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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For The Quarterly Period Ended March 31, 2007
 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
  o þ




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INDEX
 PagePART I
    
    
    
    
    
    FINANCIAL INFORMATION
    
    
    F-3Item 1.
    
    Financial Statements (Unaudited)
    
    
    F-3Balance Sheet
    
    
    F-3Statements of Operations
    
    
    F-4Statements of Cash Flow
    
    
    F-5Notes to Financial Statements
    
    
    F-6Item 2.
    
    Managements Discussion and Analysis
    
    
    14Item 3.
    
    Controls and Procedures
    
    
    21PART II
    
    
    
    
    
    OTHER INFORMATION
    
    
    21Item 1.
    
    Legal Proceedings
    
    
    21Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 5.
    

Other
Information
    
    
    22Item 6.
    
    Exhibits
    
    
    22Exhibit 31.1Exhibit 32.1




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PART I FINANCIAL INFORMATION 
 Item 1. Financial Statements (Unaudited) CLEARANT, INC.
 
 BALANCE SHEET
 (in thousands, except par value)
 March 31,2007(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    251Accounts receivable, net of allowance of $20
    
    
    372Inventory and inventory related prepayments, net of reserve of $799
    
    
    464Prepaids and other assets
    
    
    270Total current assets
    
    
    1,357Property and equipment, net of $279 of accumulated depreciation
    
    
    172Identifiable intangibles, net of $1,043 of accumulated amortization
    
    
    1,129Deposits and other assets
    
    
    63Total assets
    
    $
    2,721Liabilities and Stockholders DeficitCurrent liabilities:Accounts payable
    
    $
    1,814Accrued liabilities
    
    
    739Deferred revenue
    
    
    4Bridge loans, net
    
    
    306Total current liabilities
    
    
    2,863Deferred revenue  noncurrent
    
    
    4Total liabilities
    
    
    2,867Stockholders deficit:Common stock ($0.0001 par value; 200,000 shares authorized; 40,922
issued and outstanding at March 31, 2007)
    
    
    4Additional paid-in capital
    
    
    83,186Accumulated deficit
    
    
    (83,336
    )Total stockholders deficit
    
    
    (146
    )Total liabilities and stockholders deficit
    
    $
    2,721
 See accompanying notes to financial statements.
  F-3




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CLEARANT, INC.
 
 STATEMENTS OF OPERATIONS
 (in thousands, except for per share data)
  Three Months Ended March 31,2007
    
    
    2006Revenues:Licensing
    
    $
    40
    
    
    $
    79Direct distribution
    
    
    179
    
    
    
    Fee for service
    
    
    50
    
    
    
    30Contract research and milestones
    
    
    166
    
    
    
    61Grants
    
    
    
    
    
    
    20Total revenues
    
    
    435
    
    
    
    190Cost of sales
    
    
    148
    
    
    
    54Gross Profit
    
    
    287
    
    
    
    136Operating expenses:Sales, general and administrative
    
    
    1,134
    
    
    
    2,475Research and development
    
    
    40
    
    
    
    327Total operating expenses
    
    
    1,174
    
    
    
    2,802Loss from operations
    
    
    (887
    )
    
    
    (2,666
    )Other income (expense):Interest income, net
    
    
    5
    
    
    
    71Gain on extinguishment of debt
    
    
    
    
    
    
    117Other loss
    
    
    
    
    
    
    (35
    )Loss on disposal of fixed assets
    
    
    (85
    )
    
    
    Loss before provision (benefit) for income taxes
    
    
    (967
    )
    
    
    (2,513
    )Provision (benefit) for income taxes
    
    
    
    
    
    
    Net loss attributable to common stockholders
    
    $
    (967
    )
    
    $
    (2,513
    )Net loss per share:Basic and diluted
    
    $
    (0.02
    )
    
    $
    (0.06
    )Weighted average shares used in per share calculation:Basic and diluted
    
    
    40,758
    
    
    
    39,764
 See accompanying notes to financial statements.
  F-4




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CLEARANT, INC.
 
