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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2008.
 o
    
    Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to  .
 Commission File Number 000-50309
 
 Clearant, Inc.
  
 Delaware
(State or other jurisdiction of incorporation)
    
    91-2190195
(I.R.S. Employer Identification Number)
 1801 Avenue of the Stars, Suite 435
Los Angeles, California 90067
 (310) 479-4570
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ




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##### 



PagePART I FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Balance Sheets
    
    
    F-1Statements of Operations
    
    
    F-2Statements of Cash Flow
    
    
    F-3Notes to Financial Statements (Unaudited)
    
    
    F-4Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures
about Market Risk
    
    
    18Item 4. Controls and Procedures
    
    
    19PART II OTHER INFORMATIONItem 5. Other Information
    
    
    19Item 6. Exhibits
    
    
    19EXHIBITSExhibit 10.1Exhibit 31.1Exhibit 32.1




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PART I  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 CLEARANT, INC.
 
 BALANCE SHEETS
(in thousands, except par value)
 September 30, 2008
    
    
    December 31, 2007(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    470
    
    
    $
    1,062Accounts receivable, net of allowances
of $87 and $26 at September 30, 2008 and
December 31, 2007, respectively
    
    
    327
    
    
    
    341Other receivables
    
    
    108
    
    
    
    Inventory and inventory related
prepayments, net of reserve of $1,315
and $1,255 at September 30, 2008 and
December 31, 2007, respectively
    
    
    15
    
    
    
    Prepaids and other
    
    
    99
    
    
    
    68Total current assets
    
    
    1,019
    
    
    
    1,471Property and equipment, net of $138 and
$83 of accumulated depreciation at
September 30, 2008 and December 31, 2007,
respectively
    
    
    52
    
    
    
    87Identifiable intangibles, net of $1,275
and $1,217 of accumulated amortization at
September 30, 2008 and December 31, 2007,
respectively
    
    
    962
    
    
    
    991Deposits and other assets
    
    
    88
    
    
    
    60Total assets
    
    $
    2,121
    
    
    $
    2,609Liabilities and Stockholders Equity (Deficit)Current liabilities:Accounts payable
    
    $
    1,085
    
    
    $
    1,210Accrued liabilities
    
    
    811
    
    
    
    733Deferred revenue
    
    
    13
    
    
    
    7Bridge loans, net
    
    
    106
    
    
    
    106Total current liabilities
    
    
    2,015
    
    
    
    2,056Convertible Promissory Note, net of debt
discount of $140 and $0 at September 30,
2008 and December 31, 2007 respectively
    
    
    668
    
    
    
    Deferred revenue  noncurrent
    
    
    
    
    
    
    4Total liabilities
    
    
    2,683
    
    
    
    2,060Stockholders equity (deficit):Preferred stock ($0.0001 par
value; 50,000 shares authorized; 1
share and 0 shares issued and
outstanding at September 30, 2008
and December 31, 2007,
respectively)
    
    
    
    
    
    
    Common stock ($0.0001 par value; 200,000
shares authorized; 48,957 issued and
outstanding at September 30, 2008 and
December 31, 2007, respectively)
    
    
    5
    
    
    
    5Additional paid-in capital
    
    
    86,843
    
    
    
    86,360Accumulated deficit
    
    
    (87,410
    )
    
    
    (85,816
    )Total stockholders equity (deficit)
    
    
    (562
    )
    
    
    549Total liabilities and stockholders equity
    
    $
    2,121
    
    
    $
    2,609
 See accompanying notes to financial statements.
  F-1




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CLEARANT, INC.
 
