##### 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 September 30, 2006
 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 o þ
 o þ




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##### 



INDEX
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed Balance Sheets at September 30, 2006 (unaudited) and December 31, 2005Condensed Statements of Operations (unaudited) for the three and nine months ended September 30, 2006 and 2005Condensed Statement of Stockholders Equity (unaudited) for the nine months ended September 30, 2006Condensed Statements of Cash Flows (unaudited) for the three and nine months ended September 30, 2006 and 2005Notes to Condensed Financial Statements (unaudited)Item 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures about Market RiskItem 4. Controls and ProceduresPART II. OTHER INFORMATIONItem 1.Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Securities HoldersItem 5. Other InformationItem 6. ExhibitsSignaturesEXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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CLEARANT, INC.
 
 CONDENSED BALANCE SHEETS
 (in thousands, except par value)
 September 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,004
    
    
    $
    10,141Accounts receivable, net
    
    
    281
    
    
    
    208Inventory
    
    
    250
    
    
    
    Inventory related prepayments
    
    
    761
    
    
    
    Prepaids and other assets
    
    
    417
    
    
    
    381Total current assets
    
    
    3,713
    
    
    
    10,730Property and equipment, net of $1,047 and
$1,148 of accumulated depreciation at
September 30, 2006 and December 31, 2005,
respectively
    
    
    277
    
    
    
    415Identifiable intangibles, net of $794 and
$545 of accumulated amortization at
September 30, 2006 and December 31, 2005,
respectively
    
    
    1,332
    
    
    
    1,403Deposits and other assets
    
    
    93
    
    
    
    244Total assets
    
    $
    5,415
    
    
    $
    12,792Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    1,315
    
    
    $
    1,292Accrued liabilities
    
    
    1,017
    
    
    
    1,664Deferred revenue
    
    
    26
    
    
    
    48Bridge loans, net
    
    
    106
    
    
    
    106Total current liabilities
    
    
    2,464
    
    
    
    3,110Deferred revenue  noncurrent
    
    
    60
    
    
    
    60Other liabilities
    
    
    
    
    
    
    10Total liabilities
    
    
    2,524
    
    
    
    3,180Stockholders equity:Common stock ($0.0001 par value;
200,000 shares authorized; 39,913 and
39,759 issued and outstanding at
September 30, 2006 and December 31,
2005, respectively)
    
    
    4
    
    
    
    4Additional paid-in capital
    
    
    82,929
    
    
    
    82,179Accumulated deficit
    
    
    (80,042
    )
    
    
    (72,571
    )Total stockholders equity
    
    
    2,891
    
    
    
    9,612Total liabilities and stockholders equity
    
    $
    5,415
    
    
    $
    12,792
 See accompanying notes to condensed financial statements.
 F-3




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CLEARANT, INC.
 
 CONDENSED STATEMENTS OF OPERATIONS
 (in thousands, except for per share data)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues:Licensing
    
    $
    82
    
    
    $
    62
    
    
    $
    250
    
    
    $
    154Direct distribution
    
    
    76
    
    
    
    
    
    
    
    85
    
    
    
    Fee for service
    
    
    31
    
    
    
    
    
    
    
    61
    
    
    
    Contract research and milestones
    
    
    2
    
    
    
    72
    
    
    
    65
    
    
    
    223Grants
    
    
    
    
    
    
    20
    
    
    
    27
    
    
    
    75Total revenues
    
    
    191
    
    
    
    154
    
    
    
    488
    
    
    
    452Cost of sales
    
    
    113
    
    
    
    4
    
    
    
    226
    
    
    
    13Gross Profit
    
    
    78
    
    
    
    150
    
    
    
    262
    
    
    
    439Operating expenses:Sales, general and administrative
    
    
    2,464
    
    
    
    2,345
    
    
    
    7,254
    
    
    
    6,342Research and development
    
    
    269
    
    
    
    465
    
    
    
    737
    
    
    
    1,727Total operating expenses
    
    
    2,733
    
    
    
    2,810
    
    
    
    7,991
    
    
    
    8,069Loss from operations
    
    
    (2,655
    )
    
    
    (2,660
    )
    
    
    (7,729
    )
    
    
    (7,630
    )Other income (expense):Interest income (expense), net
    
    
    41
    
    
    
