We are equally reliant upon the skills and experience of our Executive Vice Chairman, Robert R. Schiller, who previously served as the President, Chief Operating Officer and Chief Financial Officer of Armor Holdings, Inc., and has a proven record of managing operations as well as identifying, executing and integrating strategic acquisitions.

Strong Base of Business

Our outdoor products business benefits from a strong reputation for paradigm changing, high quality, and innovative products that make us a leader in the outdoor industry with particular strength in product categories such as backpacking, hiking, rock climbing, ice climbing, skiing, and mountaineering. Underlying our innovative product lines is a strong stable of intellectual property, with multiple patents and patent applications, as well as valuable brands and trademarks. In addition, our user intimacy, strong retailer partnerships, operations and execution acumen and leadership as a champion in the access, education, and stewardship issues that affect our customers contribute to the robustness of our business.

Incentivized Management

The members of our Board of Directors and our executive officers, including Messrs. Kanders, Metcalf and Schiller, are substantial stockholders of the Company and beneficially own approximately 39% of our outstanding common stock, which we believe aligns the interests of our Board of Directors and our executive officers with that of our stockholders.

Growth-Oriented Capital Structure

Our capital structure provides us with the capacity to fund future growth. Our net operating loss and tax credit carryforwards are expected to substantially offset our future U.S. Federal income taxes, excluding the amount subject to U.S. Federal Alternative Minimum Tax (“AMT”), which is expected to allow us to retain cash flow for future growth. AMT is calculated as 20% of AMT income. For purposes of AMT, a maximum of 90% of income is offset by available NOLs. The majority of the Company’s pre-tax income is currently earned and expected to be earned in the U.S., or taxed in the U.S. as Subpart F. income and will be offset with the NOL.

We recently filed a shelf registration statement with the Securities and Exchange Commission whereby we may offer, issue and sell from time to time, in one or more offerings and series, together or separately, shares of common stock, shares of preferred stock, debt securities or guarantees of debt securities up to an aggregate amount of $250,000,000. The proceeds of any offering are anticipated to be used in the strategic development and growth of our business, both organically and through acquisitions.

Distribution

Our products are primarily distributed through a strong, global network of independent specialty retailers, specialty chains and consumer catalogs. We enjoy strong relationships with customers in a number of these sales channels that can provide for additional diversification and the ability to pursue growth opportunities in a number of different markets across a variety of product types and price points.

Products

We have developed a reputation for designing, manufacturing and distributing products considered to be both innovative and dependable in their respective market niches. Our commitment to designing innovative, durable and reliable products that enhance our customers’ capabilities, comfort and safety in their outdoor endeavors will remain our hallmark and mission. In addition to function, we believe our products’ unique aesthetic appearance is another hallmark that distinguishes us in the outdoor marketplace. Our products have won numerous awards from industry magazines including Alpinist, Backpacker, Climbing, Consumers Digest, National Geographic Adventure, Men’s Journal, Outside, Popular Science, Powder, Rock & Ice, Ski and Skiing.

Our products include a wide variety of technical outdoor equipment and lifestyle products for rock and ice climbers, alpinists, hikers, freeride skiers, outdoor enthusiasts and travelers. Many of our products are designed for extreme applications, such as high altitude mountaineering, ice and rock climbing, as well as backcountry, freeride, and alpine skiing. Generally, our product offerings are divided into the following three primary categories:

Climbing: Our climb line consists of technical equipment such as belay/rappel devices, bouldering products, carabiners and quickdraws, chalk, chalk bags, climbing packs, crampons, crash pads, dogbones and runners, harnesses, ice axes and piolets, ice protection and rock protection devices and various other climbing accessories.

Skiing: Our skiing line consists of AvaLung backpacks, winter packs for skiing and snowboarding, bindings, boots, poles, skis, skins, snow gloves, snow packs, and snow safety devices.

Mountaineering: Our mountaineering line consists of mountaineering backpacks for alpine expeditions, backpacks for backcountry excursions, overnight trips, and day hikes, bivy sacks, rain sacks, gaiters, gloves, headlamps, lights, tents, trekking poles and various other hiking and mountaineering accessories.

We also offer hydration packs for trail running and cycling, and travel and lifestyle products such as duffle bags, messenger bags, and small bags and pouches designed to carry electronics and other accessories, and a variety of Black Diamond Equipment and Gregory branded apparel and accessories.

Customers

We market and distribute our products in over 40 countries, primarily through independent specialty stores and specialty chains, including premium sporting goods and outdoor recreation stores and consumer catalogs, in the United States, Canada, New Zealand, Europe, Asia and Africa. In addition, our Gregory branded products are sold through Gregory-supplied retail stores in Tokyo, Japan, Seoul, South Korea and Taiwan. We also sell our products directly to customers through our wholly-owned retail store in Salt Lake City, Utah and online at www.blackdiamondequipment.com.

We have highly diversified account bases and sell products in over 1,500 retail locations through over 1,000 individual accounts, with the bulk of our business being done through independent retailers. Despite the benefits of this diversification, we remain highly dependent on consumer discretionary spending patterns and the purchasing patterns of our wholesale and other customers as they attempt to match their seasonal purchase volumes to volatile consumer demand.

Our end users constitute a broad range of consumers including mountain climbers, winter outdoor enthusiasts, backpackers and campers, cyclists, top endurance trail runners and outdoor-inspired consumers. Such consumers demand high-quality, reliable and well-designed products to enhance their performance and safety in a multitude of outdoor activities in virtually any climate. We expect to leverage our user intimacy, engineering prowess and design ability to expand into related technical product categories that target the same demographic group and distribution channels while leveraging our user intimacy, engineering prowess and design ability.

During 2010, Recreational Equipment, Inc. (“REI”) accounted for approximately 14% of our sales, while Kabushiki Kaisha A&F (“A&F (Japan)”) accounted for approximately 8% of our sales. The loss of either of these customers could have a material adverse effect on the Company.

Sales and Marketing

Our sales force is generally deployed by geographic region. Our focus is on providing our products to a broad spectrum of outdoor enthusiasts, from expert rock climbers to beginner skiers. Within each of our brands, we strive to create a unique look for our products and are beginning to utilize new and enhanced in-store merchandising displays and techniques to communicate those differences to the consumer. In addition, we are exploring uses for brand and market research. We also regularly utilize various promotions and public relations campaigns.

We have consistently established relationships with professional athletes to help evaluate, promote and establish product performance and authenticity with customers. Such endorsers are one of many elements in our array of marketing materials, including in-store displays, brochures and on our website.

Research and Development

We commit significant resources to new product research and development. We conduct our product research and design activities at our locations in Salt Lake City, Utah and Zhuhai, China, and conduct product evaluations at our offices located outside of Basel, Switzerland.

We expense research and development costs as incurred. We have 36 employees dedicated to research and development and have spent approximately $6.3 million in connection with research and development activities over the last three calendar years.

Manufacturing, Distribution, and Sourcing

Manufacturing and Global Distribution

Several of our products are manufactured in our facilities in the United States and Asia. Certain of our products are also manufactured to our specifications by independently owned facilities in China and the Philippines. While we do not maintain a long-term manufacturing contract with such facilities, we believe that our long-term relationship with our manufacturing facilities in Asia will help to ensure that a sufficient supply of goods built to our specification are available in a timely manner and on satisfactory economic terms in the future.

In 2006, Black Diamond Equipment Asia Ltd. (“Black Diamond Asia”), a wholly-owned subsidiary of Black Diamond, was established in southeast China. The facility in southeast China is a Black Diamond Equipment-managed 100,000 sq. ft. facility that is operated and staffed by our employees. Each piece of equipment is tested to the same degree at the Black Diamond Asia facility as they are at our Salt Lake City facility. Each of those facilities rely on identical, thoroughly documented systems and procedures to ensure consistent quality and safety for every piece of gear we put our name on. Our manufacturing operations in Salt Lake City and southeast China are each ISO 9001 certified.

In addition to manufacturing, we run our own global distribution and quality control operation at our Zhuhai, China facility, allowing us to aggregate for global shipping the goods that we and our Asian-based facilities manufacture.

Sourcing

We source raw materials and components from a variety of suppliers. Our primary raw materials include aluminum, steel, nylon, corrugated cardboard for packaging, electrical components, plastic resin, urethane and various textiles, foams and fabrics. The raw materials used in the manufacture of our products are generally available from numerous suppliers in quantities sufficient to meet normal requirements.

We source packaging materials both domestically as well as from sources in Asia and Europe. We believe that all of our purchased products and materials could be readily obtained from alternative sources at comparable costs.

Competition

Because of the diversity of our product offerings, we compete by niche with a variety of companies. Our products must stand up to the high standards set by the world’s elite mountain climbers, alpine skiers and adventurers. In the outdoor industry, quality and durability are paramount among such athletes who rely on our products to withstand some of the world’s most extreme conditions. In addition to extreme adventurers, we believe all outdoor enthusiasts benefit from the high-quality standards of our products. We also believe our products compete favorably on the basis of product innovation, product performance, marketing support and price.

The popularity of outdoor activities and changing design trends affect the desirability of our products. Therefore, we seek to anticipate and respond to trends and shifts in consumer preferences by adjusting the mix of available product offerings, developing new products with innovative performance features and designs, and by marketing our products in a persuasive and memorable fashion to drive consumer awareness and demand. Failure to anticipate or respond to consumer needs and preferences in a timely and adequate manner could have a material adverse effect on our sales and profitability.

We compete with niche, privately-owned companies as well as a number of brands owned by large multinational companies, such as those set forth below.

Climbing: Our climbing products and accessories, including but not limited to, belay devices, carabiners, and harnesses, compete with products from companies such as Arc’Teryx, Petzl and Mammut.

Skiing: Our skiing equipment and accessories, including but not limited to, skis, ski bindings, poles and boots, compete with products from competitors such as Atomic, Dynafit (Salewa), Dynastar (Lange), Garmont, K2, Volkl, Marker, Nordica, Rossignol, Salomon, Scarpa and Scott.

Mountaineering: Our mountaineering products, including but not limited to, backpacks, trekking poles, headlamps and tents, compete with products from companies such as Petzl, Mammut, Deuter, Kelty, Leki, Komperdell, Marmot, Mountain Hardwear, Mountainsmith, Osprey, Dakine, Sierra Designs and The North Face.

In addition, we compete with certain of our large wholesale customers who focus on the outdoor market, such as REI, Eastern Mountain Sports, Mountain Equipment Co-op (“MEC”) and Decathlon, which manufacture, market and distribute their own climbing, skiing and mountaineering products under their own private labels.

Patents and Trademarks

We believe our primary and pending word and icon trademarks worldwide, including the Black Diamond and Gregory logos, Black Diamond®, ATC®, Camalot®, Gregory®, AvaLung®, FlickLock®, Ascension™, Time is Life®, Hexentric®, Stopper® and Bibler® create international brand recognition for our products.

We believe our brands have an established reputation for high quality, reliability and value and, accordingly, we actively monitor and police our brands against infringement to ensure their viability and enforceability.

In addition to trademarks, we hold over 70 patents worldwide for a wide variety of technologies across our product lines.

Our success with our proprietary products is generally derived from our “first mover” advantage in the market as well as our commitment to protecting our current and future proprietary technologies and products, which acts as a deterrent to infringement of our intellectual property rights. While we believe our patent and trademark protection policies are robust and effective, if we fail to adequately protect our intellectual property rights, competitors may manufacture and market products similar to ours. Our principal intellectual property rights include our patents and trademarks but also include products containing proprietary trade secrets.

We cannot be sure that we will receive patents for any of our patent applications or that any existing or future patents that we receive or license will provide competitive advantages for our products. While we actively monitor our competitors to ensure that we do not compromise the intellectual property of others, we cannot be sure that competitors will not challenge, invalidate or avoid the application of any existing or future patents that we receive or license. In addition, patent rights may not prevent our competitors from developing, using or selling products that are in similar product niches as ours.

