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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 Commission file number 000-50309
 Clearant, Inc.
  Delaware
    
    91-2190195(State or other jurisdiction of incorporation)
    
    (I.R.S. Employer Identification No.)
 1801 Avenue of the Stars, Suite 435
Los Angeles, California 90067
 (310) 479-4570
   Common stock, $0.0001 par value per share
 Yes o No þ
 Yes o No þ
 þ o
 o
 12b-2
 Large accelerated filer: o
    
    Accelerated filer: o
    
    Non-accelerated filer: o
    
    Smaller reporting company: þ
 o þ




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Forward Looking Statements
   
    
    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 Securities and Exchange Commission (SEC).
    1




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##### 



FORM 10-K TABLE OF CONTENTS
 PagePART IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    11Item 1B. Unresolved Staff Comments
    
    
    25Item 2. Properties
    
    
    25Item 3. Legal Proceedings
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    27Item 6. Selected Financial Data
    
    
    29Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    35Item 8. Financial Statements and Supplementary Data
    
    
    36Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    37Item 9A(T). Controls and Procedures
    
    
    37Item 9B. Other Information
    
    
    38PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    38Item 11. Executive Compensation
    
    
    41Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    45Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    47Item 14. Principal Accounting Fees and Services
    
    
    47PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    48Exhibit 23.1Exhibit 31.1Exhibit 32.1
   2




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PART I
 
 Item 1. Business
 Business Development
  Business of Issuer
 ®
 The Clearant Process®
 ®
 
    
    Inactivate a broad range of known pathogens irrespective of size, origin or
structure including, but not limited to Human Immunodeficiency Virus (HIV), West
Nile Virus, and Hepatitis C;
    
    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.
 ® ® ® ®
 ®
  3




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® ®
 ® ® ®
 ® ®
 
    
    Plasma protein therapeutics;
    
    Recombinant protein therapeutics;
    
    Medical devices; and
    
    Blood and blood-related products.
  Area of Focus: The Tissue Market
 ® ® ®
  ® ® ®
  4




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® ®
 ®
 Commercialization Strategy
 ® ® ® ® ®
  
    
    Two direct sales representatives and approximately seventeen indirect sales
groups, for a total of approximately 173 sales representatives;
    
    The twelve-month initial results of our clinical study are favorable, and the
occurrence of complications, stability and strength in the anterior cruciate
ligament reconstructions using tissue treated with the Clearant Process® are
comparable to the patients non-operated contralateral knees. We are currently
gathering information on 24-month results.
 Customer Agreements
 ® ® ® ® ®
 ® ®
 Market Opportunity
   5




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
    
    Manufacturers to recover, process, store, label, package and distribute human
cells, tissues and cellular and tissue-based products in such a way that prevents
the introduction, transmission or spread of communicable diseases (including
bacteria and viruses); and
    
    Tissue banks that wish to label their products sterile will need to have a
validated process to demonstrate sterility.
 ® ® ® ®
 ® ® ®
  6




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Competition: Existing Methods
  Non-Sterile Methods ®
  Sterile Methods ® ®
 Other Potential Commercialization Markets: The Plasma Protein Therapeutics Market
  ®
 ®
  7




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Other Potential Commercialization Markets: The Recombinant Products Market
   ®
 Other Potential Commercialization Markets: The Medical Device Market
 ® ®
 Competition
   8




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® ®
   Regulatory Strategy
 ® ® ®
  9




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® ® ® ® ®
  ® ® ® ® ®
 Intellectual Property
  ®
  Employees
   10




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Reports to Security Holders
    
 Item 1A. Risk Factors
 You should carefully consider and evaluate all of the information in this report, including
the risk factors listed below. If any of these risks occur, our business, results of operations and
financial condition could be harmed, the price of our common stock could decline, and future events
and circumstances could differ significantly from those anticipated in the forward-looking
statements contained in this report.
 RISKS AND UNCERTAINTIES IN ADDITION TO THOSE WE DESCRIBE BELOW, THAT MAY NOT BE PRESENTLY KNOWN TO
US, OR THAT WE CURRENTLY BELIEVE ARE IMMATERIAL, MAY ALSO HARM OUR BUSINESS AND OPERATIONS. IF ANY
OF THESE RISKS OCCUR, OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD BE HARMED,
THE PRICE OF OUR COMMON STOCK COULD DECLINE, AND FUTURE EVENTS AND CIRCUMSTANCES COULD DIFFER
SIGNIFICANTLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS REPORT.
 Risks Related to Our Business
 We will need additional financing to fund our business.
  Unstable market and economic conditions may have serious adverse consequences on our business.
   11




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Our limited operating history may make it difficult to evaluate and forecast our business to date,
revenue potential and project our future viability.
 ® ®
 We have a history of and expect to continue to generate substantial losses, may not become
profitable and will need to expand our Clearant Process® to increase revenues.
  ® ®
 ®
  12




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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.
  