    
    
    
    
    176
    
    
    
    (1,786
    )Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    117
    
    
    
    1,329Other loss
    
    
    
    
    
    
    
    
    
    
    (35
    )
    
    
    Loss before provision (benefit) for income taxes
    
    
    (2,614
    )
    
    
    (2,660
    )
    
    
    (7,471
    )
    
    
    (8,087
    )Provision (benefit) for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Loss
    
    
    (2,614
    )
    
    
    (2,660
    )
    
    
    (7,471
    )
    
    
    (8,087
    )Add: Preferred stock dividend and financing
costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,161
    )Net loss attributable to common stock
    
    $
    (2,614
    )
    
    $
    (2,660
    )
    
    $
    (7,471
    )
    
    $
    (10,248
    )Net loss per share:Basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.07
    )
    
    $
    (0.19
    )
    
    $
    (0.39
    )Number of shares used in per share calculation:Basic and diluted
    
    
    39,912
    
    
    
    35,923
    
    
    
    39,842
    
    
    
    26,599
 See accompanying notes to condensed financial statements.
 F-4




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CLEARANT, INC.
 
 CONDENSED STATEMENT OF STOCKHOLDERS EQUITY
 (in thousands)
  Common Stock, $0.0001 par value
    
    
    Additional Paid-in
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    EquityBalance, December 31, 2005
    
    
    39,759
    
    
    $
    4
    
    
    $
    82,179
    
    
    $
    (72,571
    )
    
    $
    9,612Exercise of common stock options
    
    
    44
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    26Issuance of common stock to
consultants for services
    
    
    110
    
    
    
    
    
    
    
    168
    
    
    
    
    
    
    
    168Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    556
    
    
    
    
    
    
    
    556Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,471
    )
    
    
    (7,471
    )Balance at September 30, 2006
    
    
    39,913
    
    
    $
    4
    
    
    $
    82,929
    
    
    $
    (80,042
    )
    
    $
    2,891
 See accompanying notes to condensed financial statements.
 F-5




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CLEARANT, INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS
 (in thousands)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Operating activitiesNet loss
    
    $
    (2,614
    )
    
    $
    (2,660
    )
    
    $
    (7,471
    )
    
    $
    (8,087
    )Adjustments to reconcile net loss to net cash used in operating
activities:Depreciation and amortization
    
    
    64
    
    
    
    133
    
    
    
    412
    
    
    
    380Non-cash stock-based compensation
    
    
    151
    
    
    
    
    
    
    
    556
    
    
    
    Issuance of common stock to consultants for services rendered
    
    
    32
    
    
    
    51
    
    
    
    121
    
    
    
    503Non-cash interest expense associated with convertible debt
financings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,786Gain on extinguishment of debt and other, net
    
    
    
    
    
    
    
    
    
    
    (82
    )
    
    
    (1,329
    )Warrant exchange for common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    158Changes in operating assets and liabilities:Accounts receivable
    
    
    (82
    )
    
    
    (107
    )
    
    
    (73
    )
    
    
    (108
    )Inventory
    
    
    (194
    )
    
    
    
    
    
    
    (250
    )
    
    
    Inventory related prepayments
    
    
    (67
    )
    
    
    
    
    
    
    (761
    )
    
    
    Prepaids
    
    
    (2
    )
    
    
    154
    
    
    
    (65
    )
    
    
    176Accounts payable
    
    
    147
    
    
    
    30
    
    
    
    188
    
    
    
    (304
    )Accrued liabilities
    
    
    11
    
    
    
    (539
    )
    
    
    (628
    )
    
    
    (1,923
    )Deferred revenue
    
    
    7
    
    
    
    (30
    )
    
    
    (22
    )
    
    
    (134
    )Other assets and liabilities
    
    
    5
    
    
    
    91
    
    
    
    179
    
    
    
    34Net cash used in operating activities
    
    
    (2,542
    )
    
    
    (2,877
    )
    
    
    (7,896
    )
    
    
    (8,848
    )Investing activitiesCost of identified intangibles
    
    
    (38
    )
    
    
    (29
    )
    
    
    (178
    )
    
    
    (130
    )Capital expenditures
    
    
    (7
    )
    
    
    (16
    )
    
    
    (79
    )
    