Employees

As of December 31, 2010, we have over 475 employees worldwide. None of our employees are represented by unions or covered by any collective bargaining agreements. We have not experienced any work stoppages or employee-related slowdowns and believe that our relationship with employees is satisfactory.

Executive Officers of the Registrant

Pursuant to General Instruction G(3), the information regarding our executive officers called for by Item 401(b) of Regulation S-K is hereby included in Part I of this Annual Report on Form 10-K.

The executive officers of our Company as of March 1, 2011 are as follows:

Warren B. Kanders, 53, our Executive Chairman, has served as one of our directors since June 2002 and as Executive Chairman of our Board of Directors since December 2002. Mr. Kanders served as a director of Highlands Acquisition Corp. (“Highlands”), a publicly-held blank check company from May 2007 until September 2009. Since 1990, Mr. Kanders has served as the President of Kanders & Company, Inc. (“Kanders & Co.”), a private investment firm principally owned and controlled by Mr. Kanders, that makes investments in and provides consulting services to public and private entities. From January 1996 until its sale to BAE Systems plc (“BAE Systems”) on July 31, 2007, Mr. Kanders served as the Chairman of the Board of Directors, and as the Chief Executive Officer from April 2003, of Armor Holdings, Inc. (“Armor Holdings”), formerly a New York Stock Exchange-listed company and a manufacturer and supplier of military vehicles, armored vehicles and safety and survivability products and systems to the aerospace and defense, public safety, homeland security and commercial markets. From April 2004 until October 2006, he served as the Executive Chairman, and from October 2006 until September 2009, served as the Non-Executive Chairman of the Board of Directors of Stamford Industrial Group, Inc., which was an independent manufacturer of steel counterweights. Since November 2004, Mr. Kanders has served as the Chairman of the Board of Directors of PC Group, Inc., a manufacturer of personal care products. From October 1992 to May 1996, Mr. Kanders served as Vice Chairman of the Board of Directors of Benson Eyecare Corporation, a formerly publicly-listed manufacturer and distributor of eye care products and services. Mr. Kanders received a B.A. degree in Economics from Brown University.

Robert R. Schiller, 48, our Executive Vice Chairman, was Vice Chairman of the Board of Directors of Gregory since March 2008. From July 1996 until its sale to BAE Systems on July 31, 2007, Mr. Schiller served in a variety of capacities at Armor Holdings, including as a Director from June 2005, President from January 2004, Chief Operating Officer from April 2003, and Chief Financial Officer and Secretary from November 2000 to March 2004. Mr. Schiller graduated with a B.A. in Economics from Emory University in 1985 and received an M.B.A. from Harvard Business School in 1991.

Peter R. Metcalf, 55, our President and Chief Executive Officer, served as the Chief Executive Officer and Chairman of the Board of Directors of Black Diamond since co-founding Black Diamond in 1989 until the completion of the Company’s acquisition of Black Diamond in May 2010. He is a graduate of the University of Colorado, with a major in Political Science. He also earned a Certificate in Management from the Peter Drucker Center of Management.

Robert N. Peay, 43, is our Chief Financial Officer, Secretary and Treasurer. Mr. Peay had been the Chief Financial Officer of Black Diamond since 2008. Mr. Peay joined Black Diamond in 1996 and has previously served as Accounting Manager and Financial Controller of Black Diamond. Before joining Black Diamond, Mr. Peay worked in public accounting for two years with Arthur Andersen & Co. Mr. Peay received a Master’s degree in addition to a Bachelor of Science in Accounting from the University of Utah. He has been a Certified Public Accountant since 1996.

Seasonality

Our products are outdoor recreation related, which results in seasonal variations in sales and profitability. On a calendar year basis, we generally experience our greatest sales in the first and second quarters for certain of our products, including rock climbing gear, headlamps, lanterns, packs, trekking poles and tents, and in the third and fourth quarters for our ski, glove and ice climbing products. Sales of these products may be negatively affected by unfavorable weather conditions and other market trends. The fall/winter season represents approximately 55% of our sales while spring/summer represents approximately 45% of our sales.

Working capital requirements vary throughout the year. We fund our working capital through the use of our line of credit, which is classified as a long-term liability. Working capital increases during the first and third quarters of the year as inventory builds to support peak shipping periods and then decreases during the second and fourth quarters of the year as those inventories are sold and accounts receivable are collected, which cash collected is used to pay down the outstanding amounts on the line of credit. Cash provided by operating activities is substantially higher in the first half of the year due to reduced working capital requirements.

Available Information

Our Internet address is www.blackdiamond-inc.com. We make available free of charge on or through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, and the proxy statement for our annual meeting of stockholders as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. Forms 3, 4 and 5 filed with respect to our equity securities under section 16(a) of the Securities Exchange Act of 1934, as amended, are also available on our website. All of the foregoing materials are located at the ‘‘SEC Filings’’ tab under the section titled “Investor Relations.” The information found on our website shall not be deemed incorporated by reference by any general statement incorporating by reference this report into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under such Acts.

Materials we file with the Securities and Exchange Commission may be read and copied at the Securities and Exchange Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Securities and Exchange Commission’s Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission at www.sec.gov. In addition, you may request a copy of any such materials, without charge, by submitting a written request to: Black Diamond, Inc., c/o the Secretary, 2084 East 3900 South, Salt Lake City, UT 84124.

ITEM 1A. RISK FACTORS

In addition to other information contained in this Annual Report on Form 10-K, the following risk factors should be carefully considered in evaluating our business, because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those mentioned in any forward-looking statements. Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business, operating results, liquidity and financial condition. If any of the following risks occur, our business, operating results, liquidity and financial condition, and the price of our common stock, could be materially adversely affected.

Risks Related to Our Industry

Many of the products we sell are used for inherently risky mountain and outdoor pursuits and could give rise to product liability or product warranty claims and other loss contingencies, which could affect our earnings and financial condition.

Many of our products are used in applications and situations that involve high levels of risk of personal injury and death. As a result, we maintain staff, including in house legal counsel, who focus on testing and seek to assure the quality and safety of our products. In addition, we provide thorough and protective disclaimers and instructions on all of our products and packaging. Failure to use our products for their intended purposes, failure to use or care for them properly, or their malfunction, or, in some limited circumstances, even correct use of our products, could result in serious bodily injury or death.

As a manufacturer and distributor of consumer products, we are subject to the Consumer Products Safety Act, which empowers the Consumer Products Safety Commission to exclude from the market products that are found to be unsafe or hazardous. Under certain circumstances, the Consumer Products Safety Commission could require us to repurchase or recall one or more of our products. Additionally, laws regulating certain consumer products exist in some cities and states, as well as in other countries in which we sell our products, and more restrictive laws and regulations may be adopted in the future. Any repurchase or recall of our products could be costly to us and could damage our reputation. If we were required to remove, or we voluntarily removed, our products from the market, our reputation could be tarnished and we might have large quantities of finished products that we could not sell.

We also face exposure to product liability claims in the event that one of our products is alleged to have resulted in property damage, bodily injury or other adverse effects. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product or activities associated with the product, negligence, strict liability, and a breach of warranties. Although we maintain product liability insurance in amounts that we believe are reasonable, there can be no assurance that we will be able to maintain such insurance on acceptable terms, if at all, in the future or that product liability claims will not exceed the amount of insurance coverage. Additionally, we do not maintain product recall insurance. As a result, product recalls or product liability claims could have a material adverse effect on our business, results of operations and financial condition.

In addition, we face potential exposure to unusual or significant litigation arising out of alleged defects in our products or otherwise. We spend substantial resources ensuring compliance with governmental and other applicable standards. However, compliance with these standards does not necessarily prevent individual or class action lawsuits, which can entail significant cost and risk. We do not maintain insurance against many types of claims involving alleged defects in our products that do not involve personal injury or property damage. As a result, these types of claims could have a material adverse effect on our business, results of operations and financial condition.

Our product liability insurance program is an occurrence-based program based on our current and historical claims experience and the availability and cost of insurance. We currently either self insure or administer a high retention insurance program for product liability risks. Historically, product liability awards have not exceeded our individual per occurrence self-insured retention. We cannot assure you, however, that our future product liability experience will be consistent with our past experience.

A substantial portion of our revenues and gross profit is derived from a small number of large customers. The loss of any of these customers could substantially reduce our profits.

A few of our customers account for a significant portion of revenues. In the year ended December 31, 2010, REI and A&F (Japan) accounted for approximately 14% and 8%, respectively, of revenues. Sales are generally on a purchase order basis, and we do not have long-term agreements with any of our customers. A decision by any of our major customers to decrease significantly the number of products purchased from us could substantially reduce revenues and have a material adverse effect on our business, financial condition and results of operations. Moreover, in recent years, the retail industry has experienced consolidation and other ownership changes. In the future, retailers may further consolidate, undergo restructurings or reorganizations, realign their affiliations or reposition their stores’ target market. These developments could result in a reduction in the number of stores that carry our products, increased ownership concentration within the retail industry, increased credit exposure or increased retailer leverage over their suppliers. These changes could impact our opportunities in the market and increase our reliance on a smaller number of large customers.

We are subject to risks related to our dependence on the strength of retail economies in various parts of the world and our performance may be affected by general economic conditions and the current global financial crisis.

Our business depends on the strength of the retail economies in various parts of the world, primarily in North America and to a lesser extent Asia, Central and South America and Europe, which have recently deteriorated significantly and may remain depressed, or be subject to further deterioration, for the foreseeable future. These retail economies are affected primarily by factors such as consumer demand and the condition of the retail industry, which, in turn, are affected by general economic conditions and specific events such as natural disasters, terrorist attacks and political unrest. The impact of these external factors is difficult to predict, and one or more of the factors could adversely impact our business, results of operations and financial condition.

Purchases of many consumer products are discretionary and tend to be highly correlated with the cycles of the levels of disposable income of consumers. As a result, any substantial deterioration in general economic conditions could adversely affect consumer discretionary spending patterns, our sales and our results of operations. In particular, decreased consumer confidence or a reduction in discretionary income as a result of unfavorable macroeconomic conditions may negatively affect our business. If the current macroeconomic environment persists or worsens, consumers may reduce or delay their purchases of our products. Any such reduction in purchases could have a material adverse effect on our business, financial condition and results of operations.

Changes in the retail industry and markets for consumer products affecting our customers or retailing practices could negatively impact existing customer relationships and our results of operations.

We sell our products to retailers, including sporting goods and specialty retailers, as well as direct to consumers. A significant deterioration in the financial condition of our major customers could have a material adverse effect on our sales and profitability. We regularly monitor and evaluate the credit status of our customers and attempt to adjust sales terms as appropriate. Despite these efforts, a bankruptcy filing by a key customer could have a material adverse effect on our business, results of operations and financial condition.

In addition, as a result of the desire of retailers to more closely manage inventory levels, there is a growing trend among retailers to make purchases on a “just-in-time” basis. This requires us to shorten our lead time for production in certain cases and more closely anticipate demand, which could in the future require us to carry additional inventories.

We may be negatively affected by changes in the policies of our retailer customers, such as inventory destocking, limitations on access to and time on shelf space, use of private label brands, price demands, payment terms and other conditions, which could negatively impact our results of operations.

There is a growing trend among retailers in the U.S. and in foreign markets to undergo changes that could decrease the number of stores that carry our products or increase the concentration of ownership within the retail industry, including:

consolidating their operations;

undergoing restructurings or store closings;

undergoing reorganizations; or

realigning their affiliations.

These consolidations could result in a shift of bargaining power to the retail industry and in fewer outlets for our products. Further consolidations could result in price and other competition that could reduce our margins and our net sales.