 STATEMENTS OF OPERATIONS
 (in thousands, except for per share data)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Licensing
    
    $
    6
    
    
    $
    10
    
    
    $
    77
    
    
    $
    71Direct distribution
    
    
    421
    
    
    
    136
    
    
    
    1,183
    
    
    
    440Fee for service
    
    
    29
    
    
    
    11
    
    
    
    65
    
    
    
    80Contract research and milestones
    
    
    6
    
    
    
    3
    
    
    
    106
    
    
    
    172Total revenues
    
    
    462
    
    
    
    160
    
    
    
    1,431
    
    
    
    763Cost of revenues
    
    
    261
    
    
    
    103
    
    
    
    763
    
    
    
    343Gross profit
    
    
    201
    
    
    
    57
    
    
    
    668
    
    
    
    420Operating expenses:Sales, general and administrative
    
    
    746
    
    
    
    983
    
    
    
    2,248
    
    
    
    3,018Research and development
    
    
    1
    
    
    
    6
    
    
    
    6
    
    
    
    65Total operating expenses
    
    
    747
    
    
    
    989
    
    
    
    2,254
    
    
    
    3,083Loss from operations
    
    
    (546
    )
    
    
    (932
    )
    
    
    (1,586
    )
    
    
    (2,663
    )Other income (expense):Interest income (expense)
    
    
    (20
    )
    
    
    3
    
    
    
    (8
    )
    
    
    3Settlement of obligation
    
    
    
    
    
    
    379
    
    
    
    
    
    
    
    382Loss on disposal of fixed assets
    
    
    
    
    
    
    (26
    )
    
    
    
    
    
    
    (112
    )Loss before provision (benefit) for
income taxes
    
    
    (566
    )
    
    
    (576
    )
    
    
    (1,594
    )
    
    
    (2,390
    )Provision (benefit) for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (566
    )
    
    $
    (576
    )
    
    $
    (1,594
    )
    
    $
    (2,390
    )Net loss per share:Basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.02
    )
    
    $
    (0.03
    )
    
    $
    (0.19
    )Number of weighted average shares
used in per share calculation:Basic and diluted
    
    
    48,957
    
    
    
    25,866
    
    
    
    48,957
    
    
    
    12,269
 See accompanying notes to financial statements.
  F-2




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CLEARANT, INC.
 
 STATEMENTS OF CASH FLOWS
 (in thousands)
  Nine Months EndedSeptember 30,2008
    
    
    2007Operating activitiesNet loss
    
    $
    (1,594
    )
    
    $
    (2,390
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    113
    
    
    
    364Loss on disposal of fixed assets
    
    
    
    
    
    
    112Stock-based compensation
    
    
    410
    
    
    
    232Non-cash interest expense
    
    
    18
    
    
    
    Issuance of common stock to consultants for services
rendered
    
    
    
    
    
    
    103Issuance of warrants to consultants for services rendered
    
    
    10
    
    
    
    Gain on settlement of obligation
    
    
    
    
    
    
    (382
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    14
    
    
    
    (1
    )Inventory and inventory related prepayments
    
    
    (15
    )
    
    
    (68
    )Prepaids
    
    
    (32
    )
    
    
    (100
    )Accounts payable
    
    
    (125
    )
    
    
    22Accrued liabilities
    
    
    78
    
    
    
    101Deferred revenue
    
    
    3
    
    
    
    (58
    )Other assets and liabilities
    
    
    
    
    
    
    33Net cash used in operating activities
    
    
    (1,120
    )
    
    
    (2,032
    )Investing activitiesCost of identified intangibles
    
    
    (29
    )
    
    
    (47
    )Capital expenditures
    
    
    (20
    )
    
    
    (10
    )Net proceeds from sale of fixed assets
    
    
    
    
    
    
    22Net cash used in investing activities
    
    
    (49
    )
    
    
    (35
    )Financing activitiesProceeds from debt financing, net of fees of $115
    
    
    577
    
    
    
    Proceeds from the issuance of common stock, net of costs of $100
    
    
    
    
    
    
    2,920Proceeds from issuance of bridge loan
    
    
    
    
    
    
    200Net cash provided by financing activities
    
    
    577
    
    
    
    3,120Change in cash and cash equivalents
    
    
    (592
    )
    
    
    1,053Cash and cash equivalents, beginning of period
    
    
    1,062
    
    
    
    563Cash and cash equivalents, end of period
    
    $
    470
    
    
    $
    1,616Supplemental Disclosure of Non-cash Financing Activities:Receivable recognized in financing transaction
    
    $
    108
    
    
    $
    Issuance of warrants to consultants for services
    
    $
    10
    
    
    $
    Issuance of common stock for accounts payable
    
    $
    
    
    
    $
    109Issuance of common stock to consultants for services
    
    $
    
    
    
    $
    103
 See accompanying notes to financial statements.
  F-3




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CLEARANT, INC.
 
