##### Table of Contents



United States
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For The Quarterly Period Ended June 30, 2005
 Commission File Number 000-50309
 
 Clearant, Inc.
  
 Delaware
(State or other jurisdiction of incorporation)
    
    91-2190195
(I.R.S. Employer Identification Number)
 11111 Santa Monica Boulevard, Suite 650, Los Angeles, California 90025
 (310) 479-4570
 þ o
 o þ




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##### Table of Contents



INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Condensed Consolidated Balance Sheets at June 30, 2005 (unaudited) and December 31, 2004
    
    F-3Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2005
    
    F-4Condensed Consolidated Statement of Shareholders Equity (Deficit) for the six months ended June 30, 2005 (unaudited)
    
    F-5Condensed Consolidated Statements of Cash Flows (unaudited) for the three and six months ended June 30, 2005
    
    F-6Notes to Condensed Consolidated Financial StatementsF-7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    1Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    6Item 4.
    
    Controls and Procedures
    
    7PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    8Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    8Item 3.
    
    Defaults Upon Senior Securities
    
    8Item 4.
    
    Submission of Matters to a Vote of Securities Holders
    
    8Item 5.
    
    Other Information
    
    8Item 6.
    
    Exhibits
    
    20SignaturesExhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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CLEARANT, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 June 30,
    
    December 31,2005
    
    2004(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,999
    
    
    $
    177Accounts receivable
    
    
    128
    
    
    
    127Prepaids and other assets
    
    
    691
    
    
    
    502Total current assets
    
    
    5,818
    
    
    
    806Property and equipment, net
    
    
    478
    
    
    
    595Identifiable intangibles, net
    
    
    1,458
    
    
    
    1,453Restricted cash  noncurrent
    
    
    192
    
    
    
    161Other assets
    
    
    52
    
    
    
    63Total assets
    
    $
    7,998
    
    
    $
    3,078Liabilities, Redeemable Preferred Stock
and Stockholders Equity (Deficit)Current liabilities:Accounts payable
    
    $
    1,512
    
    
    $
    1,847Accrued liabilities
    
    
    1,646
    
    
    
    3,061Deferred revenue
    
    
    89
    
    
    
    178Bridge loans, net
    
    
    97
    
    
    
    4,997Total current liabilities
    
    
    3,344
    
    
    
    10,083Deferred revenue  noncurrent
    
    
    76
    
    
    
    91Other liabilities
    
    
    41
    
    
    
    70Total liabilities
    
    
    3,461
    
    
    
    10,244Commitments and ContingenciesSeries A Redeemable Preferred stock:Series A redeemable
convertible preferred stock
(-0- shares authorized; -0-
and 6,454 shares issued and
outstanding at June 30, 2005
and December 31, 2004,
respectively)
    
    
    
    
    
    
    17,829Stockholders equity (deficit):Series B preferred stock (-0-
shares authorized; -0- and
6,630 shares issued and
outstanding at June 30, 2005
and December 31, 2004,
respectively)
    
    
    
    
    
    
    16,386Series C junior preferred
stock (-0- shares authorized;
-0- and 37 shares issued and
outstanding at June 30, 2005
and December 31, 2005,
respectively)
    
    
    
    
    
    
    86Common stock ($0.0001 par
value; 200,000 shares
authorized; 35,915 and 7,365
issued and outstanding at June
30, 2005 and December 31,
2004, respectively)
    
    
    4
    
    
    
    1Additional paid-in capital
    
    
    70,993
    
    
    
    17,398Accumulated deficit
    
    
    (66,408
    )
    
    
    (58,820
    )Other comprehensive loss
    
    
    (52
    )
    
    
    (46
    )Total stockholders equity (deficit)
    
    
    4,537
    
    
    
    (24,995
    )Total liabilities, redeemable
preferred stock and stockholders
equity (deficit)
    
    $
    7,998
    
    
    $
    3,078
 See accompanying notes to condensed consolidated financial statements.
 F-3