Competition in our industry may hinder our ability to execute our business strategy, achieve profitability, or maintain relationships with existing customers.

We operate in a highly competitive industry. In this industry, we compete against numerous other domestic and foreign companies. Competition in the markets in which we operate is based primarily on product quality, product innovation, price and customer service and support, although the degree and nature of such competition vary by location and product line. Some of our competitors are more established in the industry and have substantially greater revenue or resources than we do. Our competitors may take actions to match new product introductions and other initiatives. Since many of our competitors source their products from third parties, our ability to obtain a cost advantage through sourcing is reduced. Certain of our competitors may be willing to reduce prices and accept lower profit margins to compete with us. Further, retailers often demand that suppliers reduce their prices on existing products. Competition could cause price reductions, reduced profits or losses or loss of market share, any of which could have a material adverse effect on our business, results of operations and financial condition.

To compete effectively in the future in the consumer products industry, among other things, we must:

maintain strict quality standards;

develop new and innovative products that appeal to consumers;

deliver products on a reliable basis at competitive prices;

anticipate and respond to changing consumer trends in a timely manner;

maintain favorable brand recognition; and

provide effective marketing support.

Our inability to do any of these things could have a material adverse effect on our business, results of operations and financial condition.

If we fail to develop new or expand existing customer relationships, our ability to grow our business will be impaired.

Our growth depends to a significant degree upon our ability to develop new customer relationships and to expand existing relationships with current customers. We cannot guarantee that new customers will be found, that any such new relationships will be successful when they are in place, or that business with current customers will increase. Failure to develop and expand such relationships could have a material adverse effect on our business, results of operations and financial condition.

Seasonality and weather conditions may cause our operating results to vary from quarter to quarter.

Sales of certain of our products are seasonal. Sales of our outdoor recreation products such as carabiners, harnesses and related climbing equipment products increase during warm weather months and decrease during winter, while sales of winter sports equipment such as our skis, boots, bindings and related ski equipment increase during the cold weather months and decrease during summer. Weather conditions may also negatively impact sales. For instance, more than anticipated natural disasters (i.e., ice storms) could negatively affect the sale of certain outdoor recreation products; mild winter weather may negatively impact sales of our winter sports products. These factors could have a material adverse effect on our business, results of operations and financial condition.

If we fail to adequately protect our intellectual property rights, competitors may manufacture and market products similar to ours, which could adversely affect our market share and results of operations.

Our success with our proprietary products depends, in part, on our ability to protect our current and future technologies and products and to defend our intellectual property rights. If we fail to adequately protect our intellectual property rights, competitors may manufacture and market products similar to ours. Our principal intellectual property rights include our trademarks, patents and trade secrets.

We hold numerous utility patents and pending patent applications covering a wide variety of products. We cannot be sure that we will receive patents for any of our patent applications or that any existing or future patents that we receive or license will provide competitive advantages for our products. We also cannot be sure that competitors will not challenge, invalidate or avoid the application of any existing or future patents that we receive or license. In addition, patent rights may not prevent our competitors from developing, using or selling products that are similar or functionally equivalent to our products.

Third parties may have patents of which we are unaware, or may be awarded new patents, that may materially adversely affect our ability to market, distribute, and sell our products. Accordingly, our products, including, but not limited to, our technical climbing and backpack products, may become subject to patent infringement claims or litigation or interference proceedings, any adverse determination of which could have a material adverse effect on our business, results of operations and financial condition.

Changes in foreign, cultural, political and financial market conditions could impair our international operations and financial performance.

Some of our operations are conducted or products are sold in countries where economic growth has slowed, such as Japan; or where economies have suffered economic, social and/or political instability or hyperinflation or where the ability to repatriate funds has been delayed or impaired in recent years. Current government economic and fiscal policies, including stimulus measures and currency exchange rates and controls, in these economies may not be sustainable and, as a result, our sales or profits related to those countries may decline. The economies of other foreign countries important to our operations, including other countries in Asia and Europe, could also suffer slower economic growth or economic, social and/or political instability or hyperinflation in the future. International operations, including manufacturing and sourcing operations (and the international operations of our customers), are subject to inherent risks which could adversely affect us, including, among other things:

protectionist policies restricting or impairing the manufacturing, sales or import and export of our products;

new restrictions on access to markets;

lack of developed infrastructure;

inflation or recession;

devaluations or fluctuations in the value of currencies;

changes in and the burdens and costs of compliance with a variety of foreign laws and regulations, including tax laws, accounting standards, environmental laws and occupational health and safety laws;

social, political or economic instability;

acts of war and terrorism;

natural disasters or other crises;

reduced protection of intellectual property rights in some countries;

increases in duties and taxation; and

restrictions on transfer of funds and/or exchange of currencies; expropriation of assets; and other adverse changes in policies, including monetary, tax and/or lending policies, encouraging foreign investment or foreign trade by our host countries.

Should any of these risks occur, our ability to sell or export our products or repatriate profits could be impaired and we could experience a loss of sales and profitability from our international operations, which could have a material adverse impact on our business.

If we cannot continue to develop new products in a timely manner, and at favorable margins, we may not be able to compete effectively.

We believe that our future success will depend, in part, upon our ability to continue to introduce innovative design extensions for our existing products and to develop, manufacture and market new products. We cannot assure you that we will be successful in the introduction, manufacturing and marketing of any new products or product innovations, or develop and introduce, in a timely manner, innovations to our existing products that satisfy customer needs or achieve market acceptance. Our failure to develop new products and introduce them successfully and in a timely manner, and at favorable margins, would harm our ability to successfully grow our business and could have a material adverse effect on our business, results of operations and financial condition.

Our results of operations could be materially harmed if we are unable to accurately forecast demand for our products.

We often schedule internal production and place orders for products with independent manufacturers before our customers’ orders are firm. Therefore, if we fail to accurately forecast customer demand, we may experience excess inventory levels or a shortage of product to deliver to our customers. Factors that could affect our ability to accurately forecast demand for our products include:

an increase or decrease in consumer demand for our products or for products of our competitors;

our failure to accurately forecast customer acceptance of new products;

new product introductions by competitors;

unanticipated changes in general market conditions or other factors, which may result in cancellations of orders or a reduction or increase in the rate of reorders placed by retailers;

weak economic conditions or consumer confidence, which could reduce demand for discretionary items such as our products; and

terrorism or acts of war, or the threat of terrorism or acts of war, which could adversely affect consumer confidence and spending or interrupt production and distribution of product and raw materials.

Inventory levels in excess of customer demand may result in inventory write-downs and the sale of excess inventory at discounted prices, which could have an adverse effect on our business, results of operations and financial condition. On the other hand, if we underestimate demand for our products, our manufacturing facilities or third party manufacturers may not be able to produce products to meet customer requirements, and this could result in delays in the shipment of products and lost revenues, as well as damage to our reputation and customer relationships. There can be no assurance that we will be able to successfully manage inventory levels to exactly meet future order and reorder requirements.

Our operating results can be adversely affected by changes in the cost or availability of raw materials.

Pricing and availability of raw materials for use in our businesses can be volatile due to numerous factors beyond our control, including general, domestic and international economic conditions, labor costs, production levels, competition, consumer demand, import duties and tariffs and currency exchange rates. This volatility can significantly affect the availability and cost of raw materials for us, and may, therefore, have a material adverse effect on our business, results of operations and financial condition.

During periods of rising prices of raw materials, there can be no assurance that we will be able to pass any portion of such increases on to customers. Conversely, when raw material prices decline, customer demands for lower prices could result in lower sale prices and, to the extent we have existing inventory, lower margins. As a result, fluctuations in raw material prices could have a material adverse effect on our business, results of operations and financial condition.

Supply shortages or changes in availability for any particular type of raw material can delay production or cause increases in the cost of manufacturing our products. We may be negatively affected by changes in availability and pricing of raw materials, which could negatively impact our results of operations.

Our operations in international markets, and earnings in those markets, may be affected by legal, regulatory, political and economic risks.

Our ability to maintain the current level of operations in our existing international markets and to capitalize on growth in existing and new international markets is subject to risks associated with international operations. These include the burdens of complying with a variety of foreign laws and regulations, unexpected changes in regulatory requirements, new tariffs or other barriers to some international markets.

We cannot predict whether quotas, duties, taxes, exchange controls or other restrictions will be imposed by the United States, the European Union or other countries upon the import or export of our products in the future, or what effect any of these actions would have on our business, financial condition or results of operations. We cannot predict whether there might be changes in our ability to repatriate earnings or capital from international jurisdictions. Changes in regulatory, geopolitical policies and other factors may adversely affect our business or may require us to modify our current business practices.

Approximately 56.6% of our consolidated sales for the year ended December 31, 2010 was earned in international markets. We are exposed to risks of changes in U.S. policy for companies having business operations outside the United States. In recent months, the President and others in his Administration have proposed changes in U.S. income tax laws that could, among other things, accelerate the U.S. taxability of non-U.S. earnings or limit foreign tax credits. Although such proposals have been deferred, if new legislation were enacted, it is possible our U.S. income tax expense could increase, which would reduce our earnings.

We use foreign suppliers and manufacturing facilities for a significant portion of our raw materials and finished products, which poses risks to our business operations.

A significant portion of our products sold were produced by and purchased from independent manufacturers primarily located in Asia, with substantially all of the remainder produced by our manufacturing facilities located in Utah, California, China and the Philippines. Although no single supplier and no one country is critical to our production needs, any of the following could materially and adversely affect our ability to produce or deliver our products and, as a result, have a material adverse effect on our business, financial condition and results of operations:

political or labor instability in countries where our facilities, contractors and suppliers are located;

political or military conflict, which could cause a delay in the transportation of raw materials and products to us and an increase in transportation costs;

heightened terrorism security concerns, which could subject imported or exported goods to additional, more frequent or more lengthy inspections, leading to delays in deliveries or impoundment of goods for extended periods or could result in decreased scrutiny by customs officials for counterfeit goods, leading to lost sales, increased costs for our anti-counterfeiting measures and damage to the reputation of its brands;

disease epidemics and health-related concerns, such as the H1N1 virus, bird flu, SARS, mad cow and hoof-and-mouth disease outbreaks in recent years, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargo of ours goods produced in infected areas;

imposition of regulations and quotas relating to imports and our ability to adjust timely to changes in trade regulations, which, among other things, could limit our ability to produce products in cost-effective countries that have the labor and expertise needed;

imposition of duties, taxes and other charges on imports; and

imposition or the repeal of laws that affect intellectual property rights.

Our business is subject to foreign, national, state and local laws and regulations for environmental, employment, safety and other matters. The costs of compliance with, or the violation of, such laws and regulations by us or by independent suppliers who manufacture products for us could have an adverse effect on our business, results of operations and financial condition.

Numerous governmental agencies in the United States and in other countries, in which we have operations, enforce comprehensive national, state and local laws and regulations on a wide range of environmental, employment, health, safety and other matters. We could be adversely affected by costs of compliance or violations of those laws and regulations. In addition, the costs of products purchased by us from independent contractors could increase due to the costs of compliance by those contractors. Further, violations of such laws and regulations could affect the availability of inventory, thereby affecting our net sales.

We may incur significant costs in order to comply with environmental remediation obligations.

Environmental laws also impose obligations on various entities to clean up contaminated properties or to pay for the cost of such remediation, often upon parties that did not actually cause the contamination. Accordingly, we may be liable, either contractually or by operation of law, for remediation costs even if the contaminated property is not presently owned or operated by us, is a landfill or other location where we have disposed wastes, or if the contamination was caused by third parties during or prior to our ownership or operation of the property. Given the nature of the past industrial operations conducted by us and others at these properties, there can be no assurance that all potential instances of soil or groundwater contamination have been identified, even for those properties where an environmental site assessment has been conducted. Future events, such as changes in existing laws or policies or their enforcement, or the discovery of currently unknown contamination, may give rise to additional remediation liabilities that may have a material adverse effect upon our business, results of operations or financial condition.