 STATEMENTS OF CASH FLOWS
 (in thousands)
  Three Months EndedMarch 31,2007
    
    
    2006Operating activitiesNet loss
    
    $
    (967
    )
    
    $
    (2,513
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    189
    
    
    
    190Stock-based compensation
    
    
    67
    
    
    
    208Issuance of common stock to consultants for services rendered
    
    
    93
    
    
    
    51Loss on sale of fixed assets
    
    
    85
    
    
    
    Gain on extinguishment of debt and other
    
    
    
    
    
    
    (82
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (98
    )
    
    
    26Inventory
    
    
    (186
    )
    
    
    (21
    )Inventory related prepayments
    
    
    107
    
    
    
    Prepaids
    
    
    34
    
    
    
    (176
    )Accounts payable
    
    
    270
    
    
    
    (35
    )Accrued liabilities
    
    
    132
    
    
    
    (760
    )Deferred revenue
    
    
    (63
    )
    
    
    (21
    )Other assets and liabilities
    
    
    (170
    )
    
    
    (10
    )Net cash used in operating activities
    
    
    (507
    )
    
    
    (3,143
    )Investing activitiesCost of identified intangibles
    
    
    (21
    )
    
    
    (68
    )Capital expenditures
    
    
    
    
    
    
    (53
    )Net proceeds from sale of fixed assets
    
    
    16
    
    
    
    Net cash used in investing activities
    
    
    (5
    )
    
    
    (121
    )Financing activitiesIssuance of bridge loan
    
    
    200
    
    
    
    Principal payments on capital lease obligations
    
    
    
    
    
    
    2Net cash provided by financing activities
    
    
    200
    
    
    
    2Change in cash and cash equivalents
    
    
    (312
    )
    
    
    (3,262
    )Cash and cash equivalents, beginning of period
    
    
    563
    
    
    
    10,141Cash and cash equivalents, end of period
    
    $
    251
    
    
    $
    6,879Supplemental Disclosure of Non-cash Financing Activities:During the three months ended March 31, 2007 and 2006, the Company paid
accounts payable of $109 and $38 with 435,280 and 10,259 shares of common
stock, respectively
    
    $
    109
    
    
    $
    38
 See accompanying notes to financial statements.
  F-5




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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
 Clearant Process® Clearant Process® Clearant Process®
  F-6




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Grants
 Clearant
Process ®
 Cost of Sales
 Clearant Process®
 Extinguishment of Debt
  Use of Estimates
  Cash Equivalents and Concentration of Credit Risk
  Inventory and Inventory Related Prepayments
 Clearant
Process®
  Property and Equipment
   F-7




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Identifiable Intangibles
  Research and Development Costs
  Income Taxes
    Stock-Based Compensation
   Expected volatility
    
    
    79.6
    %Risk-free interest rate
    
    
    4.46
    %Expected life in years
    
    
    6.25Expected dividend yield
    
    
    0
    %
   F-8




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Fair Value of Financial Instruments
  Recent Accounting Pronouncements
    NOTE 4  NET LOSS PER SHARE
   For the Three Months Ended March 31,2007
    
    
    2006Stock Options
    
    
    2,358,000
    
    
    
    4,997,000Warrants
    
    
    2,195,000
    
    
    
    3,317,000
  F-9




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For the Three Months Ended March 31,2007
    
    
    2006Basic and diluted net loss per share:Numerator:Net loss attributable to common stock
    
    $
    (967
    )
    
    $
    (2,513
    )Denominator:Weighted average common stock shares outstanding
    
    
    40,758
    
    
    
    39,764Net loss per share, basic and diluted
    
    $
    (0.02
    )
    
    $
    (0.06
    )
 NOTE 5  INCOME TAXES
    NOTE 6  DEBT
  NOTE 7  COMMON STOCK
 Common Stock Transactions and Non-cash Financing Activities
    F-10




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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, 2006
    
    
    3,405,000
    
    
    $
    0.44-$7.94
    
    
    
    595,000
    
    
    $
    0.35-$7.22
    
    
    
    4,000,000
    
    
    $
    0.35-$7.94Granted
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Exercised
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Change in Status
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Canceled
    
    
    (1,642,000
    )
    
    $
    0.60-$4.51
    
    
    
    
    
    
    $
    
    
    
    
    (1,642,000
    )
    
    $
    0.60-$4.51Outstanding at
March 31, 2007
    
    
    1,763,000
    
    
    $
    0.44-$7.94
    
    
    
    595,000
    
    
    $
    0.35-$7.22
    
    
    
    2,358,000
    
    
    $
    0.35-$7.94
  WeightedWeighted
    
    
    AverageNumber
    
    
    Average
    
    
    RemainingOf
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Life (Years)
    