    
    (51
    )Cash received in 2005 merger activities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17Net cash used in investing activities
    
    
    (45
    )
    
    
    (45
    )
    
    
    (257
    )
    
    
    (164
    )Financing activitiesIssuance of common stock, net of costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,455Issuance of convertible notes payable, net of costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,811Exercise of common stock options
    
    
    
    
    
    
    13
    
    
    
    26
    
    
    
    32Principal payments on bridge loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (366
    )Principal payments on capital lease obligations
    
    
    (4
    )
    
    
    
    
    
    
    (10
    )
    
    
    (1
    )Net cash (used) provided by financing activities
    
    
    (4
    )
    
    
    13
    
    
    
    16
    
    
    
    10,931Effect of translation adjustments on cash and cash equivalents
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (13
    )Change in cash and cash equivalents
    
    
    (2,591
    )
    
    
    (2,916
    )
    
    
    (8,137
    )
    
    
    1,906Cash and cash equivalents, beginning of period
    
    
    4,595
    
    
    
    4,999
    
    
    
    10,141
    
    
    
    177Cash and cash equivalents, end of period
    
    $
    2,004
    
    
    $
    2,083
    
    
    $
    2,004
    
    
    $
    2,083Supplemental Disclosure of Non-cash Financing Activities:During the nine months ended September 30, 2006, the Company
paid accounts payable of $38 with 10,259 shares of common stock
    
    $
    
    
    
    $
    
    
    
    $
    38
    
    
    $
    
 See accompanying notes to condensed financial statements.
 F-6




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##### Table of Contents



CLEARANT, INC.
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 (in thousands, except for share and per share data)
 NOTE 1  BASIS OF PRESENTATION
    NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Revenue Recognition and Deferred Revenue
 Revenue Recognition Clearant Process® Clearant Process® Clearant Process® Accounting for Shipping and Handling Fees and Costs
 F-7




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##### Table of Contents



CLEARANT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
  Grants
 Clearant
Process ®
 Cost of Revenues
 Clearant Process®
 Extinguishment of Debt
  Use of Estimates
  Cash and Cash Equivalents
  Inventories and Inventory related Prepayments
 Clearant Process®
  Property and Equipment
  F-8




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CLEARANT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 Identifiable Intangibles
  Research and Development Costs
  Income Taxes
 Accounting for Income Taxes
   Stock-Based Compensation
 Share-Based Payment Accounting for Stock Issued to Employees
   Expected volatility
    
    
    79.6%-93.0
    %Risk-free interest rate
    
    
    4.46%-5.18
    %Expected life in years
    
    
    5.17-6.25Expected dividend yield
    
    
    0
    %
 F-9




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##### Table of Contents



CLEARANT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
  Three months ended
    
    
    Nine months endedSeptember 30, 2005
    
    
    September 30, 2005Net loss as reported
    
    $
    (2,660
    )
    
    $
    (10,248
    )Less: Stock-based expense
determined under fair value
based method
    
    
    (868
    )
    
    
    (1,034
    )Pro forma net loss
    
    $
    (3,528
    )
    
    $
    (11,282
    )Net loss per shareAs reported  basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.39
    )Pro forma  basic and diluted
    
    $
    (0.10
    )
    
    $
    (0.42
    )
  Accounting for Stock-Based
Compensation
  F-10
    Table of Contents   CLEARANT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
   Fair Value of Financial Instruments
  New Accounting Pronouncements
 Inventory Costs
 Accounting for Servicing of Financial Assets  an
amendment of FASB Statement No. 140
 Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109
 Fair Value Measurements
 NOTE 3  NET LOSS PER SHARE
 Earnings Per Share . F-11
    Table of Contents   CLEARANT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
   Nine Months Ended September 30,2006
    
    2005Stock Options
    
    
    4,144,000
    
    
    
    2,686,000Warrants
    
    
    5,512,000
    
    
    
    3,317,000
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Basic and diluted net loss per share:Numerator:Net loss
attributable to
common stock
    
    $
    (2,614
    )
    
    $
    (2,660
    )
    
    $
    (7,471
    )
    
    $
    (10,248
    )Denominator:Weighted average common stock
shares outstanding
    
    
    39,912
    
    
    
    35,923
    
    
    
    39,842
    
    
    
    26,599Net loss per share, basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.07
    )
    