Risks Related to Our Business

There are significant risks associated with our strategy of acquiring and integrating businesses.

A key element of our strategy is the acquisition of businesses and assets that will complement our current business, increase size, expand our geographic scope of operations, and otherwise offer growth opportunities. We may not be able to successfully identify attractive acquisition opportunities, obtain financing for acquisitions, make acquisitions on satisfactory terms, or successfully acquire and/or integrate identified targets. In identifying, evaluating and selecting a target business for a potential acquisition, we expect to encounter intense competition from other entities, including blank-check companies, private equity groups, venture capital funds, leveraged buyout funds and operating businesses seeking strategic acquisitions. Many of these entities are well-established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than us which will give them a competitive advantage in pursuing the acquisition of certain target businesses.

Our ability to implement our acquisition strategy is also subject to other risks and costs, including:

loss of key employees, customers or suppliers of acquired businesses;

diversion of management's time and attention from our core businesses;

adverse effects on existing business relationships with suppliers and customers;

our ability to secure necessary financing;

our ability to realize operating efficiencies, synergies, or other benefits expected from an acquisition;

risks associated with entering markets in which we have limited or no experience;

risks associated with our ability to execute successful due diligence; and

assumption of contingent or undisclosed liabilities of acquisition targets.

The above risks could have a material adverse effect on the market price of our common stock and our business, financial condition and results of operations.

Recent turmoil across various sectors of the financial markets may negatively impact the Company’s business, financial condition and/or operating results as well as our ability to effectively execute our acquisition strategy.

Recently, the various sectors of the credit markets and the financial services industry have been experiencing a period of unprecedented turmoil and upheaval characterized by disruption in the credit markets and availability of credit and other financing, the failure, bankruptcy, collapse or sale of various financial institutions and an unprecedented level of intervention from the United States federal government. While the ultimate outcome of these events cannot be predicted, they may have a material adverse effect on our ability to obtain financing necessary to effectively execute our acquisition strategy, the ability of our customers and suppliers to continue to operate their businesses or the demand for our products which could have a material adverse effect on the market price of our common stock and our business, financial condition and results of operations.

We may not be able to adequately manage our growth.

We have expanded, and are seeking to continue to expand, our business. This growth has placed significant demands on our management, administrative, operating and financial resources, as well as our manufacturing capacity capabilities. The continued growth of our customer base, the types of products offered and the geographic markets served can be expected to continue to place a significant strain on our resources. Personnel qualified in the production and marketing of our products are difficult to find and hire, and enhancements of information technology systems to support growth are difficult to implement. Our future performance and profitability will depend in large part on our ability to attract and retain additional management and other key personnel as well as our ability to increase and maintain our manufacturing capacity capabilities to meet the needs of our current and future customers. Any failure to adequately manage our growth could have a material adverse effect on the market price of our common stock and our business, financial condition and results of operations.

The Company’s existing credit agreement contains financial and restrictive covenants that may limit our ability to operate our business.

The agreement governing our credit facility contains, and any of its other future debt agreements may contain, covenant restrictions that limit its ability to operate our business, including restrictions on its ability to:

incur debt (including secured debt) or issue guarantees;

grant liens on its assets;

sell substantially of our assets; and

enter into certain mergers or consolidations or make certain acquisitions.

In addition, our credit facility contains other affirmative and negative covenants, including the requirements to maintain a minimum level of earnings before interest, tax, depreciation and amortization, tangible net worth, and asset coverage. Our ability to comply with these covenants is dependent on its future performance, which will be subject to many factors, some of which are beyond our control, including prevailing economic conditions. Any failure to comply with the restrictions of our credit facility or any subsequent financing agreements may result in an event of default. An event of default may allow the creditors, if the agreements so provide, to accelerate the related debt as well as any other debt to which a cross-acceleration or cross-default provision applies. In addition, the lender under our credit facility may be able to terminate any commitments it had made to supply us with further funds. If we default on the financial covenants in our credit facility, our lender could exercise all rights and remedies available to it, which could have a material adverse effect on our business, results of operations, and financial condition.

As a result of these covenants, our ability to respond to changes in business and economic conditions and to obtain additional financing, if needed, may be significantly restricted, and we may be prevented from engaging in transactions or making acquisitions of a business that might otherwise be beneficial to us.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under the revolving portion of our credit facility are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows would decrease.

Currency devaluations or fluctuations may significantly increase our expenses and affect our results of operations as well as the carrying value of international assets on our balance sheet, especially where the currency is subject to intense political and other outside pressure, such as in the case of the Euro and the Swiss Franc.

While we transact business predominantly in U.S. dollars and most of our revenues are collected in U.S. dollars, a substantial portion of our assets, revenues, costs and earnings are denominated in other currencies, such as the Euro and the Swiss Franc. Changes in the relation of these and other currencies to the U.S. dollar will affect the carrying value of our international assets as well as our sales and profitability and could result in exchange losses. For example, a devaluation of the Euro would negatively impact the carrying value of our assets in Europe and our results of operations because the earnings and assets in Europe would be reduced when translated into U.S. dollars.

Additionally, as the Company has substantial operations and assets located outside the United States, foreign operations expose us to foreign currency devaluations or fluctuations that could have a material adverse impact on our business, results of operations and financial condition based on the movements of the applicable foreign currency exchange rates in relation to the U.S. dollar, both for purposes of actual conversion and financial reporting purposes. The impact of future exchange rate devaluations or fluctuations on our results of operations cannot be accurately predicted. There can be no assurance that the U.S. dollar foreign exchange rates will be stable in the future or that fluctuations in financial or foreign markets will not have a material adverse effect on our business, results of operations and financial condition.

Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, new Securities and Exchange Commission regulations and NASDAQ rules, are creating uncertainty for companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity. As a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. In particular, Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and report on our system of internal controls and requires that we have such system of internal controls audited. If we fail to maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties and/or stockholder litigation. Any inability to provide reliable financial reports could harm our business. Section 404 of the Sarbanes-Oxley Act also requires that our independent registered public accounting firm report on management’s evaluation of our system of internal controls. An acquisition target may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition. Furthermore, any failure to implement required new or improved controls, or difficulties encountered in the implementation of adequate controls over our financial processes and reporting in the future, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

Our Board of Directors and executive officers have significant influence over our affairs.

The members of our Board of Directors and our executive officers, which includes Messrs. Warren B. Kanders, Peter Metcalf and Robert R. Schiller, beneficially own approximately 39% of our outstanding common stock. As a result, our Board of Directors and executive officers, to the extent they vote their shares in a similar manner, have influence over our affairs and could exercise such influence in a manner that is not in the best interests of our other stockholders, including by attempting to delay, defer or prevent a change of control transaction that might otherwise be in the best interests of our stockholders.

We may be unable to realize the benefits of our net operating loss (“NOL”) and tax credit carryforwards.

NOLs may be carried forward to offset federal and state taxable income in future years and eliminate income taxes otherwise payable on such taxable income, subject to certain adjustments. Based on current federal corporate income tax rates, our NOL and other carryforwards could provide a benefit to us, if fully utilized, of significant future tax savings. However, our ability to use these tax benefits in future years will depend upon the amount of our otherwise taxable income. If we do not have sufficient taxable income in future years to use the tax benefits before they expire, we will lose the benefit of these NOL carryforwards permanently.

Additionally, if we underwent an ownership change, the NOL carryforward limitations would impose an annual limit on the amount of the taxable income that may be offset by our NOL generated prior to the ownership change. If an ownership change were to occur, we may be unable to use a significant portion of our NOL to offset taxable income. In general, an ownership change occurs when, as of any testing date, the aggregate of the increase in percentage points of the total amount of a corporation’s stock owned by “5-percent stockholders” within the meaning of the NOL carryforward limitations whose percentage ownership of the stock has increased as of such date over the aggregate of the lowest percentage of the stock owned by each such “5-percent stockholder” at any time during the three-year period preceding such date is more than 50 percentage points. In general, persons who own 5% or more of a corporation’s stock are “5-percent stockholders,” and all other persons who own less than 5% of a corporation’s stock are treated together as a public group. The issuance of a large number of shares of common stock in connection with our acquisition strategy could result in a limitation of the use of our NOLs.

Moreover, if a corporation experiences an ownership change and does not satisfy the continuity of business enterprise, or COBE, requirement (which generally requires that the corporation continue its historic business or use a significant portion of its historic business assets in a business for the two-year period beginning on the date of the ownership change), it cannot, subject to certain exceptions, use any NOL from a pre-change period to offset taxable income in post-change years.

The actual ability to utilize the tax benefit of any existing NOLs will be subject to future facts and circumstances with respect to meeting the above described COBE requirements at the time NOLs are being utilized on a tax return. The realization of NOLs and the recognition of asset and valuation allowances for deferred taxes require management to make estimates and judgments about the Company’s future profitability which are inherently uncertain. Deferred tax assets are reduced by valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. If, in the opinion of management, it becomes more likely than not that some portion or all of the deferred tax assets will not be realized, deferred tax assets would be reduced by a valuation allowance and any such reduction could have a material adverse effect on the financial condition of the Company.

The amount of NOL and tax credit carryforwards that we have claimed has not been audited or otherwise validated by the U.S. Internal Revenue Service (the “IRS”). The IRS could challenge our calculation of the amount of our NOL or our determinations as to when a prior change in ownership occurred and other provisions of the Internal Revenue Code of 1986, as amended (the “Code”) may limit our ability to carry forward our NOL to offset taxable income in future years. If the IRS was successful with respect to any such challenge, the potential tax benefit of the NOL carryforwards to us could be substantially reduced.

Certain protective measures implemented by us to preserve our NOL may not be effective or may have some unintended negative effects.

On July 24, 2003, at our Annual Meeting of Stockholders, our stockholders approved an amendment (the “Amendment”) to our Amended and Restated Certificate of Incorporation, as amended, to restrict certain acquisitions of our securities in order to help assure the preservation of our NOL. The Amendment generally restricts direct and indirect acquisitions of our equity securities if such acquisition will affect the percentage of the Company’s capital stock that is treated as owned by a “5% stockholder.” Additionally, on February 7, 2008, our Board of Directors approved a Rights Agreement which is designed to assist in limiting the number of 5% or more owners and thus reduce the risk of a possible “change of ownership” under Section 382 of the Code.

Although the transfer restrictions imposed on our capital stock and the Rights Agreement are intended to reduce the likelihood of an impermissible ownership change, there is no guarantee that such protective measures would prevent all transfers that would result in an impermissible ownership change. These protective measures also will require any person attempting to acquire a significant interest in us to seek the approval of our Board of Directors. This may have an “anti-takeover” effect because our Board of Directors may be able to prevent any future takeover. Similarly, any limits on the amount of capital stock that a stockholder may own could have the effect of making it more difficult for stockholders to replace current management. Additionally, because protective measures implemented by us to preserve our NOL will have the effect of restricting a stockholder’s ability to acquire our common stock, the liquidity and market value of our common stock might suffer.

The loss of any member of our senior management or certain other key executives could significantly harm our business.

Our ability to maintain our competitive position is dependent to a large degree on the efforts and skills of our senior management team, including Messrs. Warren B. Kanders, Peter Metcalf and Robert R. Schiller. If we lose the services of any member of our senior management, our business may be significantly impaired. In addition, many of our senior executives have strong industry reputations, which aid us in identifying acquisition and borrowing opportunities, and having such opportunities brought to us. The loss of the services of these key personnel could materially and adversely affect our operations because of diminished relationships with lenders, existing and prospective tenants, property sellers and industry personnel.

Our Board of Directors may change significant corporate policies without stockholder approval.