    
    Continue to successfully demonstrate the efficacy of the Clearant Process® in
tissue;
    
    Successfully demonstrate the efficacy of the Clearant Process® in sterilizing
other biological products, including plasma protein, recombinant proteins and
medical devices;
    
    Successfully market and commercialize the Clearant Process®;
    
    Enter into additional license, sterilization service and processor
representative 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.
 ® ® ® ®
 We are experiencing material cash flow constraints.
  We utilize Independent Sales Representatives and Distributors.
   13




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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 Food and Drug
Administration
applies the Good Tissue Practice guidelines issued on November 18, 2004 which became effective on
May 25, 2005, and the Task Force on Human Tissue Safety created on August 30, 2006.
 ® ® ® ®
 ® ®
 Our success will depend on our ability to retain our managerial personnel and to attract additional
personnel.
  ®
   We incur significant costs as a result of operating as a public company, and our management is
required to devote substantial time to comply with public company regulations.
   14




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The Clearant Process® has been commercialized only in the tissue market and our future success
depends on our ability to successfully commercialize the Clearant Process® for use in our other,
larger target markets.
 ® ® ® ®
 ®
 ® ® ® ®
 ® ® ®
 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®.
 ® ® ® ® ® ® ®
  15




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®
 ® ® ® ®
 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.
 ® ®
 ®
   16




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® ®
   We may be subject to products liability with respect to products which are treated with the
Clearant Process® under license, processor representative or sterilization service agreements and
which cause harm to others or damage to products, 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.
 ® ®
 ® ® ®
 ®
  17




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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.
 ® ® ® ® ® ® ® ® ® ®
 ®
 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.
 ® ® ® ® ® ®
 ® ®
  18




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®
 ® ®
 Under our new processor representative arrangement, uncertainties regarding future health care
reimbursement exist and may affect the amount and timing of revenues.
 ®
 ®
  Risks Related To Our Industry
 Our ability to commercialize our technology in our target markets will depend on the rates charged
by operators of commercial gamma irradiation facilities at which the Clearant Process® will be
applied.
 ®
 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®.
 ® ® ® ®
  19




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®
 ® ®
 ® ®
 ® ®
 ® ® ® ® ® ®
  20




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® ® ® ® ®
 ®
 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.
 ® ® ®
  ®
 ® ® ®
  21




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Because our business model is partially based on the receipt of royalties or service payments from
users of the Clearant Process®, our success may be 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.
 ® ® ® ® ® ®
 ® ®
 ® ® ®
 ®
 We depend heavily upon limited sources of human tissue, and any failure to obtain tissue from these
sources in a timely manner will interfere with our ability to process and distribute allografts.
    22




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Potential users of the Clearant Process® may depend on third party payers for reimbursement for the
use of their products by the end consumer, who may not be willing to reimburse the users at levels
sufficient to permit us to generate significant payments.
 ® ® ®
 Outside influences on healthcare regulation may negatively impact our revenues or increase our
expenses.
  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®.
 ® ®
 If we acquire any companies or technologies in the future, they could prove difficult to integrate,
disrupt our business, dilute stockholder value and adversely affect our operating results.
  
    
    difficulties in integrating operations, technologies, services and personnel;
    
    diversion of financial and managerial resources from existing operations;
    
    risk of entering new markets;
  23




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
    
    potential write-offs of acquired assets or investments;
    
    potential loss of key employees;
    
    inability to generate sufficient revenue to offset acquisition or investment
costs; and
    
    delays in customer purchases due to uncertainty.
  Risks Related to Our Common Stock
 Our independent registered public accounting firm has doubt as to our ability to continue as a
going concern and this may adversely affect our stock price.
  Our stock price may be subject to substantial volatility, and you may lose all or a substantial
part of your investment.
  The sale of shares by our stockholders may significantly impact the market price of our common
stock.
  We have never paid cash dividends and do not intend to do so.
   24




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We may incur increased costs as a result of recently enacted and proposed changes in laws and
regulations relating to corporate governance matters.
  Our corporate compliance program cannot guarantee that we are in compliance with all potentially
applicable federal and state regulations.
 ® ®
 Our common stock may be considered a penny stock and may be difficult to sell when desired.
  The possible issuance of additional shares may impact the price of our stock.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Description of Property
   25




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Item 3. Legal Proceedings
  ®
 ®
 
 Item 4. Submission of Matters to a Vote of Security Holders
   26




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Market Information
  High
    
    
    LowYear Ending December 31, 20091st Quarter (through March 17, 2009)
    
    $
    0.10
    
    
    $
    0.03Year Ended December 31, 200811st Quarter
    
    $
    0.32
    
    
    $
    0.142nd Quarter
    
    
    0.25
    
    
    
    0.103rd Quarter
    
    
    0.20
    
    
    
    0.094th Quarter
    
    
    0.19
    
    
    
    0.03Year Ended December 31, 200721st Quarter
    
    $
    0.28
    
    
    $
    0.112nd Quarter
    
    
    0.17
    
    
    
    0.023rd Quarter
    
    
    1.99
    
    
    
    0.404th Quarter
    
    
    1.03
    
    
    
    0.24
 1
    
    Over-the-counter market quotations may reflect inter-dealer prices, without retail
mark-up, mark-down or commissions and may not necessarily represent actual transactions.2
    
    On August 3, 2007, after recommendation by our board of directors, the holders of a
majority of our common stock approved an amendment to our Certificate of Incorporation to permit us
to effect a 1:14 reverse stock split of our common stock. The reverse stock split is effective as
of August 23, 2007. The prices quoted reflect the reverse stock split. Holders
  Dividends
   27




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Securities Authorized For Issuance Under Equity Compensation Plans
 
 Number ofsecurities remainingavailable for futureNumber of
    
    
    