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CLEARANT, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Revenues:Licensing
    
    $
    48
    
    
    $
    30
    
    
    $
    92
    
    
    $
    48Contract research and milestones
    
    
    108
    
    
    
    
    
    
    
    151
    
    
    
    250Grants
    
    
    35
    
    
    
    80
    
    
    
    55
    
    
    
    122Total revenues
    
    
    191
    
    
    
    110
    
    
    
    298
    
    
    
    420Cost of sales
    
    
    5
    
    
    
    8
    
    
    
    9
    
    
    
    16Net revenues
    
    
    186
    
    
    
    102
    
    
    
    289
    
    
    
    404Operating expenses:Sales and marketing
    
    
    525
    
    
    
    1,259
    
    
    
    1,308
    
    
    
    2,252Research and development
    
    
    508
    
    
    
    1,312
    
    
    
    1,262
    
    
    
    2,714General and administrative
    
    
    1,028
    
    
    
    1,317
    
    
    
    2,237
    
    
    
    2,143Stock-based compensation
    
    
    452
    
    
    
    38
    
    
    
    452
    
    
    
    66Total operating expenses
    
    
    2,513
    
    
    
    3,926
    
    
    
    5,259
    
    
    
    7,175Loss from operations
    
    
    (2,327
    )
    
    
    (3,824
    )
    
    
    (4,970
    )
    
    
    (6,771
    )Other income (expense):Interest (expense) income, net
    
    
    
    
    
    
    (80
    )
    
    
    (1,786
    )
    
    
    (76
    )Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    1,290
    
    
    
    Gain on settlement of debt for stock
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    Net loss
    
    
    (2,327
    )
    
    
    (3,904
    )
    
    
    (5,427
    )
    
    
    (6,847
    )Add: Preferred stock dividend and financing
costs
    
    
    
    
    
    
    (401
    )
    
    
    (2,161
    )
    
    
    (802
    )Net loss attributable to common stock
    
    $
    (2,327
    )
    
    $
    (4,305
    )
    
    $
    (7,588
    )
    
    $
    (7,649
    )Net loss per share:Basic and diluted
    
    $
    (0.06
    )
    
    $
    (0.58
    )
    
    $
    (0.35
    )
    
    $
    (1.04
    )Number of shares used in per share calculation:Basic and diluted
    
    
    35,860
    
    
    
    7,365
    
    
    
    21,850
    
    
    
    7,365
 See accompanying notes to condensed consolidated financial statements.
 F-4




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CLEARANT, INC.
 
 CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(in thousands)
 Series B Preferred
    
    Series C Preferred
    
    Common Stock,
    
    Additional
    
    
    
    
    
    OtherStock
    
    Stock
    
    $0.0001 par value
    
    Paid-in
    
    Accumulated
    
    ComprehensiveShares
    
    Amount
    
    Shares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Deficit
    
    Loss
    
    TotalsBalance, December 31, 2004
    
    
    6,630
    
    
    $
    16,386
    
    
    
    37
    
    
    $
    86
    
    
    
    7,372
    
    
    $
    1
    
    
    $
    17,398
    
    
    $
    (58,820
    )
    
    $
    (46
    )
    
    $
    (24,995
    )Issuance of warrants to
January 2005 Bridge
Holders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93
    
    
    
    
    
    
    
    
    
    
    
    93Settlement of debt for
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    64Exchange of warrants for
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    158
    
    
    
    
    
    
    
    
    
    
    
    158Beneficial return to
preferred shareholders
from allocation of shares
from common to preferred
stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,100
    
    
    
    
    
    
    
    
    
    
    
    2,100Conversion of preferred
stock into common stock
    
    
    (6,630
    )
    
    
    (16,386
    )
    
    
    (37
    )
    
    
    (86
    )
    
    
    11,542
    
    
    
    1
    
    
    
    30,566
    
    
    
    
    
    
    
    
    
    
    
    14,095Exchange of bridge loan
warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,349
    )
    