Our investment, financing, borrowing and dividend policies and our policies with respect to all other activities, including growth, debt, capitalization and operations, will be determined by our Board of Directors. These policies may be amended or revised at any time and from time to time at the discretion of the Board of Directors without a vote of our stockholders. In addition, the Board of Directors may change our policies with respect to conflicts of interest provided that such changes are consistent with applicable legal requirements. A change in these policies could have an adverse effect on our financial condition, results of operations, cash flow, per share trading price of our common stock and ability to satisfy our debt service obligations and to pay dividends to our stockholders.

Compensation awards to our management may not be tied to or correspond with our improved financial results or share price.

The compensation committee of our Board of Directors is responsible for overseeing our compensation and employee benefit plans and practices, including our executive compensation plans and our incentive compensation and equity-based compensation plans. Our compensation committee has significant discretion in structuring compensation packages and may make compensation decisions based on any number of factors. As a result, compensation awards may not be tied to or correspond with improved financial results for the Company or the share price of our common stock.

Risks Related to Our Common Stock

Our Amended and Restated Certificate of Incorporation authorizes the issuance of shares of preferred stock.

Our Amended and Restated Certificate of Incorporation provides that our Board of Directors will be authorized to issue from time to time, without further stockholder approval, up to 5,000,000 shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications, limitations or restrictions of the shares of each series, including the dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, including sinking fund provisions, redemption price or prices, liquidation preferences and the number of shares constituting any series or designations of any series. Such shares of preferred stock could have preferences over our common stock with respect to dividends and liquidation rights. We may issue additional preferred stock in ways which may delay, defer or prevent a change in control of the Company without further action by our stockholders. Such shares of preferred stock may be issued with voting rights that may adversely affect the voting power of the holders of our common stock by increasing the number of outstanding shares having voting rights, and by the creation of class or series voting rights.

We may issue a substantial amount of our common stock in the future, which could cause dilution to current investors and otherwise adversely affect our stock price.

A key element of our growth strategy is to make acquisitions. As part of our acquisition strategy, we may issue additional shares of common stock as consideration for such acquisitions. These issuances could be significant. To the extent that we make acquisitions and issue our shares of common stock as consideration, your equity interest in us will be diluted. Any such issuance will also increase the number of outstanding shares of common stock that will be eligible for sale in the future. Persons receiving shares of our common stock in connection with these acquisitions may be more likely to sell off their common stock, which may influence the price of our common stock. In addition, the potential issuance of additional shares in connection with anticipated acquisitions could lessen demand for our common stock and result in a lower price than might otherwise be obtained. We may issue common stock in the future for other purposes as well, including in connection with financings, for compensation purposes, in connection with strategic transactions or for other purposes. The issuance of a large number of shares of common stock in connection with our acquisition strategy could also have a negative effect on our ability to use our NOLs.

We do not expect to pay dividends on our common stock in the foreseeable future.

Although our stockholders may receive dividends if, as and when declared by our Board of Directors, we do not intend to pay dividends on our common stock in the foreseeable future. Therefore, you should not purchase our common stock if you need immediate or future income by way of dividends from your investment. In addition, upon an event of default under our credit facility, we are prohibited from declaring or paying any dividends on our common stock or generally making other distributions to our stockholders.

The price of our common stock has been and is expected to continue to be volatile, which could affect a stockholder’s return on investment.

There has been significant volatility in the stock market and in particular in the market price and trading volume of securities, which has often been unrelated to the performance of the companies. The market price of our common stock has been subject to significant fluctuations, and we expect it to continue to be subject to such fluctuations for the foreseeable future. We believe the reasons for these fluctuations include, in addition to general market volatility, the relatively thin level of trading in our stock, and the relatively low public float. Therefore, variations in financial results, announcements of material events, technological innovations or new products by us or our competitors, our quarterly operating results, changes in general conditions in the economy or the health care industry, other developments affecting us or our competitors or general price and volume fluctuations in the market are among the many factors that could cause the market price of our common stock to fluctuate substantially.

Shares of our common stock have been thinly traded in the past.

The trading volume of our common stock has not been significant, and there may not be an active trading market for our common stock in the future. As a result of the thin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly more than the stock market as a whole. Without a large float, our common stock is less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile. In the absence of an active public trading market, an investor may be unable to liquidate his investment in our common stock. Trading of a relatively small volume of our common stock may have a greater impact on the trading price for our stock than would be the case if our public float were larger. We cannot predict the prices at which our common stock will trade in the future.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 2. PROPERTIES

Our corporate headquarters, as well as our primary research and manufacturing facility, is located in a facility owned by the Company in Salt Lake City, Utah. In addition, at December 31, 2010, the Company and its subsidiaries lease or own facilities throughout the U.S., Europe and Asia. In general, our properties are well maintained, considered adequate and being utilized for their intended purposes.

The following table identifies and provides certain information regarding our principal facilities:

Activity	Location	Owned/Leased

Corporate Headquarters:	Salt Lake City, Utah	Owned

U.S. Distribution and Manufacturing Facilities:	Salt Lake City, Utah	Leased
	Calexico, California	Leased

China Distribution and Manufacturing Facility:	Free Trade Zone, Zhuhai City, Guangdong Providence, PR China	Leased

Europe Headquarters:	Reinarch, Switzerland	Leased

ITEM 3. LEGAL PROCEEDINGS

Legal Proceedings

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

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. 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. The Company believes that anticipated probable costs of litigation matters have been adequately reserved to the extent determinable. Based on current information, the Company believes that the ultimate conclusion of the various pending litigations of the Company, in the aggregate, will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

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 4. (REMOVED AND RESERVED)

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company's common stock is listed on the NASDAQ Global Select Market and trades under the symbol “BDE.”

The following table sets forth the quarterly high and low closing prices for our common stock for the years ended December 31, 2010 and 2009:

	High		Low
Year ended December 31, 2010
First Quarter	$	4.80	$	4.20
Second Quarter	$	7.73	$	4.96
Third Quarter	$	6.97	$	5.98
Fourth Quarter	$	8.01	$	6.66

Year ended December 31, 2009
First Quarter	$	4.34	$	3.85
Second Quarter	$	4.29	$	3.79
Third Quarter	$	4.40	$	3.90
Fourth Quarter	$	4.60	$	4.21

Performance Graph

Set forth below is a line graph comparing the yearly percentage change in the cumulative total stockholder return on our common stock to the cumulative total return of the NASDAQ Composite, the Russell 200 Index and the NASDAQ Global Select Market Composite for the period commencing on December 31, 2005 and ending on December 31, 2010 (the “Measuring Period”). The graph assumes that the value of the investment in our common stock and the indexes was $100 on December 31, 2005. The yearly change in cumulative total return is measured by dividing (1) the sum of (i) the cumulative amount of dividends for the Measuring Period, assuming dividend reinvestment, and (ii) the change in share price between the beginning and end of the Measuring Period, by (2) the share price at the beginning of the Measuring Period.

Because of the Company’s acquisitions of Black Diamond Equipment and Gregory and subsequent listing on the NASDAQ Global Select Market index during fiscal year 2010, we are replacing the NASDAQ Composite with the NASDAQ Global Select Market Composite. In this year of change we have shown the new and old indexes for comparison purposes. Beginning with our 2011 Annual Report on Form 10-K, we will no longer include the NASDAQ Composite.

Historical stock price performance should not be relied on as indicative of future stock price performance.

Total Return Analysis

	12/31/2005		12/31/2006		12/31/2007		12/31/2008		12/31/2009		12/31/2010
Black Diamond, Inc.	$	100.00	$	84.43	$	70.66	$	50.90	$	50.90	$	94.73
NASDAQ Composite	$	100.00	$	109.52	$	120.27	$	71.51	$	102.89	$	120.29
The Russell 2000 Index	$	100.00	$	117.00	$	113.79	$	74.19	$	92.90	$	116.40
NASDAQ Global Select Market	$	100.00	$	106.33	$	117.88	$	71.25	$	102.55	$	119.75

Stockholders

On March 8, 2011, the last reported sales price for our common stock was $6.48 per share. As of March 8, 2011, there were 138 holders of record of our common stock.

Dividends

We currently anticipate that we will retain all future earnings for use in our business and do not anticipate that we will pay any cash dividends in the foreseeable future. The payment of any future dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our results of operations, capital requirements, general business conditions, contractual restrictions on payment of dividends, if any, legal and regulatory restrictions on the payment of dividends, and other factors our Board of Directors deems relevant.

Recent Sales of Unregistered Securities

We did not sell any shares of our common stock during the Company’s fourth quarter of 2010.

Recent Purchases of our Registered Equity Securities

We did not purchase any shares of our common stock during the Company’s fourth quarter of 2010.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth certain information regarding our equity plans as of December 31, 2010:

Plan Category	(A) Number of securities to be issued upon exercise of outstanding options, warrants and rights		(B) Weighted- average exercise price of outstanding options, warrants and rights		(C) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A))
Equity compensation plans approved by security holders (1)		2,127,500	$	7.37		4,439,705

Equity compensation plans not approved by security holders (2) (3)		800,000	$	8.75		—

Total		2,927,500	$	7.74		4,439,705

(1) Consists of stock options and restricted stock awards issued under the Amended and Restated Stock Incentive Plan of Clarus Corporation (the “2000 Plan”). Also consists of stock options issued and issuable under the 2005 Clarus Corporation Stock Incentive Plan (the “2005 Plan”).

(2) Includes options granted to the Company’s Executive Chairman, Warren B. Kanders on December 20, 2003 to purchase 400,000 shares of common stock, having an exercise price of $7.50 per share.

(3) Includes options granted to the Company’s Executive Chairman, Warren B. Kanders on December 20, 2003 to purchase 400,000 shares of common stock, having an exercise price of $10.00 per share.

ITEM 6. SELECTED FINANCIAL DATA

Our selected financial information set forth below have been derived from our audited consolidated financial statements and should be read in conjunction with our consolidated financial statements, including the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" of Item 7 of Part II of this Report.

	Year Ended December 31,
	2010			2009			2008			2007			2006
	(in thousands, except per share amounts)
Statement of Operations Data:
Net sales	$	75,912		$	-		$	-		$	-		$	-
Gross profit		23,732			-			-			-			-
Operating (loss) income		(16,367	)		(5,552	)		(4,873	)		(4,113	)		(5,307	)
Net income (loss)		51,190			(4,845	)		(2,402	)		117			(1,291	)

Earnings (loss) per share attributable to stockholders:
Basic earnings (loss) per share	$	2.58		$	(0.29	)	$	(0.14	)	$	0.01		$	(0.08	)
Diluted earnings (loss) per share		2.56			(0.29	)		(0.14	)		0.01			(0.08	)

Weighted average common shares outstanding for earnings per share:
Basic		19,815			16,867			16,867			16,658			16,613
Diluted		20,022			16,867			16,867			17,051			16,613

	December 31,
	2010		2009		2008		2007		2006
Balance Sheet Data:
Total current assets	$	62,603	$	83,095	$	86,145	$	87,299	$	84,974
Total assets		212,679		83,791		87,177		88,680		86,673

Long-term obligations, net of current		30,241		446		-		-		-
Total liabilities		49,757		2,159		793		961		957

Total stockholders' equity		162,922		81,632		86,384		87,719		85,716

	Predecessor Company (Note 1 of our consolidated financial statements)
	Period from July 1, 2009 to May 28,		Year Ended June 30,
	2010		2009		2008		2007		2006
	(in thousands)
Statement of Operations Data:
Net sales	$	87,081	$	83,956	$	77,793	$	64,023	$	56,345
Gross profit		33,920		30,564		28,589		23,993		20,750
Operating income		7,708		4,629		3,558		3,252		3,352
Net income		6,242		2,285		2,057		1,516		1,856

	June 30,
	2009		2008		2007		2006
Balance Sheet Data:
Total current assets	$	39,034	$	35,419	$	30,941	$	24,622
Total assets		50,904		44,537		38,052		30,423

Long-term obligations, net of current		14,796		11,228		9,865		5,359
Total liabilities		27,672		22,971		19,326		13,018

Total stockholders' equity		23,232		21,566		18,726		17,405

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Certain statements included in this Annual Report on Form 10-K are "forward-looking statements" within the meaning of the federal securities laws. 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 Annual Report on Form 10-K include the overall level of consumer spending on our products; general economic conditions and other factors affecting consumer confidence; disruption and volatility in the global capital and credit markets; the financial strength of the Company's customers; the Company's ability to implement its growth strategy; the Company's ability to successfully integrate and grow acquisitions; the Company's ability to maintain the strength and security of its information technology systems; stability of the Company's manufacturing facilities and foreign suppliers; the Company's ability to protect trademarks and other intellectual property rights; fluctuations in the price, availability and quality of raw materials and contracted products; foreign currency fluctuations; our ability to utilize our net operating loss carryforwards; and legal, regulatory, political and economic risks in international markets. More information on potential factors that could affect the Company's financial results can be found under Item 1A.—Risk Factors of this Annual Report on Form 10-K. All forward-looking statements included in this Annual Report on Form 10-K are based upon information available to the Company as of the date of this Annual Report on Form 10-K, and speak only as the date hereof. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Annual Report on Form 10-K.