    
    
    
    issuance undersecurities to be
    
    
    
    
    
    
    equityissued upon exercise
    
    
    Weighted-average
    
    
    compensation plansof outstanding
    
    
    exercise price of
    
    
    (excluding securitiesoptions, warrants
    
    
    outstanding options,
    
    
    reflected in columnPlan Category
    
    and rights1
    
    
    warrants and rights
    
    
    (a))2(a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    4,870,907
    
    
    $
    1.28
    
    
    
    7,673,723Equity compensation
plans not approved
by security holders
    
    
    0
    
    
    $
    0.00
    
    
    
    0Total
    
    
    4,870,907
    
    
    $
    1.28
    
    
    
    7,673,723
 1
    
    On August 3, 2007, at our annual meeting, the stockholders approved a 6,000,000
share increase in our 2005 Stock Award Plan. As of December 31, 2008, there were 2,113,052 shares
of our common stock reserved for issuance upon the exercise of warrants and 2,757,855 shares of
common stock reserved for issuance upon the exercise of options.2
    
    These options were issued under the 2000 and 2005 Stock Award Plans.3
    
    Of this amount, no shares were available for issuance under the 2000 Stock Award
Plan and 7,673,723 shares were available for issuance under the 2005 Stock Award Plan.  28




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Item 6. Selected Financial Data
  
 Item 7. Managements Discussion and Analysis or Plan of Operation
 Results of Operations for the years ended December 31, 2008 and 2007
  Liquidity and Capital Resources
        29




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Off-Balance Sheet Arrangements
  Revenues
 ®
   ®
 Cost of Revenues
  Sales, General and Administrative and Stock Based Compensation Expenses
    30




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®
  Research and Development Expenses
 ®
 Other Income/Expense
  Doubt About Our Ability to Continue As Going Concern
   31




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Critical Accounting Policies and Estimates
   32




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Revenue Recognition and Deferred Revenue
 ® ® ®
 Cost of Revenues
 ®
 Inventories and Inventory Related Prepayments
 ®
  Identifiable Intangibles
  Research and Development Costs
  Income Taxes
 Accounting for Income Taxes
  33




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Accounting for Uncertainty in Income Taxes
 Stock-Based Compensation
 Share-Based Payment
  Fair Value of Financial Instruments
 Fair Value Measurements
 Legal Proceedings
  Recent Accounting Pronouncements
 Written Loan Commitments Recorded at Fair Value
Through Earnings
 Business Combinations
  34




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Disclosures about Derivative Instruments and Hedging
Activities Accounting for Derivative
Instruments and Hedging Activities
 Determination of the
Useful Life of Intangible Assets Goodwill and Other Intangible Assets
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles
 Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash Settlement)
 
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
   35




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Item 8. Financial Statements and Supplementary Data
 CONTENTS
 PAGEReport Of Independent Registered Public Accounting Firm
    
    
    F-1FINANCIAL STATEMENTSBalance Sheets As Of December 31, 2008 and 2007
    
    
    F-2Statements Of Operations For The Years Ended December 31, 2008 and 2007
    
    
    F-3Statements Of Stockholders Equity (Deficit) For The Years Ended December 31, 2008 and 2007
    
    
    F-4Statements Of Cash Flows For The Years Ended December 31, 2008 and 2007
    
    
    F-5Notes to Financial Statements
    
    
    F-6
  36




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
       
  F-1




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CLEARANT, INC.
 
 BALANCE SHEETS
 (in thousands, except par value amounts)
 December 31,
    
    
    December 31,2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    265
    
    
    $
    1,062Accounts receivable, net of allowance of $91 and
$26 at December 31, 2008 and 2007, respectively
    
    
    276
    
    
    
    341Inventory, net of $909 and $849 inventory
allowance at December 31, 2008 and 2007,
respectively
    
    
    15
    
    
    
    Inventory related prepayments, net of $406 and
$406 inventory allowance at December 31, 2008
and 2007, respectively
    
    
    
    
    
    
    Prepaids and other assets
    
    
    62
    
    
    
    68Total current assets
    
    
    618
    
    
    
    1,471Property and equipment, net of $146 and $83
accumulated depreciation at December 31, 2008 and
2007, respectively
    
    
    44
    
    
    
    87Identifiable intangibles, net of $1,285 and $1,217
accumulated amortization at December 31, 2008 and
2007, respectively
    
    
    970
    
    
    
    991Deposits and other assets
    
    
    85
    
    
    
    60Total assets
    
    $
    1,717
    
    
    $
    2,609Liabilities, Preferred Stock and Stockholders Equity (Deficit)Current liabilities:Accounts payable
    
    $
    1,070
    
    
    $
    1,210Accrued liabilities
    
    
    736
    
    
    
    733Bridge loans
    
    
    106
    
    
    
    106Deferred revenue
    
    
    7
    
    
    
    7Total current liabilities
    
    
    1,919
    
    
    
    2,056Convertible promissory note  related party, net of
debt discount of $135 and $0 at December 31, 2008
and 2007, respectively
    
    
    758
    
    
    
    Deferred Revenue  noncurrent
    
    
    
    
    
    
    4Total liabilities
    
    
    2,677
    
    
    
    2,060Stockholders equity (deficit):Series A preferred stock ($0.0001 par value;
50,000 shares authorized; 0 and 0 share issued
and outstanding at December 31, 2008 and 2007,
respectively)
    
    
    
    
    
    
    Common stock ($0.0001 par value; 200,000 shares
authorized; 48,957 and 48,957 shares issued and
outstanding at December 31, 2008 and 2007,
respectively)
    
    
    5
    
    
    
    5Additional paid-in capital
    
    
    87,013
    
    
    
    86,360Accumulated deficit
    
    
    (87,978
    )
    
    
    (85,816
    )Total stockholders equity (deficit)
    
    
    (960
    )
    
    
    549Total liabilities and stockholders equity (deficit)
    
    $
    1,717
    
    
    $
    2,609
 See accompanying notes to financial statements.
  F-2




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CLEARANT, INC.
 
