##### Table of Contents



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 June 30, 2009.
 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
    
    91-2190195(State or other jurisdiction of incorporation)
    
    (I.R.S. Employer Identification Number)
 1801 Avenue of the Stars, Suite 435
Los Angeles, California 90067
 (310) 479-4570
 þ o
 Yes þ No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ




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##### 



PagePART 1 FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)
    
    
    F-1Balance 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
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    21PART II OTHER INFORMATIONItem 6. Exhibits
    
    
    22Exhibit 31.1Exhibit 32.1




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 CLEARANT, INC.
 
 BALANCE SHEETS
 (in thousands, except par value)
 June 30, 2009
    
    
    December 31, 2008(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    104
    
    
    $
    265Accounts receivable, net of allowances of
$81 and $91 at June 30, 2009 and December
31, 2008, respectively
    
    
    206
    
    
    
    276Inventory and inventory related
prepayments, net of reserve of $1,307 and
$1,315 at June 30, 2009 and December 31,
2008, respectively
    
    
    15
    
    
    
    15Prepaids and other
    
    
    114
    
    
    
    62Total current assets
    
    
    439
    
    
    
    618Property and equipment, net of $166 and
$146 of accumulated depreciation at June
30, 2009 and December 31, 2008,
respectively
    
    
    24
    
    
    
    44Identifiable intangibles, net of $1,307
and $1,285 of accumulated amortization at
June 30, 2009 and December 31, 2008,
respectively
    
    
    986
    
    
    
    970Deposits and other assets
    
    
    84
    
    
    
    85Total assets
    
    $
    1,533
    
    
    $
    1,717Liabilities and Stockholders DeficitCurrent liabilitiesAccounts payable
    
    $
    1,131
    
    
    $
    1,070Accrued liabilities
    
    
    923
    
    
    
    736Deferred revenue
    
    
    8
    
    
    
    7Bridge loans
    
    
    106
    
    
    
    106Total current liabilities
    
    
    2,168
    
    
    
    1,919Convertible promissory note  related
party, net of discount of $154 and $135 at
June 30, 2009 and December 31, 2008,
respectively
    
    
    1,133
    
    
    
    758Total liabilities
    
    
    3,301
    
    
    
    2,677Stockholders deficit:Series A preferred stock ($0.0001 par
value; 50,000 shares authorized; 0 issued
and outstanding at June 30, 2009 and
December 31, 2008, respectively)
    
    
    
    
    
    
    Common stock ($0.0001 par value; 200,000
shares authorized; 48,957 and 48,957
issued and outstanding at June 30, 2009
and December 31, 2008, respectively)
    
    
    5
    
    
    
    5Additional paid-in-capital
    
    
    87,243
    
    
    
    87,013Accumulated deficit
    
    
    (89,016
    )
    
    
    (87,978
    )Total stockholders deficit
    
    
    (1,768
    )
    
    
    (960
    )Total liabilities and stockholders deficit
    
    $
    1,533
    
    
    $
    1,717
 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 Month Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008RevenuesLicensing
    
    $
    9
    
    
    $
    14
    
    
    $
    16
    
    
    $
    71Direct distributions
    
    
    363
    
    
    
    455
    
    
    
    800
    
    
    
    762Fee for service
    
    
    24
    
    
    
    27
    
    
    
    48
    
    
    
    36Contract research and milestones
    
    
    6
    
    
    
    8
    
    
    
    12
    
    
    
    100Total revenues
    
    
    402
    
    
    
    504
    
    
    
    876
    
    
    
    969Cost of revenues
    
    
    204
    
    
    
    289
    
    
    
    463
    
    
    
    502Gross profit
    
    
    198
    
    
    
    215
    
    
    
    413
    
    
    
    467Operating expenses:Sales, general and administrative
    
    
    687
    
    
    
    690
    
    
    
    1,358
    
    
    
    1,502Research and development
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    5Total operating expenses
    
    
    687
    
    
    
    692
    
    
    
    1,358
    
    
    
    1,507Loss from operations
    
    
    (489
    )
    
    
    (477
    )
    
    
    (945
    )
    
    
    (1,040
    )Other income (expense):Interest income (expense)
    
    
    (51
    )
    
    
    3
    
    
    
    (93
    )
    
    
    12Loss before provision (benefit) for income taxes
    
    
    (540
    )
    
    
    (474
    )
    
    
    (1,038
    )
    
    
    (1,028
    )Provision (benefit) for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (540
    )
    
    $
    (474
    )
    
    $
    (1,038
    )
    
    $
    (1,028
    )Net loss per share:Basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.02
    )
    
    $
    (0.02
    )Number of weighted average shares used in per
share calculation:Basic and diluted
    
    
    48,957
    
    
    
    48,957
    
    
    
    48,957
    
    
    
    48,957
 See accompanying notes to financial statements.
  F-2




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CLEARANT, INC.
 