Overview

On January 21, 2011, we changed our name from Clarus Corporation to Black Diamond, Inc., which we believe more accurately reflects our current business.

Operating History

Since the 2002 sale of our e-commerce solutions business, we have engaged in a strategy of seeking to enhance stockholder value by pursuing opportunities to redeploy our assets through an acquisition of, or merger with, an operating business or businesses that would serve as a platform company. On May 28, 2010, we acquired Black Diamond Equipment, Ltd. (which may be referred to as “Black Diamond Equipment” or “BDEL”) and Gregory Mountain Products, LLC (which may be referred to as “Gregory” or “GMP”) (the “Mergers”). Because the Company had no operations at the time of our acquisition of Black Diamond Equipment, Black Diamond Equipment is considered to be our predecessor company (the “Predecessor”) for financial reporting purposes (see Note 2 of our consolidated financial statements for a more detailed explanation of the acquisition). The Predecessor does not include Gregory.

Critical Accounting Policies and Use of Estimates

Management’s discussion of financial condition and results of operations is based on the consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements require 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 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 derivatives, revenue recognition, income taxes, stock-based compensation, and valuation of 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.

We believe the following critical accounting policies include the more significant estimates and assumptions used in the preparation of our consolidated financial statements. Our accounting policies are more fully described in Note 1 of our consolidated financial statements.

We use derivative instruments to hedge currency rate movements on foreign currency denominated sales. We enter into forward contracts, option contracts and non-deliverable forwards to manage the impact of foreign currency fluctuations on a portion of our forecasted sales denominated in foreign currencies. These derivatives are carried at fair value on our consolidated balance sheets in other assets and accrued liabilities. Changes in fair value of the derivatives not designated as hedge instruments are included in the determination of net income. For derivative contracts designated as hedge instruments, the effective portion of gains and losses resulting from changes in fair value of the instruments are included in accumulated other comprehensive income and reclassified to earnings in the period the underlying hedged item is recognized in earnings.

We use operating budgets and cash flow forecasts to estimate future sales and to determine the level and timing of derivative transactions intended to mitigate such sales in accordance with our risk management policies. If the forecasted sales levels are not reached, our derivative instruments may be deemed to be not effective which may result in foreign currency gains and losses being recorded in our statement of income, which could materially affect our financial position and results of operations.

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

At the time of revenue recognition, we also provide for estimated sales returns and miscellaneous claims from customers as reductions to revenues. The estimates are based on historical rates of product returns and claims. However, actual returns and claims in any future period are inherently uncertain and thus may differ from these estimates. If actual or expected returns and claims are significantly greater or lower than the reserves that we have established, we will record a reduction or increase to sales in the period in which we make such a determination.

We account for income taxes using the asset and liability method. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. We make assumptions, judgments and estimates to determine our current provision for income taxes, our deferred tax assets and liabilities, and our uncertain tax positions. Our judgments, assumptions and estimates relative to the current provision for income tax take into account current tax laws, our interpretation of current tax laws and possible outcomes of current and future audits conductions by foreign and domestic tax authorities. Changes in tax law or our interpretation of tax laws and the resolution of current and future tax audits could significantly affect the amounts provided for income taxes in our consolidated financial statements. Our assumptions, judgments and estimates relative to the value of a deferred tax asset take into account predictions of the amount and category of taxable income. Actual operating results and the underlying amount and category of income in future years could cause our current assumptions, judgments and estimates of recoverable net deferred taxes to be inaccurate. Changes in any of the assumptions, judgments and estimates mentioned above could cause our actual income tax obligations to differ from our estimates, which could materially affect our financial position and results of operations.

Compensation expense is recorded for all share-based awards granted based on the fair value of the award at the time of the grant and is recognized on a straight-line basis over the requisite service period of the award. We estimate stock-based compensation for stock-options granted using the Black-Scholes option pricing model, which requires various highly subjective assumptions, including volatility and expected option life. Further, we estimate forfeitures for stock-based awards granted, which are not expected to vest. If any of these inputs or assumptions changes significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period.

Our depreciation policies for property and equipment reflect judgments on their estimated economic lives and residual value, if any. Our amortization policies for intangible assets reflect judgments on the estimated amounts and duration of future cash flows expected to be generated by those assets. We review property and definite-lived intangible assets for possible impairment whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount of an asset may not be fully recoverable. We test for possible impairment at the asset or asset group level, which is the lowest level for which there are identifiable cash flows. We measure recoverability of the carrying value of an asset or asset group by comparison with estimated undiscounted cash flows expected to be generated by the asset. If the total of undiscounted cash flows exceeds the carrying value of the asset, there is no impairment charge. If the undiscounted cash flows are less than the carrying value of the asset, we estimate the fair value of the asset based on the present value of its future cash flows and recognize an impairment charge for the excess of the asset’s carrying value over its fair value.

Indefinite−lived intangible assets, consisting of trademarks, and goodwill are not subject to amortization. Rather, we evaluate those assets for possible impairment on an annual basis or more frequently if events or changes in circumstances indicate that it is more likely than not that the carrying value of an asset may exceed its fair value. Fair value of an indefinite−lived trademark intangible asset is based on an income approach using the relief−from−royalty method. Under this method, forecasted revenues for a trademark are assigned a royalty rate that would be charged to license the trademark (in lieu of ownership) from an independent party, and fair value is the present value of those forecasted royalties avoided by owning the trademark. If the fair value of the trademark intangible asset exceeds its carrying value, there is no impairment charge. If the fair value of the asset is less than its carrying value, an impairment charge would be recognized for the difference.

We assess the recoverability of the carrying value of goodwill using a required two−step approach. In the first step of the goodwill impairment test, we compare the carrying value the Company, including its recorded goodwill, to the estimated fair value. We estimate the fair value using an equity-value based and enterprise-value based methodology. The principal method used is an equity-value based method in which the Company’s market-cap is compared to the net book value. In the enterprise-value based method, the fair value of the Company is estimated by taking its market-cap plus interest bearing debt, which equals the enterprise value. This value is then compared to total assets, less non-interest bearing debt. If the fair value of the Company exceeds its carrying value, the goodwill is not impaired and no further review is required. However, if the fair value of the business unit is less than its carrying value, we perform the second step of the goodwill impairment test to determine the amount of the impairment charge, if any. The second step involves a hypothetical allocation of the fair value of the Company to its net tangible and intangible assets (excluding goodwill) as if the business unit were newly acquired, which results in an implied fair value of goodwill. The amount of the impairment charge is the excess of the recorded goodwill over the implied fair value of goodwill.

Recent Accounting Pronouncements

There were no new accounting pronouncements for the year ended December 31, 2010 that materially impact the financial results or disclosures of the Company.

New accounting guidance issued by the FASB, but not effective until after December 31, 2010, is not expected to have a material effect on the Company’s consolidated financial position, results of operations or disclosures.

Results of Operations (In Thousands)

Combined Year Ended December 31, 2010 Compared to Combined Year Ended December 31, 2009

The following presents a discussion of operations for the combined year ended December 31, 2010, compared with the combined year ended December 31, 2009. The combined year ended December 31, 2010, represent the combined results of the Company for the year ended December 31, 2010, and the Predecessor for the period from January 1, 2010 through May 28, 2010, the closing date of the Mergers. The combined year ended December 31, 2009, represent the combined results of the Company and the Predecessor for the year ended December 31, 2009. The Predecessor does not include GMP.

The Mergers were accounted for in accordance with ASC 805, Business Combinations, resulting in a new basis of accounting from those previously reported by the Predecessor. However, sales and most operating cost items are substantially consistent with those reflected by the Predecessor. Inventories were revalued in accordance with the purchase accounting rules. Depreciation and amortization changed as a result of adjustments to the fair values of property and equipment and amortizable intangible assets due to fair value purchase allocation.

	TWELVE MONTHS			FIVE MONTHS			TWELVE MONTHS			TWELVE MONTHS
	ENDED			ENDED			ENDED			ENDED
				Predecessor			Combined						Predecessor Company			Combined
	December 31, 2010			Company May 28, 2010			December 31, 2010			December 31, 2009			December 31, 2009			December 31, 2009

Sales
Domestic sales	$	32,972		$	15,751		$	48,723		$	-		$	40,492		$	40,492
International sales		42,940			19,192			62,132			-			47,653			47,653
Total sales		75,912			34,943			110,855			-			88,145			88,145

Cost of goods sold		52,180			21,165			73,345			-			55,127			55,127
Gross profit		23,732			13,778			37,510			-			33,018			33,018

Operating expenses
Selling, general and administrative		31,208			12,138			43,346			3,939			26,524			30,463
Restructuring charge		2,842			-			2,842			-			-			-
Merger and integration		974			-			974			-			-			-
Transaction costs		5,075			-			5,075			1,613			-			1,613

Total operating expenses		40,099			12,138			52,237			5,552			26,524			32,076

Operating (loss) income		(16,367	)		1,640			(14,727	)		(5,552	)		6,494			942

Other (expense) income
Interest expense		(1,723	)		(165	)		(1,888	)		-			(994	)		(994	)
Interest income		46			3			49			701			-			701
Other, net		(995	)		1,803			808			-			311			311

Total other (expense) income, net		(2,672	)		1,641			(1,031	)		701			(683	)		18

(Loss) income before income tax		(19,039	)		3,281			(15,758	)		(4,851	)		5,811			960
(Benefit) income tax provision		(70,229	)		966			(69,263	)		(6	)		1,868			1,862
Net income (loss)	$	51,190		$	2,315		$	53,505		$	(4,845	)	$	3,943		$	(902	)

Sales

Combined sales increased $22,710 or 25.8%, to $110,855 during 2010 compared to $88,145 during 2009. The increase in sales was primarily attributable to the inclusion of $13,598 in sales from GMP for seven months, as well as an increase in sales of approximately $9,112 by BDEL which increase was driven by an increase in the quantity of new and existing products sold during the period.

Combined domestic sales increased $8,231 or 20.3%, to $48,723 during 2010 compared to $40,492 during 2009. The increase in domestic sales was primarily attributable to the inclusion of $4,245 in domestic sales from GMP for seven months, as well as an increase in domestic sales of $3,986 by BDEL which increase was driven by an increase in the quantity of new and existing climbing protection and general mountain products sold.

Combined international sales increased $14,479 or 30.4%, to $62,132 during 2010 compared to $47,653 during 2009. The increase in international sales was primarily attributable to the inclusion of $9,353 in international sales by GMP for seven months, as well as an increase in international sales of approximately $5,126 by BDEL which increase was driven by an increase in the quantity of new and existing general mountain and ski products sold.