 STATEMENTS OF OPERATIONS
 (in thousands, except per share amounts)
 Fiscal Year Ended December 31,2008
    
    
    2007Revenues:Licensing
    
    $
    83
    
    
    $
    90Direct distribution
    
    
    1,599
    
    
    
    696Fee for service
    
    
    89
    
    
    
    115Contract research and milestones
    
    
    112
    
    
    
    183Total revenues
    
    
    1,883
    
    
    
    1,084Cost of revenues
    
    
    1,016
    
    
    
    981Gross profit
    
    
    867
    
    
    
    103Operating expenses:Sales, general and administrative
    
    
    2,411
    
    
    
    3,374Stock based compensation
    
    
    571
    
    
    
    368Research and development
    
    
    7
    
    
    
    80Total operating expenses
    
    
    2,989
    
    
    
    3,822Loss from operations
    
    
    (2,122
    )
    
    
    (3,719
    )Other income (expense):Interest income (expense), net
    
    
    (45
    )
    
    
    20Gain on settlement of obligation
    
    
    5
    
    
    
    382Loss on disposal of property and equipment
    
    
    
    
    
    
    (130
    )Loss before provision (benefit) for income taxes
    
    
    (2,162
    )
    
    
    (3,447
    )Provision (benefit) for income taxes
    
    
    
    
    
    
    Net loss attributable to common stock
    
    $
    (2,162
    )
    
    $
    (3,447
    )Net loss per share:Basic and diluted
    
    $
    (0.04
    )
    
    $
    (0.16
    )Number of weighted average shares used in per share calculation:Basic and diluted
    
    
    48,957
    
    
    
    21,517
 See accompanying notes to financial statements.
  F-3




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CLEARANT, INC.
 
 STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 (in thousands, except par value amounts)
 Stock-Series A Preferred
    
    
    Common Stock, $0.0001
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    holdersStock
    
    
    par value
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    EquityShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Loss
    
    
    (Deficit)Balance at December 31, 2006
    
    
    
    
    
    $
    
    
    
    
    2,870
    
    
    $
    
    
    
    $
    82,953
    
    
    $
    (82,369
    )
    
    $
    
    
    
    $
    584Issuance of common stock to
consultants for services
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    60
    
    
    
    
    
    
    
    
    
    
    
    60Issuance of common stock as
settlement of debt
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    109Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    46,034
    
    
    
    5
    
    
    
    3,214
    
    
    
    
    
    
    
    
    
    
    
    3,219Issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (344
    )
    
    
    
    
    
    
    
    
    
    
    (344
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    368
    
    
    
    
    
    
    
    
    
    
    
    368Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,447
    )
    
    
    
    
    
    
    (3,447
    )Balance at December 31, 2007
    
    
    
    
    
    $
    
    
    
    
    48,957
    
    
    $
    5
    
    
    $
    86,360
    
    
    $
    (85,816
    )
    
    $
    
    
    
    $
    549Issuance of preferred stock
in connection with related
party convertible
promissory note
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of warrants in
connection with related
party convertible
promissory note
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63
    
    
    
    
    
    
    
    
    
    
    
    63Issuance of warrants to
consultants for services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10Settlement of issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    9Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    571
    
    
    
    
    
    
    
    
    
    
    
    571Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,162
    )
    
    
    
    
    
    
    (2,162
    )Balance at December 31, 2008
    
    
    
    
    
    $
    
    
    
    
    48,957
    
    
    $
    5
    
    
    $
    87,013
    
    
    $
    (87,978
    )
    
    $
    
    
    
    $
    (960
    )
 See accompanying notes to financial statements.
  F-4




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##### Table of Contents



CLEARANT, INC.
 
 STATEMENTS OF CASH FLOWS
 (in thousands, except for share and per share data)
 Year Ended December 31,2008
    
    
    2007Operating activitiesNet loss
    
    $
    (2,162
    )
    
    $
    (3,447
    )Adjustments to reconcile net loss to net cash used in operating activities:Provision for inventory and inventory related prepayments write down
    
    
    
    
    
    
    444Loss on disposal of fixed assets
    
    
    
    
    
    
    130Depreciation and amortization
    
    
    131
    
    
    
    407Stock-based compensation
    
    
    571
    
    
    
    368Issuance of common stock to consultants for accounts payable
    
    
    
    
    
    
    109Issuance of common stock to consultants for services rendered
    
    
    
    
    
    
    103Issuance of warrants to consultants for services rendered
    
    
    10
    
    
    
    Accretion of debt discount
    
    
    47
    
    
    
    Gain on settlement of obligation
    
    
    (5
    )
    