    $
    (0.19
    )
    
    $
    (0.39
    )
 NOTE 4  COMMON STOCK
 Common Stock Transactions and Non-cash Financing Activities
     Lock-up Period
 F-12
    Table of Contents   CLEARANT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
  NOTE 5 STOCK-BASED AWARDS
 Stock Options
    Employees
    
    
    Non-Employees
    
    
    TotalExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at
December 31, 2004
    
    
    5,253,000
    
    
    $
    0.60-$7.94
    
    
    
    319,000
    
    
    $
    0.60-$7.22
    
    
    
    5,572,000
    
    
    $
    0.60-$7.94Granted
    
    
    1,254,000
    
    
    $
    3.86-$4.51
    
    
    
    120,000
    
    
    $
    4.12
    
    
    
    1,374,000
    
    
    $
    3.86-$4.51Exercised
    
    
    (86,000
    )
    
    $
    0.60
    
    
    
    
    
    
    $
    
    
    
    
    (86,000
    )
    
    $
    0.60Change in status
    
    
    (226,000
    )
    
    $
    0.60-$2.30
    
    
    
    226,000
    
    
    $
    0.60-$2.30
    
    
    
    
    
    
    
    Canceled
    
    
    (3,799,000
    )
    
    $
    0.60-$7.94
    
    
    
    (285,000
    )
    
    $
    0.60-$7.22
    
    
    
    (4,084,000
    )
    
    $
    0.60-$7.94Outstanding at
December 31, 2005
    
    
    2,396,000
    
    
    $
    0.60-$7.94
    
    
    
    380,000
    
    
    $
    0.60-$7.22
    
    
    
    2,776,000
    
    
    $
    0.60-$7.94Granted
    
    
    1,671,000
    
    
    $
    0.44-$1.64
    
    
    
    25,000
    
    
    $
    0.91
    
    
    
    1,696,000
    
    
    $
    0.44-$1.64Exercised
    
    
    (3,000
    )
    
    $
    0.60
    
    
    
    (41,000
    )
    
    $
    0.60
    
    
    
    (44,000
    )
    
    $
    0.60Change in status
    
    
    (263,000
    )
    
    $
    0.60-$3.17
    
    
    
    263,000
    
    
    $
    0.60-$3.17
    
    
    
    
    
    
    $
    0.60-$3.17Canceled
    
    
    (242,000
    )
    
    $
    0.60-$4.51
    
    
    
    (42,000
    )
    
    $
    2.30
    
    
    
    (284,000
    )
    
    $
    0.60-$4.51Outstanding at
September 30, 2006
    
    
    3,559,000
    
    
    $
    0.44-$7.94
    
    
    
    585,000
    
    
    $
    0.60-$7.22
    
    
    
    4,144,000
    
    
    $
    0.44-$7.94
 F-13




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CLEARANT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
  WeightedWeighted
    
    AverageNumber
    
    Average
    
    RemainingOf
    
    Exercise
    
    Contractual
    
    IntrinsicShares
    
    Price
    
    Life (Years)
    
    ValueAs of December 31, 2005:Employees  Outstanding
    
    
    2,396,000
    
    
    $
    2.83
    
    
    
    7.17
    
    
    $
    692,000Employees  Expected to Vest
    
    
    2,376,000
    
    
    $
    2.82
    
    
    
    7.16
    
    
    $
    692,000Employees  Exercisable
    
    
    1,563,000
    
    
    $
    2.25
    
    
    
    6.03
    
    
    $
    692,000Non-Employees  Outstanding
    
    
    380,000
    
    
    $
    2.04
    
    
    
    5.78
    
    
    $
    287,000Non-Employees  Expected to Vest
    
    
    380,000
    
    
    $
    2.04
    
    
    
    5.78
    
    
    $
    287,000Non-Employees  Exercisable
    
    
    380,000
    
    
    $
    2.04
    
    
    
    5.78
    
    
    $
    287,000As of September 30, 2006:Employees  Outstanding
    
    
    3,559,000
    
    
    $
    1.93
    
    
    
    7.94
    
    
    $
    Employees  Expected to Vest
    
    
    3,381,000
    
    
    $
    1.94
    
    
    
    7.87
    
    
    $
    Employees  Exercisable
    
    
    1,516,000
    
    
    $
    2.42
    
    
    