Cost of Goods Sold

Combined cost of goods sold increased $18,218 or 33.0%, to $73,345 during 2010 compared to $55,127 during 2009. The increase in cost of goods sold was primarily attributable to an increase in sales both organically and from the inclusion of GMP for the seven months ended December 31, 2010, and $4,997 related to the sale of inventory that was recorded at fair value in purchase accounting.

Gross Profit

Combined gross profit increased $4,492 or 13.6%, to $37,510 during 2010 compared to $33,018 during 2009. Gross margin was 33.8% during 2010 compared to 37.5% during 2009. The decrease in gross profit percentage was primarily attributable to the increase in cost of goods sold due to the sale of inventory that was recorded at fair value in purchase accounting. Excluding the $4,997 step-up in fair value of inventory in purchase accounting, gross margin percentage for 2010 would have been 38.3%. The increase in gross margin compared to that of 2009 is due to lower outbound costs as a result of shipping full containers from BDEL’s China facility, lower costs on manufacturing product at BDEL’s China facility, and product mix.

Selling, General and Administrative

Combined selling, general and administrative expenses increased $12,883 or 42.3%, to $43,346 during 2010 compared to $30,463 during 2009. The increase in selling, general and administrative expenses was primarily attributable to an increase in non-cash equity compensation expense of $4,925, the inclusion of GMP expenses of $4,314 for the seven months ended December 31, 2010, an increase in depreciation and amortization of $980, and an overall increase in operations. For more details on the non-cash equity compensation, please refer to Note 11 of our consolidated financial statements.

Restructuring Charge

Combined restructuring expense increased 100.0%, to $2,842 during the 2010 compared to $0 during 2009. The increase in restructuring expense was attributable to the acquisitions of BDEL and GMP. Such restructuring expenses comprised of (i) a total of $1,295 relating to the release of the Company from its lease obligations and indemnifications by Kanders & Company in connection with the relocation of our corporate office from Stamford, Connecticut to Salt Lake City, Utah, (ii) a total of $596 relating to the write-off of fixed assets partially offset by $462 write-off of a deferred rent liability for the relocation of our corporate office from Stamford, Connecticut to Salt Lake City, Utah, (iii) $352 related to severance and relocation benefits provided to GMP employees, and (iv) the complete amortization of the $1,061 paid for severance and a transition services agreement between the Company and Kanders & Company.

Merger and Integration

Combined merger and integration expense increased 100.0%, to $974 during 2010 compared to $0 during 2009. The increase in merger and integration expense was attributable to transaction bonuses paid and consulting fees related to the acquisitions of BDEL and GMP.

Transaction Costs

Combined transaction expense increased $3,462 or 214.6%, to $5,075 during 2010 compared to $1,613 during 2009. The increase in transaction expense was attributable to the acquisitions of BDEL and GMP. Transaction expense consists primarily of professional fees and expenses related to due diligence, negotiation and documentation of the acquisitions of BDEL and GMP, financing and related matters. The transaction expenses incurred during 2009 related to a transaction that terminated without consummation.

Interest Expense

Combined interest expense increased $894 or 89.9%, to $1,888 during 2010 compared to $994 during 2009. The increase in interest expense was primarily attributable to seven months of new debt outstanding including $13,582 of discounted 5% Subordinated Notes due in 2017 and a $35,000 line of credit related to financing of the acquisitions of BDEL and GMP, of which $14,735 was outstanding as of December 31, 2010, compared to twelve months of line of credit debt outstanding in the year ended December 31, 2009.

Other Income/Expense, Net

Combined other income, net increased $497 or 159.8%, to income of $808 during 2010 compared to income of $311 during 2009. The increase in other income, net was primarily attributable to the change in the mark-to-market value of foreign currency contracts.

Income Taxes

Combined income taxes for 2010 are an income tax benefit of $69,263 compared to an income tax expense of $1,862 for 2009. As a result of the Company’s acquisitions of BDEL and GMP, it became more likely than not that some of the deferred asset related to the Company’s NOL would be utilized. The increase in tax benefit of $71,125 is due to primarily to the reversal of $65,000 of the valuation allowance on the Company’s deferred tax asset, as well as a $6,125 benefit for current year losses.

Combined Year Ended December 31, 2009 Compared to Combined Year Ended December 31, 2008

The following presents a discussion of operations for the combined year ended December 31, 2009, compared with the combined year ended December 31, 2008. The combined year ended December 31, 2009, represent the combined results of the Company and the Predecessor for the year ended December 31, 2009. The combined year ended December 31, 2008, represent the combined results of the Company and the Predecessor for the year ended December 31, 2008. The Predecessor does not include GMP. Management believes this combined presentation of the Company and Predecessor statement of operations is the most useful comparison between periods.

	TWELVE MONTHS									TWELVE MONTHS
	ENDED									ENDED
				Predecessor Company			Combined						Predecessor Company			Combined
	December 31, 2009			December 31, 2009			December 31, 2009			December 31, 2008			December 31, 2008			December 31, 2008

Sales
Domestic sales	$	-		$	40,492		$	40,492		$	-		$	42,222		$	42,222
International sales		-			47,653			47,653			-			44,031			44,031
Total sales		-			88,145			88,145			-			86,253			86,253

Cost of goods sold		-			55,127			55,127			-			55,436			55,436
Gross profit		-			33,018			33,018			-			30,817			30,817

Operating expenses
Selling, general and administrative		3,939			26,524			30,463			4,873			27,233			32,106
Transaction costs		1,613			-			1,613			-			-			-

Total operating expenses		5,552			26,524			32,076			4,873			27,233			32,106

Operating (loss) income		(5,552	)		6,494			942			(4,873	)		3,584			(1,289	)

Other (expense) income
Interest expense		-			(994	)		(994	)		-			(788	)		(788	)
Interest income		701			-			701			2,473			-			2,473
Other, net		-			311			311			(2	)		271			269

Total other (expense) income, net		701			(683	)		18			2,471			(517	)		1,954

(Loss) income before income tax		(4,851	)		5,811			960			(2,402	)		3,067			665
(Benefit) income tax provision		(6	)		1,868			1,862			-			573			573
Net income (loss)	$	(4,845	)	$	3,943		$	(902	)	$	(2,402	)	$	2,494		$	92

Sales

Combined sales increased $1,892 or 2.2%, to $88,145 during 2009 compared to $86,253 during 2008. The increase in sales was primarily attributable to the increase in BDEL’s European and international distribution business, which was partially off-set by a decrease in domestic sales during the period.

Combined domestic sales decreased $1,730 or 4.1%, to $40,492 during 2009 compared to $42,222 during 2008. The decrease was primarily attributable to a decrease in the volume of units sold due to the downturn in the economy.

Combined international sales increased $3,622 or 8.2%, to $47,653 during 2009 compared to $44,031 during 2008. The increase in international sales was primarily attributable to the increase in the quantity of products sold.

Cost of Goods Sold

Combined cost of goods sold decreased $309 or 0.6%, to $55,127 during 2009 compared to $55,436 during 2008. The decrease in cost of goods sold was primarily attributable to lower costs on the mix of product sold and a reduction in the last-in, first-out (“LIFO”) reserve.

Gross Profit

Combined gross profit increased $2,201 or 7.1%, to $33,018 during 2009 compared to $30,817 during 2008. Gross margin was 37.5% during 2009 compared to 35.7% during 2008. The increase in gross profit was primarily attributable to the lower costs on the mix of product sold and a reduction in the LIFO reserve.

Selling, General and Administrative

Combined selling, general and administrative expenses decreased $1,643 or 5.1%, to $30,463 during 2009 compared to $32,106 during 2008. The decrease in selling, general and administrative expenses was primarily attributable to leveraging existing fixed cost components, decreases in employment compensation and benefits through head count and certain salary reductions, non-cash equity compensation expense, consulting fees, accounting fees, travel expenses, and other non-transaction related professional services.

Transaction Costs

Combined transaction expense increased $1,613 or 100.0% during 2009 compared to $0 during 2008. The increase in transaction expense was due to a significant negotiation and due diligence review of a proposed transaction relating to the Company’s redeployment strategy, which involved an acquisition of several major assets and a financing component that terminated without consummation. The transaction expenses included legal, accounting, and other professional fees incurred for due diligence, and preparation and negotiation of documentation.

Interest Expense

Combined interest expense increased $206 or 26.1%, to $994 during 2009 compared to $788 during 2008. The increase in interest expense was primarily attributable to having a higher average line of credit balance outstanding due to funding working capital and capital expenditures during 2009 compared 2008.

Interest Income

Combined interest income decreased $1,772, or 71.7%, to $701during 2009, from $2,473 in 2008. Interest income 2009 and 2008, includes $466 and $1,945 in discount accretion and premium amortization, respectively. The decrease in interest income was due primarily to lower rates of return on investments as well as lower levels of cash available for investment. The weighted average interest rate for the Company’s investments for 2009 was 0.8% compared to 2.9% for 2008.

Other Income/Expense, Net

Combined other income, net increased $42 or 15.6%, to income of $311 during 2009, compared to income of $269 during 2008. The increase in other income, net was primarily attributable to the increase of royalty income received.

Income Taxes

Combined income tax expenses increased $1,289 or 225.0%, to $1,862 during 2009 compared to $573 for 2008. The increase in tax expense is due to primarily due to the higher pre-tax income of the Predecessor during 2009 compared to 2008.

Liquidity and Capital Resources (In Thousands)

Combined Year Ended December 31, 2010 Compared to Combined Year Ended December 31, 2009

The following presents a discussion of cash flows for the combined year ended December 31, 2010, compared with the combined year ended December 31, 2009. The combined year ended December 31, 2010, represents the combined results of the Company for the year ended December 31, 2010, and the Predecessor for the period from January 1, 2010 through May 28, 2010, the closing date of the Mergers. The Predecessor does not include GMP. Management believes this combined presentation of the Company and Predecessor cash flows is the most useful comparison between periods.

Our primary ongoing funding requirements are for working capital, investing activities associated with the expansion of our operations and general corporate needs. At December 31, 2010, we had total cash and cash equivalents of $2,767 compared with a combined cash and cash equivalents balance of $59,680 at December 31, 2009. In addition we had combined investments in marketable securities of $0 and $24,059 at December 31, 2010 and 2009, respectively.

	TWELVE MONTHS			FIVE MONTHS			TWELVE MONTHS			TWELVE MONTHS
	ENDED			ENDED			ENDED			ENDED
				Predecessor			Combined						Predecessor Company			Combined
	December 31, 2010			Company May 28, 2010			December 31, 2010			December 31, 2009			December 31, 2009			December 31, 2009

Net cash (used in ) provided by operating activities	$	(13,751	)	$	7,412		$	(6,339	)	$	(3,652	)	$	6,909		$	3,257
Net cash (used in) provided by investing activities		(60,587	)		(788	)		(61,375	)		42,673			(3,303	)		39,370
Net cash provided by (used in) financing activities		18,503			(6,261	)		12,242			-			(4,369	)		(4,369	)
Effect of foreign exchange rates on cash		239			(60	)		179			-			(46	)		(46	)
Change in cash and cash equivalents		(55,596	)		303			(55,293	)		39,021			(809	)		38,212
Cash and cash equivalents, beginning of period		58,363			1,317			59,680			19,342			2,126			21,468
Cash and cash equivalents, end of period	$	2,767		$	1,620		$	4,387		$	58,363		$	1,317		$	59,680

Net Cash (Used In) Provided by Operating Activities

Combined net cash used in operating activities was $6,339 during 2010 compared to net cash provided by of $3,257 during 2009. The increase in cash used is primarily due to $5,075 of transaction expenses relating to the Mergers, the increase in inventory sold of $4,997 due to the step-up in fair value in purchase accounting, $1,061 in severance payments and transition costs, $1,295 in lease indemnity payments and $974 in merger and integration charges related to the acquisitions of BDEL and GMP, with the remaining change of $3,806 attributable to increases in working capital during 2010.