    
    (382
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    65
    
    
    
    (67
    )Inventory and inventory related prepayment
    
    
    (15
    )
    
    
    (59
    )Prepaids
    
    
    5
    
    
    
    (82
    )Accounts payable
    
    
    (135
    )
    
    
    12Accrued liabilities
    
    
    12
    
    
    
    (37
    )Deferred revenue
    
    
    (3
    )
    
    
    (61
    )Other assets and liabilities
    
    
    2
    
    
    
    32Net cash used in operating activities
    
    
    (1,477
    )
    
    
    (2,530
    )Investing activitiesCost of identified intangibles
    
    
    (47
    )
    
    
    (58
    )Capital expenditures
    
    
    (20
    )
    
    
    (10
    )Proceeds from sales of property and equipment, net
    
    
    
    
    
    
    22Net cash used in investing activities
    
    
    (67
    )
    
    
    (46
    )Financing activitiesProceeds from convertible promissory note  related party, net of fees of $122
    
    
    747
    
    
    
    Proceeds from the issuance of common stock, net of costs of $344
    
    
    
    
    
    
    2,875Proceeds from the issuance of bridge loan
    
    
    
    
    
    
    200Net cash provided by financing activities
    
    
    747
    
    
    
    3,075Change in cash and cash equivalents
    
    
    (797
    )
    
    
    499Cash and cash equivalents, beginning of period
    
    
    1,062
    
    
    
    563Cash and cash equivalents, end of period
    
    $
    265
    
    
    $
    1,062Supplemental Disclosure of Cash Flow Information:Cash paid for interest
    
    $
    13
    
    
    $
    Supplemental
Disclosure of Non Cash Investing and Financing ActivitiesIssuance of common stock as settlement of debt
    
    $
    
    
    
    $
    109Issuance of common stock to consultants for services
    
    $
    
    
    
    $
    103Issuance of warrants to consultants for services
    
    $
    10
    
    
    $
    Conversion of debt to equity
    
    $
    
    
    
    $
    200Settlement of issuance costs
    
    $
    9
    
    
    $
    Issuance of warrants in connection with related party convertible promissory note
    
    $
    63
    
    
    $
    
 See
accompanying notes to financial statements.
  F-5




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##### Table of Contents



CLEARANT, INC.
 
 NOTES TO FINANCIAL STATEMENTS
 (in thousands, except for share and per share data)
 NOTE 1  NATURE OF OPERATIONS
 ® ® ® ® ® ® ® ®
   NOTE 2  GOING CONCERN
   F-6




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 NOTE 3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Revenue Recognition and Deferred Revenue
 ® ® ®
 Cost of Revenues
 ®
 Settlement of Obligation
  Use of Estimates
  Cash Equivalents and Concentration of Credit Risk
   F-7




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 Accounts Receivable and Allowance for Doubtful Accounts
  Inventories and Inventory Related Prepayments
 ®
  Property and Equipment
  Fair Value Measurements
 Fair Value Measurements
       F-8




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 Long-Lived Assets
  Identifiable Intangibles
 Accounting for the Impairment or Disposal of Long-Lived Assets
 Research and Development Costs
  Income Taxes
 Accounting for Income Taxes
   Accounting for Uncertainty in Income Taxes
  F-9




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 Stock-Based Compensation
 Share Based Payment
  Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services
  Fair Value of Financial Instruments
 Fair Value Measurements
 Recent Accounting Pronouncements
 Written Loan
Commitments Recorded at Fair Value Through Earnings
 Business Combinations
   F-10




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 Disclosures about Derivative Instruments and Hedging
Activities Accounting for Derivative Instruments and Hedging
Activities
 Determination of the
Useful Life of Intangible Assets Goodwill and Other Intangible Assets
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present
Fairly in Conformity with Generally Accepted Accounting Principles
 Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash Settlement)
 NOTE 4  NET LOSS PER SHARE
   For the Year Ended December 31,2008
    
    
    2007Stock Options
    
    
    2,757,855
    
    
    
    3,416,844Warrants
    
    
    2,113,052
    
    
    
    156,780
  F-11




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
  For
the Year Ended December 31,2008
    
    
    2007Basic and diluted net loss per share:Numerator:Net loss attributable to common stock
    
    $
    (2,162
    )
    
    $
    (3,447
    )Denominator:Weighted average common stock shares outstanding
    
    
    48,957
    
    
    
    21,517Net loss per share, basic and diluted
    
    $
    (0.04
    )
    
    $
    (0.16
    )
 NOTE 5  PROPERTY AND EQUIPMENT
  2008
    
    
    2007Equipment
    
    $
    89
    
    
    $
    69Computer equipment and software
    
    
    66
    
    
    
    66Furniture and fixtures
    
    
    27
    
    
    
    27Leasehold improvements
    
    
    8
    
    
    
    8190
    
    
    
    170Less accumulated depreciation
    
    
    (146
    )
    
    
    (83
    )$
    44
    
    
    $
    87
  NOTE 6  IDENTIFIABLE INTANGIBLES
  2008
    
    
    2007Trademarks
    
    
    37
    
    
    
    37Patents
    
    
    2,218
    
    
    
    2,1712,255
    
    
    
    2,208Less accumulated amortization
    
    
    (1,285
    )
    
    
    (1,217
    )$
    970
    
    
    $
    991
    F-12




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 NOTE 7  INCOME TAXES
   2008
    