    
    
    
    
    
    
    
    
    
    (1,349
    )Conversion of Series A
Preferred dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,141
    
    
    
    
    
    
    
    3,794
    
    
    
    
    
    
    
    
    
    
    
    3,794Conversion of Series C
Preferred dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Conversion of 2004 bridge
loans into common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,834
    
    
    
    1
    
    
    
    6,724
    
    
    
    
    
    
    
    
    
    
    
    6,725Bliss Essential, Corp.
shares issued in
connection with the
merger transaction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,136
    
    
    
    1
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    17Issuance of common stock
in conjunction with
Private Placement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,910
    
    
    
    
    
    
    
    8,413
    
    
    
    
    
    
    
    
    
    
    
    8,413Conversion of Publico
Bridge Loans into common
stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    783
    
    
    
    
    
    
    
    2,373
    
    
    
    
    
    
    
    
    
    
    
    2,373Exercise of common stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    17Issuance of common stock
to consultants for
services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    
    
    
    
    235
    
    
    
    
    
    
    
    
    
    
    
    235Compensation expenses
incurred in connection
with issuance of options
and warrants to
non-employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    386
    
    
    
    
    
    
    
    
    
    
    
    386Comprehensive loss:Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,427
    )
    
    
    
    
    
    
    (5,427
    )Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )Total Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,427
    )
    
    
    (6
    )
    
    
    (5,433
    )Preferred stock dividend
and financing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,161
    )
    
    
    
    
    
    
    (2,161
    )Balance at June 30, 2005
(unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,915
    
    
    $
    4
    
    
    $
    70,993
    
    
    $
    (66,408
    )
    
    $
    (52
    )
    
    $
    4,537
 See accompanying notes to condensed consolidated financial statements.
 F-5




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CLEARANT, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Operating activitiesNet loss
    
    $
    (2,327
    )
    
    $
    (3,904
    )
    
    $
    (5,427
    )
    
    $
    (6,847
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    81
    
    
    
    105
    
    
    
    247
    
    
    
    197Stock-based compensation
    
    
    452
    
    
    
    38
    
    
    
    452
    
    
    
    66Non-cash interest expense associated with
convertible debt financings (Note 6)
    
    
    
    
    
    
    82
    
    
    
    1,786
    
    
    
    82Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (1,290
    )Gain on settlement of debt for stock
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    Warrant exchange for common stock
    
    
    
    
    
    
    
    
    
    
    158
    
    
    
    Changes in operating assets and liabilities:Receivables and prepaids
    
    
    (77
    )
    
    
    119
    
    
    
    21
    
    
    
    18Accounts payable
    
    
    (360
    )
    
    
    354
    
    
    
    (334
    )
    
    
    879Accrued liabilities
    
    
    (796
    )
    
    
    100
    
    
    
    (1,384
    )
    
    
    (175
    )Deferred revenue
    
    
    (83
    )
    
    
    124
    
    
    
    (104
    )
    
    
    123Other assets and liabilities
    
    
    (111
    )
    
    
    (25
    )
    
    
    (57
    )
    
    
    12Net cash used in operating activities
    
    
    (3,221
    )
    
    
    (3,007
    )
    
    
    (5,971
    )
    
    
    (5,645
    )Investing activitiesCost of identified intangibles
    
    
    (50
    )
    
    
    (98
    )
    
    
    (101
    )
    
    
    (328
    )Capital expenditures
    
    
    (35
    )
    
    
    (38
    )
    
    
    (35
    )
    
    
    (55
    )Cash received in 2005 merger activities
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    Proceeds from disposals of marketable securities:
    
    
    
    
    
    
    747
    
    
    
    
    
    
    
    3,088Net cash provided by (used in) investing activities
    
    
    (85
    )
    
    
    611
    
    
    
    (119
    )
    
    
    2,705Financing activitiesIssuance of common stock, net of costs
    
    
    
    
    
    
    
    
    
    
    8,455
    
    
    