Excluding $5,075 of transaction expenses relating to the acquisitions of BDEL and GMP, $4,997 in step-up value of inventory sold, $1,061 in severance payments and transition costs, $1,295 in lease indemnity payments, and $974 in merger and integration charges related to the acquisitions of BDEL and GMP, the net cash provided by operating activities would have been $7,063 for 2010.

Combined capital expenditures decreased $436 to $2,874 during 2010 compared to $3,310 during 2009. The decrease was due to certain building renovation and tooling costs that were incurred during 2009 that were not incurred during 2010. Free cash flow, defined as net cash (used in) provided by operating activities less capital expenditures was $(9,213) during 2010 compared to $(53) during 2009. Excluding $5,075 of transaction expenses relating to the acquisitions of BDEL and GMP, $4,997 in step-up value of inventory sold, $1,061 in severance payments and transition costs, $1,295 in lease indemnity payments, and $974 in merger and integration charges related to the acquisitions of BDEL and GMP, free cash flow would have been $4,189 during 2010.

Net Cash (Used In) Provided by Investing Activities

Combined net cash (used in) provided by investing activities decreased by $100,745 to $(61,375) during 2010 compared to $39,370 during 2009. The decrease is primarily due to the $82,560 used for the purchase of BDEL and GMP, net of cash acquired, as well as a liquidation of marketable securities of $18,621 to fund the Mergers, and is partially offset by a $436 reduction in purchases of capital expenditures.

Net Cash Provided by (Used In) Financing Activities

Combined net cash provided by financing activities increased by $16,611 to $12,242 during 2010 compared to $(4,369) used in during 2009. The increase is primarily due to the change in net borrowings on the line of credit and capital leases of $13,266, $1,746 in stock subscription and sales in treasury stock and exercise of stock options proceeds, and reduction in treasury purchases and dividends paid of $1,599 by Predecessor. The net borrowings were used to finance the acquisitions of BDEL and GMP.

Combined Year Ended December 31, 2009 Compared to Combined Year Ended December 31, 2008

The increase in cash provided by operating activities in 2009 compared to 2008 was primarily due to an increase in net earnings and a lower level of net cash used in 2009 for operating assets and liabilities.

Net Operating Loss

As of December 31, 2010, the Company had net operating loss, research and experimentation credit and alternative minimum tax credit carryforwards for U.S. federal income tax purposes of $226,837, $1,501 and $56, respectively. The Company's ability to benefit from certain net operating loss and tax credit carryforwards is limited under section 382 of the Internal Revenue Code due to a prior ownership change of greater than 50%. The Company believes it’s more likely than not that its U.S. Federal net operating loss (“NOL”), will substantially offset its future U.S. Federal income taxes, excluding the amount subject to U.S. Federal Alternative Minimum Tax (“AMT”). AMT is calculated as 20% of AMT income. For purposes of AMT, a maximum of 90% of income is offset by available NOLs. The majority of the Company’s pre-tax income is currently earned and expected to be earned in the U.S., or taxed in the U.S. as Subpart F. income and will be offset with the NOL. Of the $225,786 of NOLs available to offset taxable income, $214,160 does not expire until 2020 or later, subject to compliance with Section 382 of the Internal Revenue Code.

As of December 31, 2010, the Company’s gross deferred tax asset was $91,031. The Company has recorded a valuation allowance, resulting in a net deferred tax asset of approximately $69,527, not including deferred tax liabilities.

Loan Agreement

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

Pursuant to the terms of the Loan Agreement, the Lender has made available to the Borrowers a $35,000 unsecured revolving credit facility (the “Loan”), of which $25,000 was made available at the time of the closing of the acquisition of BDEL and an additional $10,000 was made available to the Company upon the closing of the acquisition of GMP. The Loan matures on July 2, 2013. The Loan may be prepaid or terminated at the Company's option at anytime without penalty. No amortization is required. Any outstanding principal balance together with any accrued but unpaid interest or fees will be due in full at maturity. The Loan bears interest at the 90-day LIBOR rate plus an applicable margin as determined by the ratio of Senior Net Debt (as calculated in the Loan Agreement) to Trailing Twelve Month EBITDA (as calculated in the Loan Agreement).

Contractual Obligations

The following summarizes our contractual obligations and commercial commitments at December 31, 2010, excluding note discounts of $8,636, with initial or remaining terms of one or more years, and the effect such obligations are expected to have on our liquidity and cash flow in future periods:

	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)
Contractual Obligations:
Operating leases	$	4,326	$	1,186	$	1,787	$	642	$	711
Capital leases		305		158		131		16		-
Line of credit		14,735		-		14,735		-		-
5% Senior Subordinated Notes		22,610		-		-		-		22,610
Trademark payable		750		150		600		-		-
Other long-term liabilities		785		-		-		-		785
	$	43,511	$	1,494	$	17,253	$	658	$	24,106

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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In general, we can be exposed to market risks including fluctuations in interest rates, foreign currency exchange rates and certain commodity prices, and that can affect the cost of operating, investing and financing under those conditions. The Company believes it has moderate exposure to these risks. We assess market risk based on changes in interest rates, foreign currency rates and commodity prices utilizing a sensitivity analysis that measures the potential loss in earnings, fair values and cash flows based on a hypothetical 10% change in these rates and prices.

Interest Rate Risks

Our primary exposure to market risk is interest rate risk associated with our $35.0 million unsecured revolving credit facility (the “Loan”). We have cash flow exposure on the Loan since the interest is indexed to LIBOR. As of December 31, 2010, the applicable interest rate for the outstanding borrowings under the Loan was 3.25%.

Foreign Currency Risk

While we transact business predominantly in U.S. dollars and most of our revenues are collected in U.S. dollars, a portion of our operating costs are denominated in other currencies. Changes in the relation of these and other currencies to the U.S. dollar will affect our sales and profitability and could result in exchange losses. For the year ending December 31, 2010, approximately 31% of our sales were denominated in foreign currencies, the most significant of which were the Euro, British Pound, Norwegian Kroner, Swiss Franc and Canadian Dollar. The primary purpose of our foreign currency hedging activities is to mitigate the foreign currency exchange rate exposure on the cash flows related to forecasted inventory purchases and sales. A hypothetical 10% change in foreign currency rates would not have a material effect on foreign currency gains and losses related to the foreign currency derivatives or the net fair value of the Company’s foreign currency derivatives.

Derivative Instrument Risk

We employ a variety of practices to manage these market risks, including operating and financing activities and, where deemed appropriate, the use of derivative instruments. Derivative instruments are used only for risk management purposes and not for speculation or trading. Derivatives are such that a specific debt instrument, contract, or anticipated purchase determines the amount, maturity, and other specifics of the hedge. If a derivative contract is entered into, we either determine that it is an economic hedge or we designate the derivative as a cash flow or fair value hedge. We do not hold derivative financial investments, derivative commodity investments, engage in foreign currency hedging or other transactions that expose us to material market risk.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BLACK DIAMOND, INC. AND SUBSIDIARIES

Index to Financial Statements

		Page

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements		34

Independent Auditor’s Report		35

Independent Auditor’s Report		36

Consolidated Balance Sheets - December 31, 2010 and 2009 and June 30, 2009 (Predecessor)		37

Consolidated Statements of Operations - Years Ended December 31, 2010, 2009 and 2008 and Period From
July 1, 2009 to May 28, 2010, and Years Ended June 30, 2009 and 2008 (Predecessor)		38

Consolidated Statements of Cash Flows -Years Ended December 31, 2010, 2009 and 2008 and Period From
July 1, 2009 to May 28, 2010, and Years Ended June 30, 2009 and 2008 (Predecessor)		39

Consolidated Statements of Stockholders' Equity and Comprehensive Loss -Years Ended December 31, 2010, 2009 and
2008 and Period From July 1, 2009 to May 28, 2010, and Years ended June 30, 2009 and 2008 (Predecessor)		41

Notes to Consolidated Financial Statements		43

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

of Black Diamond, Inc.:

We have audited the accompanying consolidated balance sheets of Black Diamond, Inc. and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the aforementioned consolidated financial statements referred to above present fairly, in all material respects, the financial position of Black Diamond, Inc. and subsidiaries, as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP
Salt Lake City, UT
March 15, 2011

Independent Auditors’ Report

The Board of Directors and Stockholders

Black Diamond Equipment, Ltd.:

We have audited the accompanying consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows of Black Diamond Equipment, Ltd. and subsidiaries (the Company) for the period from July 1, 2009 to May 28, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of Black Diamond Equipment, Ltd. and subsidiaries operations and their cash flows for the period from July 1, 2009 to May 28, 2010 in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP
Salt Lake City, UT
March 15, 2011

Independent Auditors’ Report

Board of Directors and Stockholders

Black Diamond Equipment, Ltd. And Subsidiaries:

We have audited the accompanying consolidated balance sheet of Black Diamond Equipment, Ltd. and Subsidiaries (collectively, the Company) as of June 30, 2009 and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for the years ended June 30, 2009 and 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Black Diamond Equipment, Ltd. and Subsidiaries as of June 30, 2009 and the results of their operations and their cash flows for the years ended June 30, 2009 and 2008 in conformity with accounting principle generally accepted in the United States of America.

/s/ TANNER LC
Salt Lake City, UT
September 15, 2009

BLACK DIAMOND, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

	December 31,						Predecessor Company
	2010			2009			June 30, 2009
Assets
Current Assets
Cash and cash equivalents	$	2,767		$	58,363		$	1,271
Marketable securities		-			24,059			-
Accounts receivable, net		20,293			-			9,727
Inventories		34,942			-			25,580
Prepaid and other current assets		2,527			673			646
Income tax receivable		376			-			-
Deferred income taxes		1,698			-			1,810
Total Current Assets		62,603			83,095			39,034

Non-Current Assets
Property and equipment, net		14,740			696			9,781
Definite lived intangible assets, net		17,439			-			32
Indefinite lived intangible assets		32,650			-			897
Goodwill		40,601			-			1,160
Deferred income taxes		43,582			-			-
Other long-term assets		1,064			-			-
Total Non-Current Assets		150,076			696			11,870
TOTAL ASSETS	$	212,679		$	83,791		$	50,904

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued liabilities	$	19,208		$	1,713		$	9,884
Current portion of long-term debt		308			-			2,992
Total Current Liabilities		19,516			1,713			12,876

Non-Current Liabilities
Long-term debt		29,456			-			14,195
Other long-term liabilities		785			446			-
Deferred income taxes		-			-			601
TOTAL LIABILITIES		49,757			2,159			27,672

Stockholders' Equity
Preferred stock, $.0001 par value; 5,000 shares authorized; none issued		-			-			-
Common stock, $.0001 par value; 100,000 shares authorized:
21,814 and 17,442 shares issued; and 21,739 and
17,367 outstanding in 2010 and 2009, respectively		2			2			-
Common stock, $0.01 par value; 200 shares authorized; 86 shares issued
at June 30, 2009 (including 11 shares held in treasury at June 30, 2009)		-			-			1
Additional paid-in capital		399,475			370,994			2,707
(Accumulated deficit) retained earnings		(238,178	)		(289,368	)		22,499
Treasury stock, at cost		(2	)		(2	)		(2,678	)
Accumulated other comprehensive income		1,625			6			703
TOTAL STOCKHOLDERS' EQUITY		162,922			81,632			23,232
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	212,679		$	83,791		$	50,904

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

BLACK DIAMOND, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

			Predecessor Company
			Period from July 1, 2009 to May 28,
Year Ended December 31,				Year Ended June 30,
2010	2009	2008