    
    2007Deferred tax assets:Net operating loss carryforwards
    
    $
    28,245
    
    
    $
    27,790Purchase in-process research and development
    
    
    545
    
    
    
    521Research and development credits
    
    
    1,362
    
    
    
    1,369Depreciation, accrued expenses and other
    
    
    978
    
    
    
    718Net deferred tax assets
    
    
    31,130
    
    
    
    30,398Less valuation allowance
    
    
    (31,130
    )
    
    
    (30,398
    )$
    
    
    
    $
    
    2008
    
    
    2007Federal statutory rate
    
    
    (34
    %)
    
    
    (34
    %)State taxes
    
    
    (6
    %)
    
    
    (6
    %)Tax credits & other
    
    
    6
    %
    
    
    (9
    %)Foreign loss with no benefit
    
    
    0
    %
    
    
    0
    %Valuation allowance
    
    
    34
    %
    
    
    49
    %0
    %
    
    
    0
    %
    F-13




---



##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 NOTE 8  CONVERTIBLE SECURED PROMISSORY NOTE  RELATED PARTY
  Application of Issue No. 98-5 to
Certain Convertible Instruments 00-27).
 Accounting for Convertible Debt and Debt Issued with Stock
Purchase Warrants
 Accounting for Derivative Financial Statements Indexed to,
and Potentially Settled in a Companys own stock
   NOTE 9  DEBT
   F-14




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 NOTE 10  CAPITALIZATION
 Common Stock Transactions and Non-Cash Financing Activities
      Series A Preferred Stock
  NOTE 11  STOCK OPTIONS
    F-15




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
  Employees
    
    
    Non-Employees
    
    
    TotalExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at December 31, 2006
    
    
    243,000
    
    
    $
    6.16-$63.14
    
    
    
    43,000
    
    
    $
    4.90-$57.68
    
    
    
    286,000
    
    
    $
    4.90-$63.14Granted
    
    
    3,137,000
    
    
    $
    0.35-$0.45
    
    
    
    130,000
    
    
    $
    0.70
    
    
    
    3,267,000
    
    
    $
    0.35-$0.70Exercised
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Change in status
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Forfeited or expired
    
    
    (136,000
    )
    
    $
    0.35-$63.14
    
    
    
    
    
    
    $
    
    
    
    
    (136,000
    )
    
    $
    0.35-$63.14Outstanding at December 31, 2007
    
    
    3,244,000
    
    
    $
    0.35-$63.14
    
    
    
    173,000
    
    
    $
    0.70-$57.68
    
    
    
    3,417,000
    
    
    $
    0.35-$63.14Granted
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Exercised
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Change in status
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Forfeited or expired
    
    
    (659,000
    )
    
    $
    0.35-$57.68
    
    
    
    
    
    
    $
    
    
    
    
    (659,000
    )
    
    $
    0.35-$57.68Outstanding at December 31, 2008
    
    
    2,585,000
    
    
    $
    0.35-$63.14
    
    
    
    173,000
    
    
    $
    0.70-$57.68
    
    
    
    2,758,000
    
    
    $
    0.35-$63.14
  WeightedWeighted
    
    
    AverageNumber
    
    
    Average
    
    
    RemainingOf
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Life (Years)
    
    
    ValueAs of December 31, 2007:Employees  Outstanding
    
    
    3,244,000
    
    
    $
    1.31
    
    
    
    9.57
    
    
    $
    Employees  Expected to Vest
    
    
    3,079,000
    
    
    $
    1.31
    
    
    
    9.57
    
    
    $
    Employees  Exercisable
    
    
    188,000
    
    
    $
    10.69
    
    
    
    7.85
    
    
    $
    Non-Employees  Outstanding
    
    
    173,000
    
    
    $
    8.09
    
    
    
    8.30
    
    
    $
    Non-Employees  Expected to Vest
    
    
    173,000
    
    
    $
    8.09
    
    
    
    8.30
    
    
    $
    Non-Employees  Exercisable
    
    
    41,000
    
    
    $
    31.47
    
    
    
    3.34
    
    
    $
    As of December 31, 2008:Employees  Outstanding
    
    
    2,585,000
    
    
    $
    1.43
    
    
    
    8.56
    
    
    $
    Employees  Expected to Vest
    
    
    2,423,000
    
    
    $
    1.44
    
    
    
    8.55
    
    
    $
    Employees  Exercisable
    
    
    919,000
    
    
    $
    2.67
    
    
    
    8.35
    
    
    $
    Non-Employees  Outstanding
    
    
    173,000
    
    
    $
    8.09
    
    
    
    7.70
    
    
    $
    Non-Employees  Expected to Vest
    
    
    173,000
    
    
    $
    8.09
    
    
    
    7.70
    
    
    $
    Non-Employees  Exercisable
    
    
    107,000
    
    
    $
    12.61
    
    
    
    6.99
    
    
    $
    
  F-16




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
      NOTE 12  WARRANTS
     F-17




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
  Warrants OutstandingNumber
    
    Exercise
    
    
    Weighted Average of Remainingof Shares
    
    Price
    
    
    Contractual Life (Years)133,052
    
    $
    4.21
    
    
    
    1.851,800,000
    
    $
    0.30
    
    
    
    1.5280,000
    
    $
    0.15
    
    
    