    Issuance of convertible notes payable, net of costs
    
    
    
    
    
    
    2,580
    
    
    
    2,811
    
    
    
    2,580Exercise of common stock options
    
    
    17
    
    
    
    
    
    
    
    19
    
    
    
    Principal payments on bridge loans
    
    
    (366
    )
    
    
    
    
    
    
    (366
    )
    
    
    Principal payments on capital lease obligations
    
    
    
    
    
    
    (5
    )
    
    
    (1
    )
    
    
    (13
    )Net cash provided by (used in) financing activities
    
    
    (349
    )
    
    
    2,575
    
    
    
    10,918
    
    
    
    2,567Effect of translation adjustments on cash and cash
equivalents
    
    
    1
    
    
    
    (5
    )
    
    
    (6
    )
    
    
    (2
    )Change in cash and cash equivalents
    
    
    (3,654
    )
    
    
    174
    
    
    
    4,822
    
    
    
    (375
    )Cash and cash equivalents, beginning of period
    
    
    8,653
    
    
    
    625
    
    
    
    177
    
    
    
    1,174Cash and cash equivalents, end of period
    
    $
    4,999
    
    
    $
    799
    
    
    $
    4,999
    
    
    $
    799
 See accompanying notes to condensed consolidated financial statements.
 F-6




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CLEARANT, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 NOTE 1
 BASIS OF PRESENTATION
     NOTE 2
 NEW ACCOUNTING PRONOUNCEMENTS
 Share-Based Payment Accounting for Stock Issued to Employees
 Exchanges of Nonmonetary Assets Accounting for Nonmonetary Transactions
 F-7




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CLEARANT, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 NOTE 2
 NEW ACCOUNTING PRONOUNCEMENTS (Continued)
  Accounting for Conditional
Asset Retirement Obligations conditional asset
retirement obligation Accounting for Asset Retirement
Obligations
 Accounting Changes
and Error Corrections Accounting Changes Reporting Accounting Changes in
Interim Financial
Statements
 NOTE 3
 NET LOSS PER SHARE
 Earnings Per Share .
  Six Months Ended June 30,2005
    
    2004Convertible preferred stock (and related
accrued dividends)
and convertible bridge loans
    
    
    
    
    
    
    14,002,000Stock Options
    
    
    1,804,000
    
    
    
    4,999,000Warrants
    
    
    3,417,000
    
    
    
    4,119,000
 F-8




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CLEARANT, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
  Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004Basic and diluted net loss per share:Numerator:Net loss attributable to common
stock
    
    $
    (2,327
    )
    
    $
    (4,305
    )
    
    $
    (7,588
    )
    
    $
    (7,649
    )Denominator:Weighted average common stock
shares outstanding
    
    
    35,860
    
    
    
    7,365
    
    
    
    21,850
    
    
    
    7,365Net loss per share, basic and diluted
    
    $
    (0.06
    )
    
    $
    (0.58
    )
    
    $
    (0.35
    )
    
    $
    (1.04
    )
 NOTE 4  STOCK OPTIONS AND STOCK-BASED COMPENSATION
     Risk-free interest rate
    
    
    3.0%-5.5
    %Expected life in years
    
    
    5Dividend yield
    
    
    0
    %Expected volatility
    
    
    70%-75
    %
 F-9




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CLEARANT, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 NOTE 4  STOCK OPTIONS AND STOCK-BASED COMPENSATION (Continued)
 :
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net loss attributable to common stock, as reported
    
    $
    (2,327
    )
    
    $
    (4,305
    )
    
    $
    (7,588
    )
    
    $
    (7,649
    )Add: stock-based compensation expense included in
reported net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deduct: stock-based compensation expense
determined under the fair value method for all
awards
    
    
    (34
    )
    
    
    (395
    )
    
    
    (166
    )
    
    
    (1,130
    )Net loss
attributable to common stock  pro forma
    
    $
    (2,361
    )
    
    $
    (4,700
    )
    