 STATEMENTS OF CASH FLOWS
 (in thousands)
  Six Months EndedJune 30,2009
    
    
    2008Operating activitiesNet loss
    
    $
    (1,038
    )
    
    $
    (1,028
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    41
    
    
    
    89Accretion of debt discount
    
    
    38
    
    
    
    Stock-based compensation
    
    
    230
    
    
    
    273Changes in operating assets and liabilities:Accounts receivable
    
    
    70
    
    
    
    18Inventory and inventory related prepayments
    
    
    
    
    
    
    (16
    )Prepaids
    
    
    (52
    )
    
    
    (56
    )Accounts payable
    
    
    61
    
    
    
    (40
    )Accrued liabilities
    
    
    152
    
    
    
    99Deferred revenue
    
    
    1
    
    
    
    (1
    )Other assets and liabilities
    
    
    (4
    )
    
    
    1Net cash used in operating activities
    
    
    (501
    )
    
    
    (661
    )Investing activitiesCost of identified intangibles
    
    
    (37
    )
    
    
    (24
    )Capital expenditures
    
    
    
    
    
    
    (15
    )Net cash used in investing activities
    
    
    (37
    )
    
    
    (39
    )Financing activitiesProceeds from convertible secured promissory note  related party, net of
fees of $42
    
    
    377
    
    
    
    Net cash provided by financing activities
    
    
    377
    
    
    
    Change in cash and cash equivalents
    
    
    (161
    )
    
    
    (700
    )Cash and cash equivalents, beginning of period
    
    
    265
    
    
    
    1,062Cash and cash equivalents, end of period
    
    $
    104
    
    
    $
    362Supplemental Disclosure of Non-cash Financing Activities:Cash paid for interest
    
    $
    56
    
    
    $
    
 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
 st st nd nd nd nd nd
  F-4




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NOTE 3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Revenue Recognition and Deferred Revenue
 Revenue Recognition ® ® ® Accounting for Performance
of Construction-Type and Certain Production-Type Contracts Accounting for
Shipping and Handling Fees and Costs
 Cost of revenues
 ®
 Use of Estimates
  Cash Equivalents and Concentration of Credit Risk
  Accounts Receivable and Allowance for Doubtful Accounts
   F-5




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Inventory and Inventory Related Prepayments
 ®
  Property and Equipment
  Fair Value Measurements
 Fair Value Measurements
      Long-Lived Assets
   F-6




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Identifiable Intangibles
 Accounting for the Impairment or Disposal of Long-Lived Assets
 Research and Development Costs
  Income Taxes
 Accounting for Income Taxes
   Accounting for Uncertainty in Income Taxes
 Stock-Based Compensation
 Share Based Payment
   F-7




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Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
or in Conjunction with Selling, Goods or Services
  Fair Value of Financial Instruments
  Recent Accounting Pronouncements
 Subsequent Events
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles
 NOTE 4  NET LOSS PER SHARE
 Earnings Per Share
  For the Six Months Ended June 30,2009
    
    
    2008Stock Options
    
    
    2,557,855
    
    
    
    3,358,212Warrants
    
    
    2,113,052
    
    
    
    133,052
  F-8




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Three Months Ended
    
    
    Six Month EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Basic and diluted net loss per share:Numerator:Net loss attributable to common stock
    
    $
    (540
    )
    
    $
    (474
    )
    
    $
    (1,038
    )
    
    $
    (1,028
    )Denominator:Weighted average common stock shares outstanding
    
    
    48,957
    
    
    
    48,957
    
    
    
    48,957
    
    
    
    48,957Net loss per share, basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.02
    )
    
    $
    (0.02
    )
 NOTE 5  INCOME TAXES
   NOTE 6  CONVERTIBLE SECURED PROMISSORY NOTE  RELATED PARTY
  st st st nd nd nd nd nd Application of Issue No. 98-5 to Certain Convertible Instruments
  F-9




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Accounting for Convertible Debt and Debt Issued with Stock
Purchase Warrants
  Accounting for Derivative Financial Statements Indexed to,
and Potentially Settled in a Companys own stock
   NOTE 7  STOCK-BASED AWARDS
 Stock Options
  Employees
    
    
    Non-Employees
    
    
    TotalExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at December 31,
2008
    
    
    2,585,000
    
    
    $
    0.35-$63.14
    
    
    
    173,000
    
    
    $
    0.70-$57.68
    
    
    
    2,758,000
    
    
    $
    0.35-$63.14Granted
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Exercised
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Change in Status
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Canceled
    
    
    200,000
    
    
    $
    0.45
    
    
    
    
    
    
    $
    
    
    
    
    200,000
    
    
    $
    0.45Outstanding at June 30, 2009
    
    
    2,385,000
    
    
    $
    0.35-$63.14
    
    
    
    173,000
    
    
    $
    0.70-$57.68
    
    
    
    2,558,000
    
    
    $
    0.35-$63.14
     F-10




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NOTE 8  COMMITMENTS AND CONTINGENCIES
 ®
 ®
 NOTE 8  SUBSEQUENT EVENTS
 nd nd nd nd nd
  F-11