    1.52100,000
    
    $
    0.10
    
    
    
    9.62
  Risk-free interest rate
    
    
    2.1%-3.2
    %Expected life in years
    
    
    2-5Dividend yield
    
    
    0
    %Expected volatility
    
    
    217
    %
  NOTE 13  COMMITMENTS AND CONTINGENCIES
 Leases
  2009
    
    $
    1212010
    
    
    202011 and thereafter
    
    
    Net minimum lease payments
    
    $
    141
   Litigation
   F-18




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 Supply and Distribution Agreements
 ®
 ®
 NOTE 14  401K PLAN
   F-19




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 NOTE 15  SELECTED QUARTERLY FINANCIAL DATA
  Quarter endedMar. 31,
    
    
    Jun. 30,
    
    
    Sept. 30,
    
    
    Dec. 31,2008Total revenues
    
    $
    465
    
    
    $
    504
    
    
    $
    462
    
    
    $
    452Gross profit
    
    
    252
    
    
    
    215
    
    
    
    201
    
    
    
    199Total operating expenses
    
    
    815
    
    
    
    692
    
    
    
    747
    
    
    
    735Loss from operations
    
    
    (563
    )
    
    
    (477
    )
    
    
    (546
    )
    
    
    (536
    )Other income (expense), net
    
    
    9
    
    
    
    3
    
    
    
    (20
    )
    
    
    (32
    )Net loss
    
    
    (554
    )
    
    
    (474
    )
    
    
    (566
    )
    
    
    (568
    )Net loss attributable to common stock
    
    $
    (554
    )
    
    $
    (474
    )
    
    $
    (566
    )
    
    $
    (568
    )Net loss per share  Basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )Number of weighted average shares
    
    
    48,957
    
    
    
    48,957
    
    
    
    48,957
    
    
    
    48,9572007Total revenues
    
    $
    435
    
    
    $
    168
    
    
    $
    160
    
    
    $
    321Gross profit (loss)
    
    
    287
    
    
    
    76
    
    
    
    57
    
    
    
    (317
    )Total operating expenses
    
    
    1,174
    
    
    
    920
    
    
    
    989
    
    
    
    739Loss from operations
    
    
    (887
    )
    
    
    (844
    )
    
    
    (932
    )
    
    
    (1,056
    )Other income (expense), net
    
    
    (80
    )
    
    
    (4
    )
    
    
    356
    
    
    
    0Net loss
    
    
    (967
    )
    
    
    (848
    )
    
    
    (576
    )
    
    
    (1,056
    )Net loss attributable to common stock
    
    $
    (967
    )
    
    $
    (848
    )
    
    $
    (576
    )
    
    $
    (1,056
    )Net loss per share  Basic and diluted
    
    $
    (0.33
    )
    
    $
    (0.11
    )
    
    $
    (0.02
    )
    
    $
    (0.02
    )Number of weighted average shares
    
    
    2,911
    
    
    
    7,778
    
    
    
    25,866
    
    
    
    48,957
 NOTE 16  SUBSEQUENT EVENTS
   F-20




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A(T). Controls and Procedures
   Report of Management on Internal Control Over Financial Reporting
     Changes in Internal Controls
   37




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##### Table of Contents



Item 9B. Other Information
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
 Directors and Executive Officers
  Name
    
    Age
    
    Position
    
    Start of TermJon Garfield
    
    
    45
    
    
    Chief Executive Officer
Chief Financial Officer
Director
Secretary
    
    January 25, 2007
August 2, 2005
August 3, 2007
August 2, 2005Michael Elek
    
    
    48
    
    
    Director
    
    August 3, 2007Michael Bartlett
    
    
    66
    
    
    Chairman of the Board
Director
    
    December 9, 2008
July 11, 2008Kenneth W. Davidson
    
    
    61
    
    
    Director
    
    September 11, 2008Alan S. Blazei
    
    
    53
    
    
    Director
    
    September 11, 2008Susan E. Etzel
    
    
    35
    
    
    Chief Accounting Officer
Controller
    
    December 9, 2008
July 5, 2005
 Jon Garfield
 Michael Elek
 Michael Bartlett
  38




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##### Table of Contents



Kenneth W. Davidson
 Alan S. Blazei
 Susan E. Etzel
 Family Relationships
  Legal Proceedings
  Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
   39




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##### Table of Contents



Audit Committee
    Compensation Committee
   40




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##### Table of Contents



Independent Registered Public Accounting Firm
  
 Item 11. Executive Compensation
  SUMMARY COMPENSATION TABLE
 NonqualifiedNon-Equity
    
    
    DeferredName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    Option
    
    
    Incentive Plan
    
    
    Compensation
    
    
    All Otherprincipal
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Earnings
    
    
    Compensation
    
    
    Totalposition
    
    Year
    
    
    ($)
    
    
    ($)1
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    

($)Jon Garfield,
    
    
    2008
    
    
    $
    240,000
    
    
    $
    0
    
    
    $
    
    
    
    $
    0
    3
    
    $
    
    
    
    $
    
    
    
    $
    2,869
    4
    
    $
    242,869Chief Executive Officer and Chief

    
    
    2007
    
    
    $
    240,000
    
    
    $
    0
    
    
    $
    
    
    
    $
    0
    3
    
    $
    
    
    
    $
    
    
    