    $
    (7,754
    )
    
    $
    (8,779
    )Net loss per share:As reported, basic and diluted
    
    $
    (0.06
    )
    
    $
    (0.58
    )
    
    $
    (0.35
    )
    
    $
    (1.04
    )Pro forma, basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.64
    )
    
    $
    (0.35
    )
    
    $
    (1.19
    )
    NOTE 5
 REVERSE MERGER TRANSACTION
 
 F-10




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CLEARANT, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 NOTE 5  REVERSE MERGER TRANSACTION (Continued)
  NOTE 6  COMMON STOCK
 Common Stock Transactions and Non-cash Financing Activities
     Lock-up Period
  NOTE 7  SUBSEQUENT EVENTS
 2005 Stock Award Plan
  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.
 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, 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 5 below.
 Overview
 Clearant
Process ®
 
    
    Tissue allograft implants
    
    Recombinant products
    
    Plasma therapeutics
    
    Blood and blood-related products.
 The Merger
  Our Business
 Clearant
Process ® Clearant
Process ®
 
    
    Inactivate a broad range of known pathogens irrespective of size, origin or structure
    
    Achieve sterility, in some cases with margins of safety greater than four to
thirteen logs of pathogen reduction
    
    Be used in both intermediate and final stages of production
    
    Be applied to a product after it has been sealed into its final package.
 Clearant Process ® Clearant
Process ® Clearant Process ®
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Clearant Process ® Clearant Process ®
 Clearant Process ® Clearant Process ®
 Clearant Process ® Clearant
Process ® Clearant Process ® Clearant Process ®
 Results of Operations
 Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004
 Revenues
 Clearant Process ®
 Marketing, General and Administrative Expenses
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Research and Development Expenses
 Clearant Process ® Clearant Process ®
 Stock-based Compensation
  Net Interest Expense
  Preferred Stock Dividend and Financing Costs
  Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004
 Revenues
 Clearant Process ®
 Marketing, General and Administrative Expenses
  Research and Development Expenses
 Clearant Process ® Clearant Process ®
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##### Table of Contents



Stock-based Compensation
  Net Interest Expense
  Preferred Stock Dividend and Financing Costs
  Liquidity and Capital Resources
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Contractual Obligations and Commercial Commitments
  Less than
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    1 year
    
    1 - 3 years
    
    3 - 5 years
    
    5 yearsOperating lease obligations
    
    $
    770
    
    
    $
    672
    
    
    $
    98
    
    
    
    
    
    
    
    Other obligations
    
    $
    255
    
    
    $
    255
    
    
    
    
    
    
    
    
    
    
    
    $
    1,025
    
    
    $
    927
    
    
    $
    98
    
    
    
    
    
    
    
    
 Off-Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
   Revenue Recognition and Deferred Revenue
 Revenue Recognition
 ® ® ®
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Identifiable Intangibles
  Recent Accounting Pronouncements
 Share-Based Payment
  Accounting for Conditional
Asset Retirement Obligations conditional asset
retirement obligation Accounting for Asset Retirement
Obligations
 Accounting Changes
and Error Corrections Accounting Changes Reporting Accounting Changes in
Interim Financial
Statements
 
 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
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ITEM 4. Controls and Procedures
  Internal Control over Financial Reporting
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PART II  OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 ITEM 3. Defaults Upon Senior Securities
  
 ITEM 4. Submission of Matters to a Vote of Securities Holders
  For
    
    Withheld(1) Election of Directors:John S. Wehrle
    
    
    22,895,415
    
    
    
    Alain Delongchamp
    
    
    22,895,415
    
    
    
    Nolan H. Sigal
    
    
    22,895,415
    
    
    
    Herve de Kergrohen, M.D.
    