    
    ValueAs of December 31, 2006:Employees  Outstanding
    
    
    3,405,000
    
    
    $
    1.89
    
    
    
    8.01
    
    
    $
    Employees  Expected to Vest
    
    
    2,126,000
    
    
    $
    2.00
    
    
    
    7.47
    
    
    $
    Employees  Exercisable
    
    
    1,449,000
    
    
    $
    2.40
    
    
    
    6.45
    
    
    $
    Non-Employees  Outstanding
    
    
    595,000
    
    
    $
    2.19
    
    
    
    4.49
    
    
    $
    Non-Employees  Expected to Vest
    
    
    595,000
    
    
    $
    2.19
    
    
    
    4.49
    
    
    $
    Non-Employees  Exercisable
    
    
    570,000
    
    
    $
    2.27
    
    
    
    4.28
    
    
    $
    As of March 31, 2007:Employees  Outstanding
    
    
    1,763,000
    
    
    $
    2.03
    
    
    
    7.32
    
    
    $
    Employees  Expected to Vest
    
    
    1,682,000
    
    
    $
    2.02
    
    
    
    7.31
    
    
    $
    Employees  Exercisable
    
    
    956,000
    
    
    $
    2.30
    
    
    
    6.01
    
    
    $
    Non-Employees  Options Outstanding
    
    
    595,000
    
    
    $
    2.19
    
    
    
    4.25
    
    
    $
    Non-Employees  Expected to Vest
    
    
    595,000
    
    
    $
    2.19
    
    
    
    4.25
    
    
    $
    Non-Employees  Options Exercisable
    
    
    570,000
    
    
    $
    2.27
    
    
    
    4.03
    
    
    $
    
   F-11




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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
   NOTE 9  COMMITMENTS AND CONTINGENCIES
 Clearant
Process ®
 ®
 NOTE 10  SUBSEQUENT EVENTS
   F-12




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F-13




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ITEM 2. Managements Discussion and Analysis
 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 for the year
ended December 31, 2006, filed with the SEC on May 17, 2007 (the Form 10-KSB).
 Overview
 Clearant Process ®
 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 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.
 Clearant
Process® Clearant Process® Clearant Process® Clearant Process®
 Clearant Process ® Clearant Process ®
  14




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Results of Operations
 Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006
 Revenues
  Clearant Process ®
 Clearant
Process ® Clearant Process ®
  Clearant Process ®
 Sales, General and Administrative Expenses
 Clearant Process ®
   15




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Research and Development Expenses
 Clearant Process ®
  Other Income/Expense
  Preferred Stock Dividend and Financing Costs
  Liquidity and Capital Resources
    Research and Development
   16




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Direct Distribution Strategy
 ®
 Clearant Process® Clearant Process®
  Limited Cash Availability
 Clearant
Process ®
   Doubt About Our Ability To Continue As Going Concern
   17




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Contractual Obligations and Commercial Commitments
  Less than
    
    
    1 - 3
    
    
    3 - 5
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 YearsLease Obligations
    
    $
    102
    
    
    $
    63
    
    
    $
    38
    
    
    $
    1
    
    
    
    Bridge Loan
    
    $
    306
    
    
    $
    306
    
    
    
    
    
    
    
    
    
    
    
    Purchase Obligations(1)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    
    Total
    
    $
    408
    
    
    $
    369
    
    
    $
    38
    
    
    $
    1
    
    
    
    
 (1)
    
    Excludes renewable two-year spinal supply and distribution agreement which was
terminated in February 2007.
  Off-Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
   18




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Revenue Recognition and Deferred Revenue
 ® ® ®
 Cost of Sales
 Clearant Process®
 Inventory and Inventory Related Prepayments
 Clearant Process®
  Identifiable Intangibles
  Research and Development Costs
   19




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Income Taxes
  Stock-Based Compensation
   Fair Value of Financial Instruments
  Legal Proceedings
      20




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Recent Accounting Pronouncements
    
 ITEM 3. Controls and Procedures
  
 PART II  OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
    21




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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
     
 ITEM 5. Other Information
  
 ITEM 6. Exhibits
     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
  CLEARANT, INC.Date: June 20, 2007
    
    /s/ Jon GarfieldBy:
    
    Jon Garfield, Chief Executive Officer and
Chief Financial Officer
  24




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EXHIBIT INDEX
 ExhibitNo.
    
    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