    5.99
    
    
    $
    Non-Employees  Options Outstanding
    
    
    585,000
    
    
    $
    2.29
    
    
    
    5.04
    
    
    $
    Non-Employees  Expected to Vest
    
    
    585,000
    
    
    $
    2.29
    
    
    
    5.04
    
    
    $
    Non-Employees  Options Exercisable
    
    
    560,000
    
    
    $
    2.37
    
    
    
    4.82
    
    
    $
    
  Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services
   F-14




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CLEARANT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 NOTE 6  REVERSE MERGER TRANSACTION
   NOTE 7  COMMITMENTS AND CONTINGENCIES
 Clearant
Process®
 NOTE 8  SUBSEQUENT EVENTS
 Clearant Process®
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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, 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 1A of our Form 10-K for the year
ended December 31, 2005.
 Overview
 Clearant
Process ®
 
    
    Devitalized musculoskeletal tissue allograft implants (tissue),
    
    Plasma protein therapeutics,
    
    Recombinant protein therapeutics,
    
    Medical devices, and
    
    Blood and blood-related products.
 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 both intermediate and 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 ®
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® nd th Clearant Process ® ®
 Clearant Process® Clearant
Process® Clearant
Process ® Clearant
Process ® Clearant Process® .
 Clearant Process® Clearant Process®
 Results of Operations
 Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005
 Revenues
 Clearant Process®
 Clearant Process® Clearant Process ®  Clearant
Process ®
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Clearant Process®
 Sales, General and Administrative Expenses
    Clearant Process®
 Research and Development Expenses
 Clearant Process®
  Other Income/Expense
  Preferred Stock Dividend and Financing Costs
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Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005
 Revenues
 Clearant Process®
 Clearant Process ®  Clearant
Process ® Clearant Process®
  Clearant Process®
 Sales, General and Administrative Expenses
    Clearant Process®
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Research and Development Expenses
 Clearant Process®
  Other Income/Expense
  Preferred Stock Dividend and Financing Costs
  Liquidity and Capital Resources
 Development Stage
  Clearant Process®
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Direct Distribution Strategy
 Clearant Process ® Clearant Process ®
 Clearant Process® Clearant Process® .
 Clearant Process® Clearant Process®
  Limited Cash Availability
 Clearant Process®
   Doubt About Our Ability To Continue As Going Concern
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##### Table of Contents



Contractual Obligations and Commercial Commitments
  Less than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 year
    
    
    1 - 3 years
    
    
    3 - 5 years
    
    
    5 yearsLease obligations
    
    $
    116
    
    
    $
    87
    
    
    $
    28
    
    
    $
    2
    
    
    $
    Bridge loans
    
    
    106
    
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations
    
    
    9,500
    
    
    
    4,950
    
    
    
    4,550
    
    
    
    
    
    
    
    $
    9,722
    
    
    $
    5,143
    
    
    $
    4,578
    
    
    $
    2
    
    
    $
    
 Off-Balance Sheet Arrangements
  Critical Accounting Policies and Estimates
   Revenue Recognition and Deferred Revenue
 Revenue Recognition Clearant Process®
 Clearant Process® Clearant Process ® Clearant Process ® . Clearant Process® Clearant Process® Clearant
Process ® Accounting for Shipping and Handling Fees and
Costs
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Identifiable Intangibles
  Stock-Based Compensation
 Share-Based Payment Accounting for Stock Issued to Employees
 Recent Accounting Pronouncements
 Inventory Costs
 Accounting for Servicing of Financial Assets  an
amendment of FASB Statement No. 140
 Accounting for Uncertainty in
Income Taxes, an interpretation of FASB Statement No. 109
 Fair Value Measurements
 
 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
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ITEM 4. Controls and Procedures
  
 PART II  OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
   
 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
  
 ITEM 5. Other Information
 CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
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25




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
    
    general economic conditions,
    
    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,
    
    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.
  
 ITEM 6. Exhibits
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SIGNATURES
  CLEARANT, INC.Date: November 9, 2006
    By:
    /s/ ALAIN DELONGCHAMPAlain DelongchampChief Executive Officer Date: November 9, 2006
    By:
    /s/ JON GARFIELDJon GarfieldChief Financial Officer 27