    
    22,895,415
    
    
    
    Richard A. Anderson
    
    
    22,895,415
    
    
    
    Alexander Man-Kit Ngan
    
    
    22,895,415
    
    
    
    (2) Adoption of 2005 Stock Award Plan:For
    
    
    
    
    
    
    22,683,859Against
    
    
    
    
    
    
    Abstain
    
    
    
    
    
    
    (3) Reincorporation to Delaware:For
    
    
    
    
    
    
    22,683,859Against
    
    
    
    
    
    
    Abstain
    
    
    
    
    
    
    
 
 ITEM 5. Other Information
 Risk Factors
  Risks Related to Our Business
 Our limited operating history may make it difficult to evaluate our business to date and our
future viability.
 Clearant
Process ® Clearant Process ®
 We have a history of and expects to continue to generate substantial losses, may not become
profitable and will need to expand our licensing of the Clearant Process ® to
generate significant revenues.
  Clearant
Process ® Clearant
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Process ®
 Clearant Process ®
 The Clearant Process ® is at an early stage of commercial development
and, if we are not able to clinically validate claims of our effectiveness in our target markets
and obtain widespread commercial acceptance of the Clearant Process ® in our
target markets, we may not be able to grow or attain profitability.
  
    
    Successfully demonstrate the efficacy of the Clearant Process® in sterilizing biological
products, including devitalized human tissue, serum and recombinant proteins;
    
    Enter into additional license agreements with manufacturers and providers of biological products;
    
    Develop and protect our intellectual property rights;
    
    Complete product-specific development of the Clearant Process® for our target markets; and
    
