##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-QSB
 QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For The Quarterly Period Ended June 30, 2007
 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
 o þ
  o þ




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##### 



INDEX
 PagePART I   FINANCIAL INFORMATION
    
    
    F-3Item 1.   Financial Statements (unaudited)
    
    
    F-3Balance Sheets
    
    
    F-3Statements of Operations
    
    
    F-4Statements of Cash Flow
    
    
    F-5Notes to Financial Statements (Unaudited)
    
    
    F-6Item 2.   Managements Discussion and Analysis
    
    
    14Item 3.   Controls and Procedures
    
    
    22PART II   OTHER INFORMATION
    
    
    23Item 1.   Legal Proceedings
    
    
    23Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 6.   Exhibits
    
    
    24Exhibit 10.1Exhibit 10.2Exhibit 10.3Exhibit 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,
    
    
    December 31,2007
    
    
    2006(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    1,675
    
    
    $
    563Accounts receivable, net of
allowances of $20 at June 30,
2007 and December 31, 2006,
respectively
    
    
    843
    
    
    
    274Inventory and inventory
related prepayments, net of
reserve of $799 and $811 at
June 30, 2007 and December
31, 2006, respectively
    
    
    455
    
    
    
    385Prepaids and other
    
    
    129
    
    
    
    137Total current assets
    
    
    3,102
    
    
    
    1,359Property and equipment, net of $249 and
$1,076 of accumulated depreciation at
June 30, 2007 and December 31, 2006,
respectively
    
    
    148
    
    
    
    290Identifiable intangibles, net of $1,113
and $871 of accumulated amortization at
June 30, 2007 and December 31, 2006,
respectively
    
    
    1,067
    
    
    
    1,279Deposits and other assets
    
    
    71
    
    
    
    93Total assets
    
    $
    4,388
    
    
    $
    3,021Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    1,748
    
    
    $
    1,653Accrued liabilities
    
    
    1,197
    
    
    
    607Deferred revenue
    
    
    2
    
    
    
    67Bridge loans, net
    
    
    312
    
    
    
    106Total current liabilities
    
    
    3,259
    
    
    
    2,433Deferred revenue  noncurrent
    
    
    4
    
    
    
    4Total liabilities
    
    
    3,263
    
    
    
    2,437Stockholders equity:Common stock ($0.0001 par value;
200,000 shares authorized; 134,642
and 40,178 issued and outstanding
at June 30, 2007 and December 31,
2006, respectively)
    
    
    13
    
    
    
    4Additional paid-in capital
    
    
    85,296
    
    
    
    82,949Accumulated deficit
    
    
    (84,184
    )
    
    
    (82,369
    )Total stockholders equity
    
    
    1,125
    
    
    
    584Total liabilities and stockholders equity
    
    $
    4,388
    
    
    $
    3,021
 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
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:Licensing
    
    $
    21
    
    
    $
    89
    
    
    $
    61
    
    
    $
    168Direct distribution
    
    
    125
    
    
    
    9
    
    
    
    304
    
    
    
    9Fee for service
    
    
    19
    
    
    
    
    
    
    
    69
    
    
    
    30Contract research and milestones
    
    
    3
    
    
    
    1
    
    
    
    169
    
    
    
    62Grants
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    27Total revenues
    
    
    168
    
    
    
    106
    
    
    
    603
    
    
    
    296Cost of revenues
    
    
    92
    
    
    
    58
    
    
    
    240
    
    
    
    113Gross Profit
    
    
    76
    
    
    
    48
    
    
    
    363
    
    
    
    183Operating expenses:Sales, general and administrative
    
    
    901
    
    
    
    2,312
    
    
    
    2,035
    
    
    
    4,789Research and development
    
    
    19
    
    
    
    143
    
    
    
    59
    
    
    
    468Total operating expenses
    
    
    920
    
    
    
    2,455
    
    
    
    2,094
    
    
    
    5,257Loss from operations
    
    
    (844
    )
    
    
    (2,407
    )
    
    
    (1,731
    )
    
    
    (5,074
    )Other income (expense):Interest income (expense), net
    
    
    (6
    )
    
    
    64
    
    
    
    (1
    )
    
    
    135Gain on extinguishment of debt
    
    
    3
    
    
    
    
    
    
    
    3
    
    
    
    117Loss on disposal of fixed assets
    
    
    (1
    )
    
    
    
    
    
    
    (86
    )
    