 NOTES TO FINANCIAL STATEMENTS
 (in thousands, except for share and per share data)
  NOTE 1  BASIS OF PRESENTATION
   NOTE 2  GOING CONCERN
  NOTE 3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Revenue Recognition and Deferred Revenue
 Revenue Recognition ® ® ® Accounting for
Shipping and Handling Fees and Costs
  F-4




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Cost of revenues
 ®
 Use of Estimates
  Cash Equivalents and Concentration of Credit Risk
  Fair Value Measurements
 Fair Value Measurements
       F-5




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Inventory and Inventory Related Prepayments
 ®
  Property and Equipment
  Long-Lived Assets
  Identifiable Intangibles
 Accounting for the Impairment or Disposal of Long-Lived Assets
 Research and Development Costs
  Income Taxes
 Accounting for Income Taxes
    F-6




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Stock-Based Compensation
 Share Based Payment
   Fair Value of Financial Instruments
  Recent Accounting Pronouncements
 The
Hierarchy of Generally Accepted Accounting Principles The Meaning
of Present Fairly in Conformity with Generally Accepted Accounting Principles
 NOTE 4  NET LOSS PER SHARE
 Earnings Per Share
  For the Nine Months EndedSeptember 30,2008
    
    
    2007Stock Options
    
    
    3,357,855
    
    
    
    3,287,000Warrants
    
    
    1,173,052
    
    
    
    157,000
  F-7




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Basic and diluted net loss per share:Numerator:Net loss attributable to common stock
    
    $
    (566
    )
    
    
    (576
    )
    
    $
    (1,594
    )
    
    
    (2,390
    )Denominator:Weighted average common stock
shares outstanding
    
    
    48,957
    
    
    
    25,866
    
    
    
    48,957
    
    
    
    12,269Net loss per share, basic and diluted
    
    $
    (0.01
    )
    
    
    (0.02
    )
    
    $
    (0.03
    )
    
    
    (0.19
    )
 NOTE 5  INCOME TAXES
 Accounting for Uncertainty in Income Taxes
   NOTE 6  DEBT
   Accounting for Convertible Debt and Debt Issued with Stock
Purchase Warrants
    F-8




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NOTE 7  COMMON STOCK
 Common Stock Transactions and Non-cash Financing Activities
         F-9




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NOTE 8  STOCK-BASED AWARDS
 Stock Options
  Employees
    
    
    Non-Employees
    
    
    TotalExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at
December 31, 2007
    
    
    3,244,000
    
    
    $
    0.35-$63.14
    
    
    
    173,000
    
    
    $
    4.90-$57.68
    
    
    
    3,417,000
    
    
    $
    0.35-$63.14Granted
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Exercised
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Change in Status
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Canceled
    
    
    59,000
    
    
    $
    0.35-$57.68
    
    
    
    
    
    
    
    
    
    
    
    59,000
    
    
    $
    0.35-$57.68Outstanding at
September 30, 2008
    
    
    3,185,000
    
    
    $
    0.35-$63.14
    
    
    
    173,000
    
    
    $
    4.90-$57.68
    
    
    