    Obtain (or have the users of the Clearant Process® obtain) required product regulatory approvals.
 Clearant
Process ®
 Achieving market acceptance for the Clearant Process ® will depend on our
ability to demonstrate the efficacy of the Clearant Process ® in our target
markets, as well as how the FDA applies the Good Tissue Practice guidelines issued on November 18,
2004.
 Clearant Process ® Clearant
Process ® Clearant Process ® Clearant Process ®
 Clearant Process ® Clearant Process ®
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Our success will depend on our ability to retain our highly skilled scientific and managerial
personnel and to attract additional personnel.
  Clearant Process ®
  We need to develop our financial and reporting processes, procedures and controls to support
our anticipated growth.
   The Clearant Process ® has been commercialized only in the devitalized
human tissue market and our future success depends on its ability to successfully commercialize the
Clearant Process ® for use in our other, larger target markets.
 Clearant Process ® Clearant
Process ® Clearant
Process ® Clearant Process ®
 Clearant Process®
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Clearant
Process ® Clearant
Process ®
 Clearant Process ® Clearant Process ® Clearant Process ®
 The success of our business will depend on our ability to develop new uses of the Clearant
Process ® that can be applied cost-effectively on a commercial scale, which
may in some cases require potentially costly and time-consuming modification of the Clearant
Process ® .
 Clearant Process ® Clearant Process ® Clearant Process ® Clearant Process ® Clearant
Process ®
  Clearant Process ®
 Clearant
Process ® Clearant
Process® Clearant Process ® Clearant Process ®
 The success of our business will depend on our ability to develop and protect our intellectual
property rights, which could be expensive, as well as our ability to conduct our business without
infringing the intellectual property rights of others.
 Clearant Process ® Clearant Process ®
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Clearant
Process ®
  Clearant Process ® Clearant
Process ®
   We may be subject to products liability with respect to products which are treated with the
Clearant Process ® and which cause harm to others, including related and
costly litigation or other proceedings, and our products liability insurance may not provide
adequate coverage and may not be available in the future.
 Clearant Process ® Clearant Process ®
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Clearant Process ® Clearant Process ® Clearant Process ®
 Clearant
Process ®
 We face environmental and other liabilities related to certain hazardous materials used in our
operations.
  If our sterilization technology is not accepted by manufacturers of biological products in our
target markets and the health care community at large, our business will suffer and we will not be
able to successfully implement our business plan.
 Clearant Process ® Clearant
Process ® Clearant
Process ® Clearant
Process ® Clearant Process ® Clearant Process ® Clearant Process ® Clearant Process ® Clearant Process ® Clearant
Process ®
 Clearant Process ®
 We face competition from a number of companies, which may have greater resources or better
technologies than we do, and rapid changes in technology in the sterilization industry could result
in the failure of the Clearant Process ® to be accepted in the marketplace or
to capture market share.
 Clearant Process ® Clearant Process ®
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Clearant Process ® Clearant Process ® Clearant Process ® Clearant Process ®
 TM Clearant
Process ® Clearant Process ®
 TM Clearant Process ®
 Clearant
Process ® Clearant Process ®
 Risks Related To Our Industry
 Our ability to commercialize our technology in our target markets will depend on the rates
charged to our customers by operators of commercial gamma irradiation facilities at which the
Clearant Process ® will be applied.
 Clearant Process ®
 Products which could utilize the Clearant Process ® are in general
subject to extensive regulation by domestic and foreign government agencies, which could result in
significant delays in approval, or rejection, of the Clearant Process ® for
use in connection with a particular product or significant additional costs to the manufacturers of
such products, which would hinder the widespread adoption of the Clearant Process ® .
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Clearant
Process ® Clearant
Process ® Clearant Process ® Clearant Process ®
 Clearant Process ®
 Clearant Process ® Clearant Process ® Clearant Process ® Clearant
Process ®
 Clearant Process ® Clearant
Process ®
 Clearant Process ® Clearant Process ® Clearant Process ® Clearant Process ® Clearant
Process ® Clearant Process ®
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Clearant Process ® Clearant Process ® Clearant Process ® Clearant
Process ® Clearant Process ®
 Clearant Process ®
 The success of our business depends on the results of clinical trials performed by third
parties incorporating the Clearant Process ® into their products and no such
clinical trials have been completed to date.
 Clearant Process ® Clearant Process ® Clearant
Process ®
  Clearant
Process ®
 Clearant Process ®
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Clearant Process ®
 Because our business model is based on the receipt of royalties from users of the Clearant
Process ® , our success is ultimately dependent on the ability of our customers
to successfully market their products which have been treated by the Clearant
Process ® , which is dependent on events and developments in their businesses
which are beyond our control.
 Clearant
Process ® Clearant Process ® Clearant Process ® Clearant Process ® Clearant
Process ® Clearant
Process ®
 Clearant Process ® Clearant
Process ®
 Clearant Process ® Clearant Process ® Clearant Process ®
 Clearant Process ®
 Potential users of the Clearant Process ® may depend on third party
payors for reimbursement for the use of their products by the end consumer, which may not be
willing to reimburse the users at levels sufficient to permit us to generate significant royalty
payments.
 Clearant Process ® Clearant Process ® Clearant Process ®
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Because the markets for our technology are dominated by a small number of participants, if we
fail to properly market, price or license the Clearant Process ® to even a
small number of the large potential customers in our markets, our business could be substantially
harmed.
   Guidelines and recommendations published by various organizations could reduce the use of
products made with the Clearant Process ® .
 Clearant Process ® Clearant ®
 Risks Related to Our Common Stock
 Our stock price may be subject to substantial volatility, and you may lose all or a
substantial part of your investment.
  We have never paid cash dividends and do not intend to do so .
  We may incur increased costs as a result of recently enacted and proposed changes in laws and
regulations relating to corporate governance matters .
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Our corporate compliance program cannot guarantee that we are in compliance with all
potentially applicable federal and state regulations.
 Clearant Process ® Clearant Process ®
 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,
    
    competition among addiction treatment centers,
    
    anticipated trends and conditions in the industry in which we operate, including regulatory changes,
    
    development of new treatment modalities,
    
    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.
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ITEM 6. Exhibits
      
 SIGNATURES
  CLEARANT, INC.Date: August 9, 2005
    By:
    /s/ Alain DelongchampAlain DelongchampChief Executive OfficerDate: August 9, 2005
    By:
    /s/ Donald J. LewisDonald J. LewisChief Financial Officer 20