    
    (35
    )Loss before provision for (benefit from)
income taxes
    
    
    (848
    )
    
    
    (2,343
    )
    
    
    (1,814
    )
    
    
    (4,857
    )Provision for (benefit from) income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss attributable to common stock
    
    $
    (848
    )
    
    $
    (2,343
    )
    
    $
    (1,814
    )
    
    $
    (4,857
    )Net loss per share:Basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.06
    )
    
    $
    (0.02
    )
    
    $
    (0.12
    )Number of shares used in per share
calculation:Basic and diluted
    
    
    108,894
    
    
    
    39,849
    
    
    
    75,014
    
    
    
    39,807
 See accompanying notes to financial statements.
  F-4




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CLEARANT, INC.
 
 STATEMENTS OF CASH FLOWS
 (in thousands)
  Six Months EndedJune 30,2007
    
    
    2006Operating activitiesNet loss
    
    $
    (1,814
    )
    
    $
    (4,857
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    277
    
    
    
    348Loss on sale of fixed assets
    
    
    86
    
    
    
    Non-cash stock-based compensation
    
    
    160
    
    
    
    404Issuance of common stock to consultants for
services rendered
    
    
    93
    
    
    
    89Gain on extinguishment of debt and other, net
    
    
    
    
    
    
    (82
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (269
    )
    
    
    10Inventory and inventory related prepayments
    
    
    (70
    )
    
    
    (56
    )Prepaids
    
    
    175
    
    
    
    (757
    )Accounts payable
    
    
    204
    
    
    
    42Accrued liabilities
    
    
    296
    
    
    
    (639
    )Deferred revenue
    
    
    (66
    )
    
    
    (29
    )Other assets and liabilities
    
    
    (178
    )
    
    
    173Net cash used in operating activities
    
    
    (1,106
    )
    
    
    (5,354
    )Investing activitiesCost of identified intangibles
    
    
    (30
    )
    
    
    (140
    )Capital expenditures
    
    
    
    
    
    
    (72
    )Net proceeds from sale of fixed assets
    
    
    22
    
    
    
    Net cash used in investing activities
    
    
    (8
    )
    
    
    (212
    )Financing activitiesIssuance of common stock, net of costs of $316
    
    
    2,026
    
    
    
    Issuance of bridge loan
    
    
    200
    
    
    
    Exercise of common stock options
    
    
    
    
    
    
    26Principal payments on capital lease obligations
    
    
    
    
    
    
    (6
    )Net cash provided by financing activities
    
    
    2,226
    
    
    
    20Change in cash and cash equivalents
    
    
    1,112
    
    
    
    (5,546
    )Cash and cash equivalents, beginning of period
    
    
    563
    
    
    
    10,141Cash and cash equivalents, end of period
    
    $
    1,675
    
    
    $
    4,595Supplemental Disclosure of Non-cash Financing Activities:During the six months ended June 30, 2007 and 2006,
the Company paid accounts payable of $109 and $38
with 435,280 and 10,259 shares of common stock
    
    $
    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
   F-6




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




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Identifiable Intangibles
  Research and Development Costs
  Income Taxes
    Stock-Based Compensation
   Expected volatility
    
    
    102.3
    %Risk-free interest rate
    
    
    4.55
    %Expected life in years
    
    
    5-5.75Expected 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 Six Months Ended June 30,2007
    
    
    2006Stock Options
    
    
    3,976,000
    
    
    
    4,135,000Warrants
    
    
    2,195,000
    
    
    
    5,512,000
  F-9




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Basic and diluted net loss per share:Numerator:Net loss attributable to common
stock
    
    $
    (848
    )
    
    $
    (2,343
    )
    
    $
    (1,814
    )
    
    $
    (4,857
    )Denominator:Weighted average common stock
shares outstanding
    
    
    108,894
    
    
    
    39,849
    
    
    
    75,014
    
    
    
    39,807Net loss per share, basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.06
    )
    
    $
    (0.02
    )
    
    $
    (0.12
    )
 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
    
    
    1,806,000
    
    
    $
    .025
    
    
    
    
    
    
    $
    
    
    
    
    1,806,000
    
    
    $
    .025Exercised
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Change in Status
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Canceled
    
    
    (1,830,000
    )
    
    $
    0.025-$4.51
    
    
    
    
    
    
    $
    
    
    
    
    (1,830,000
    )
    
    $
    0.025-$4.51Outstanding at
June 30, 2007
    
    
    3,381,000
    
    
    $
    0.025-$7.94
    
    
    