    3,358,000
    
    
    $
    0.35-$63.14
   
 NOTE 9  COMMITMENTS AND CONTINGENCIES
 ®
 ®
  F-10




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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion of our financial condition and results of operations should be read in
conjunction with our financial statements and the related notes, and the other financial
information included in this report. As used in this report, the terms Clearant, Company, we,
our, and like references mean Clearant, Inc., a Delaware corporation.
 Forward-Looking Statements
 The forward-looking comments contained in this report involve risks and uncertainties. Our actual
results may differ materially from those discussed here due to factors such as, among others,
limited operating history, difficulty in developing, exploiting and protecting proprietary
technologies, results of additional clinical studies, acceptance and success of our direct
distribution of allografts, intense competition and substantial regulation in the healthcare
industry. Additional factors that could cause or contribute to such differences can be found in the
following discussion and in the Risks Factors set forth in Item 1 of our Form 10-KSB dated
December 31, 2007, filed with the Securities and Exchange Commission on April 1, 2008 (the Form
10-KSB).
 Overview
 ®
 ®  ®
 
    
    Inactivate a broad range of known pathogens irrespective of size, origin or structure;
    
    Achieve sterility, in some cases with margins of safety greater than that of a medical device;
    
    Be used in either intermediate or final stages of production;
    
    Protect the mechanical and biological properties of the biological product being treated; and
    
    Be applied to a product after it has been sealed into its final package.
 ® ® ® ® ®
 ® ®
  11




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Results of Operations
 Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007
 Revenues
  ® ®
   ®
 Cost of Revenues
  Sales, General and Administrative Expenses
  ®
   12




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Research and Development Expenses
 ®
 Other Income/Expense
  Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007
 Revenues
  ® ®
   ®
  13




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Cost of Revenues
  Sales, General and Administrative Expenses
  ®
  Research and Development Expenses
 ®
 Other Income/Expense
  Preferred Stock Dividend and Financing Costs
   14




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Liquidity and Capital Resources
    Doubt About Our Ability To Continue As Going Concern
    Research and Development
  Tissue Agreement
 ®
  15




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®
 Limited Cash Availability
    Contractual Obligations and Commercial Commitments
  Payments Due By PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    

Total
    
    

1 Year
    
    

1 - 3 Years
    
    
    3 - 5 Years
    
    

5 YearsOperating Lease Obligations
    
    $
    51
    
    
    $
    42
    
    
    $
    9
    
    
    
    
    
    
    
    
  Off-Balance Sheet Arrangements
   16




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Critical Accounting Policies and Estimates
   Revenue Recognition and Deferred Revenue
 Revenue Recognition ® ® ® Accounting for Shipping and Handling Fees and Costs
 Cost of Revenues
 ®
 Inventory and Inventory Related Prepayments
 ®
  Identifiable Intangibles
 Accounting for the Impairment or Disposal of
Long-Lived Assets
  17




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Income Taxes
 Accounting for Income Taxes
 Accounting for Uncertainty in Income Taxes
 Stock-Based Compensation
 Share Based Payment
 Recent Accounting Pronouncements
 The
Hierarchy of Generally Accepted Accounting Principles The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles
 
 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    18




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ITEM 4. Controls and Procedures
 Disclosure Controls and Procedures
    Changes in Internal Control
  
 PART II  OTHER INFORMATION
 
 ITEM 5. Other Information
  
 ITEM 6. Exhibits
 Exhibit 31.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit 32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
  19




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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
   
    
    general economic conditions;
 
    
    the effectiveness of our planned advertising, marketing and promotional
campaigns;
 
    
    physician and patient acceptance of our products and services, including
newly introduced products;
 
    
    anticipated trends and conditions in the industry in which we operate,
including regulatory changes;
 
    
    our future capital needs and our ability to obtain financing; and
 
    
    other risks and uncertainties as may be detailed from time to time in our
public announcements and filings with the SEC.
    20




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SIGNATURES
  Date: November 14, 2008
    CLEARANT, INC.By:
    /s/ Jon GarfieldJon Garfield, Chief Executive Officer and Chief Financial Officer  21




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EXHIBIT INDEX
 Exhibit No.
    
    DescriptionExhibit 10.1
    
    Agreement dated August 1, 2008, with Cameron & Associates Corporate Finance, Inc.Exhibit 31.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit 32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
  22