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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-K dated
December 31, 2008, filed with the Securities and Exchange Commission on March 24, 2009 (the Form
10-K).
 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.
 ® ® ® ® ®
 ® ®
  12




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Results of Operations
 Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008
 Revenues
  ®
   ®
 Cost of Revenues
  Sales, General and Administrative Expenses
  ®
   13




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Research and Development Expenses
 ®
 Other Income/Expense
  Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008
 Revenues
  ® ®
   ®
 Cost of Revenues
   14




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Sales, General and Administrative Expenses
  ®
  Research and Development Expenses
 ®
 Other Income/Expense
  Preferred Stock Dividend and Financing Costs
  Liquidity and Capital Resources
   15




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Research and Development
  Direct Distribution Strategy
 ®
 ®
 ®
  Limited Cash Availability
     16




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Doubt About Our Ability To Continue As Going Concern
   
    
    $400,000 due and paid on July 8, 2008;
 
    
    $400,000 due on August 22, 2008, of which $252,000 was received on September 5,
2008, and $148,000 was received on October 1, 2008;
 
    
    $600,000 due on October 6, 2008, of which $68,000 was received on December 12,
2008, $50,000 was received on January 8, 2009, $155,000 was received on February 26,
2009, $77,000 was received on March 12, 2009, $76,000 was received on May 4, 2009, and
$60,000 was received on May 20, 2009; and
 
    
    $600,000 due on February 16, 2009, which has not been received.
 st st
 
    
    $160,000 due on February 20, 2009, of which we received $155,000 on February 26,
2009 and $5,000 on March 12, 2009,
 
    
    $100,000 due by March 10, 2009, of which we received $72,000 on March 12, 2009
and $28,000 on May 4, 2009; and
 
    
    $222,000 due before March 31, 2009, of which we received $48,000 on May 4, 2009
and $60,000 on May 20, 2009.
 st nd nd nd
 
    
    $114,000 on August 3, 2009, of which we received $50,000 on August 5, 2009
  17




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##### Table of Contents



nd
 
    
    $100,000 on August 15, 2009,
    
    $100,000 on August 31, 2009,
 
    
    $200,000 on September 30, 2009, and
 
    
    $200,000 on October 31, 2009.
 nd
        18




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Contractual Obligations and Commercial Commitments
  Payments Due By PeriodMore than 5Contractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    YearsOperating Lease Obligations
    
    $
    81
    
    
    $
    77
    
    
    $
    4
    
    
    $
    
    
    
    $
    
  Off-Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
   Revenue Recognition and Deferred Revenue
 Revenue Recognition ® ® ® Accounting for Performance of Construction-Type and Certain Production-Type
Contracts Accounting for
Shipping and Handling Fees and Costs
  19




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Cost of Revenues
 ®
 Inventory and Inventory Related Prepayments
 ®
  Identifiable Intangibles
  Research and Development Costs
  Income Taxes
 Accounting for Income Taxes
 Accounting for Uncertainty in Income Taxes
 Stock-Based Compensation
 Share Based Payment
 Fair Value of Financial Instruments
   20




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Legal Proceedings
  Recent Accounting Pronouncements
 Subsequent Events
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles
 
 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
  
 ITEM 4. Controls and Procedures
   21




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PART II  OTHER INFORMATION
 
 ITEM 6. Exhibits
 Exhibit 3.1
    
    Amended and Restated Certificate of Incorporation Clearant,
Inc., a Delaware corporation, incorporated by reference to
Exhibit 3.1 on our Current Report on Form 10-KSB filed with
the SEC on April 1, 2008.Exhibit 3.2
    
    Bylaws of Clearant, Inc., A Delaware corporation,
incorporated by reference to our Proxy Statement on Form
DEF14A for our annual meeting of stockholders held on June
30, 2005, filed with the SEC on April 4, 2005.Exhibit 4.1
    
    Specimen Common Stock Certificate, incorporated by reference
to Exhibit 4.2 on our Registration Statement on Form S-3,
filed with the SEC on November 23, 2005.Exhibit 10.1
    
    Amendment No. 2 to Subscription and Purchase Agreement dated
August 3, 2009, by and between Clearant, Inc. and CPI
Investments, Inc., incorporated by reference to Exhibit 10.1
on our Current Report on Form 8-K filed with the SEC on
August 12, 2009.Exhibit 10.2
    
    Exhibit A to Amendment No. 2 to Subscription and Purchase
Agreement, dated July 24, 2009, incorporated by reference to
Exhibit 10.2 on our Current Report on Form 8-K filed with the
SEC on August 12, 2009.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




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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.
    23




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SIGNATURES
   By:
    /s/ Jon GarfieldJon Garfield, Chief Executive Officerand Chief Financial OfficerBy:
    /s/ Susan EtzelSusan Etzel, Chief Accounting Officer  24




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EXHIBIT INDEX
 Exhibit No.
    
    DescriptionExhibit 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.
  25