    595,000
    
    
    $
    0.35-$7.22
    
    
    
    3,976,000
    
    
    $
    0.025-$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 June 30, 2007:Employees  Outstanding
    
    
    3,381,000
    
    
    $
    .92
    
    
    
    8.43
    
    
    $
    97Employees  Expected to Vest
    
    
    3,298,000
    
    
    $
    .90
    
    
    
    8.43
    
    
    $
    96Employees  Exercisable
    
    
    2,652,000
    
    
    $
    .77
    
    
    
    8.33
    
    
    $
    90Non-Employees  Options Outstanding
    
    
    595,000
    
    
    $
    2.19
    
    
    
    4
    
    
    $
    Non-Employees  Expected to Vest
    
    
    595,000
    
    
    $
    2.19
    
    
    
    4
    
    
    $
    Non-Employees  Options Exercisable
    
    
    576,000
    
    
    $
    2.25
    
    
    
    3.84
    
    
    $
    
  F-11




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NOTE 9  COMMITMENTS AND CONTINGENCIES
  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
   
    
    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.
    14




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Results of Operations
 Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006
 Revenues
      Sales, General and Administrative Expenses
     15




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Research and Development Expenses
   Other Income/Expense
  Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006
 Revenues
       16




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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
    17




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Research and Development
  Direct Distribution Strategy
    Limited Cash Availability
   18




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Doubt About Our Ability To Continue As Going Concern
     Contractual Obligations and Commercial Commitments
  Less than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
1 Year
    
    
    1 -3 Years
    
    
    3 - 5 Years
    
    
    5 YearsLease Obligations
    
    $
    139
    
    
    $
    91
    
    
    $
    48
    
    
    
    
    
    
    
    Bridge Loan
    
    $
    312
    
    
    $
    312
    
    
    
    
    
    
    
    
    
    
    
    Purchase Obligations (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    451
    
    
    $
    403
    
    
    $
    48
    
    
    
    
    
    
    
    
 (1)
    
    Excludes renewable two-year spinal supply and distribution agreement which was terminated in
February 2007.
 Form 10-KSB.
  19




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Off-Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
   Revenue Recognition and Deferred Revenue
  Cost of Revenues
  Inventory and Inventory Related Prepayments
   20




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Identifiable Intangibles
  Research and Development Costs
  Income Taxes
  Stock-Based Compensation
   Fair Value of Financial Instruments
  Legal Proceedings
    21




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th
  Recent Accounting Pronouncements
    
 ITEM 3. Controls and Procedures
   22




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PART II  OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
    th
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
   23




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ITEM 4. Submission of Matters to a Vote of Security Holders
  Action
    
    For
    
    
    WithheldElection of DirectorsJon Garfield
    
    
    96,360,919
    
    
    
    1,849,134Rowland W. Day
    
    
    96,359,814
    
    
    
    1,850,239Michael Elek
    
    
    96,324,819
    
    
    
    1,885,234
 BrokerAction
    
    For
    
    
    Against
    
    
    Abstain
    
    
    Non-VoteApproval of 1:14 Reverse Stock Split
    
    
    94,004,371
    
    
    
    4,121,879
    
    
    
    83,803
    
    
    
    06,000,000 Increase in Shares under the 2005
Stock Award Plan
    
    
    79,294,594
    
    
    
    2,590,783
    
    
    
    21,693
    
    
    
    16,302,984
 
 ITEM 6. Exhibits
       24




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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
   
 
 
 
 
 
    25




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SIGNATURES
  CLEARANT, INC.Date: August 14, 2007
    
    /s/ Jon GarfieldBy: Jon Garfield, Chief Executive Officer andChief Financial Officer  26




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EXHIBIT INDEX
 Exhibit No.
    
    DescriptionExhibit 10.1
    
    Form of Stock Purchase Agreement for the August private
placement and August 3, 2007 sale of shares (incorporated by
reference from the Companys Current Report on Form 8-K filed
with the SEC on August 8, 2007).Exhibit 10.2
    
    Form of Registration Rights Agreement for the August private
placement and August 3, 2007 sale of shares (incorporated by
reference from the Companys Current Report on Form 8-K filed
with the SEC on August 8, 2007).Exhibit 10.3
    
    Conversion Agreement between the Company and John McGinnis
(incorporated by reference from the Companys Current Report
on Form 8-K filed with the SEC on August 8, 2007).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.
  27