    $
    2,869
    4
    
    $
    242,869Financial Officer2Susan Etzel,
    
    
    2008
    
    
    $
    145,625
    
    
    $
    5,000
    
    
    $
    
    
    
    $
    0
    6
    
    $
    
    
    
    $
    
    
    
    $
    102
    7
    
    $
    150,727Chief Accounting Officer5
    
    
    2007
    
    
    $
    129,896
    
    
    $
    10,000
    
    
    $
    
    
    
    $
    0
    6
    
    $
    
    
    
    $
    
    
    
    $
    115
    7
    
    $
    140,011
 1
    
    Bonuses are based on performance.2
    
    Mr. Garfield joined us as the Chief Financial Officer in August 2005 and was
appointed as Chief Executive Officer in January 2007. Upon appointment as Chief Executive Officer,
Mr. Garfields employment agreement was extended for 3 years. Under the terms of the agreement his
salary was to be increased to $280,000. This increase has been accrued, but no adjustment to his
salary has been made to date.3
    
    Mr. Garfield was granted 0 and 1,228,572 stock options for the years ended
December 31, 2008 and 2007, respectively, under the terms of his employment agreement for his role
as an officer and director. All options were granted under the 2005 Stock Award Plan. The intrinsic
value of the options granted in 2008 and 2007 is $0.4
    
    Mr. Garfield receives $360,000 worth of life insurance for which premiums of $829
is paid annually and a sports club membership for which we pay $2,040.5
    
    Ms. Etzel joined us as Controller in May 2005 and was appointed as Chief
Accounting Officer in December 2008.6
    
    Ms. Etzel was granted 0 and 260,258 stock options for the years ended December 31,
2008 and 2007, respectively. All options were granted under the 2005 Stock Award Plan. The
intrinsic value of the options granted in 2008 and 2007 is $0.7
    
    Ms. Etzel receives $50,000 worth of life insurance for which premiums of $102 and
$115 were paid for the years ended December 31, 2008 and 2007.  41




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##### Table of Contents



Employment Agreements
      Material Modification to Stock Options
   42




---



##### Table of Contents



Outstanding Equity Awards At Fiscal Year-End
  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 OPTION AWARDS
    
    STOCK AWARDSEquityIncentiveEquity
    
    
    PlanMarket
    
    
    Incentive
    
    
    Awards:Value
    
    
    Plan
    
    
    Market orEquity
    
    
    
    
    
    
    Number
    
    
    of
    
    
    Awards:
    
    
    PayoutIncentive
    
    
    
    
    
    
    of
    
    
    Shares
    
    
    Number of
    
    
    Value ofPlan Awards:
    
    
    
    
    
    
    Shares
    
    
    or Units
    
    
    Unearned
    
    
    UnearnedNumber of
    
    
    Number of
    
    
    Number of
    
    
    
    
    
    
    or Units
    
    
    of
    
    
    Shares,
    
    
    Shares,Securities
    
    
    Securities
    
    
    Securities
    
    
    
    
    
    
    of Stock
    
    
    Stock
    
    
    Units or
    
    
    Units orUnderlying
    
    
    Underlying
    
    
    Underlying
    
    
    
    
    
    
    That
    
    
    That
    
    
    Other
    
    
    OtherUnexercised
    
    
    Unexercised
    
    
    Unexercised
    
    
    
    
    
    
    Have
    
    
    Have
    
    
    Rights
    
    
    Rights ThatOptions
    
    
    Options
    
    
    Unearned
    
    
    
    
    
    
    Not
    
    
    Not
    
    
    That Have
    
    
    Have Not(#)
    
    
    (#)
    
    
    Options
    
    
    Option Exercise Price
    
    
    
    Vested
    
    
    Vested
    
    
    Not Vested
    
    
    VestedName
    
    Exercisable 1
    
    
    Unexercisable 2
    
    
    (#)
    
    
    ($)
    
    Option Expiration Date
    
    (#)
    
    
    ($)
    
    
    (#)
    
    
    (#)Jon Garfield
    
    
    359,527
    
    
    
    922,618
    
    
    
    
    
    
    14,286 @ $54.04
    
    14,286 @ 8/30/15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chief Executive Officer
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,786 @ $22.96
    
    1,786 @ 1/27/16and Chief Financial Officer
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,786 @ $15.68
    
    1,786 @ 4/14/1635,715 @ $12.74
    
    35,715 @ 5/1/1628,572 @ $0.35
    
    28,572 @ 4/4/171,200,000 @ $0.45
    
    1,200,000 @ 9/12/17Susan E. Etzel
    
    
    69,009
    
    
    
    193,929

    
    
    
    
    
    
    1,072 @ $63.14
    
    1,072 @ 7/29/15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chief Accounting Officer
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,072 @ $15.68
    
    1,072 @ 4/14/16536 @ $12.74
    
    536 @ 5/1/163,115 @ $0.35
    
    3,115 @ 4/4/1757,143 @ $0.56
    
    57,143 @ 8/14/17200,000 @ $0.45
    
    200,000 @ 9/12/17
 1
    
    Represents shares that are vested and/or immediately exercisable. All option shares
were granted under the 2005 Stock Award Plan and are post-reverse stock split.2
    
    Represents shares that are unvested and not immediately exercisable.  43




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##### Table of Contents



Compensation Of Directors
  DIRECTOR COMPENSATION
 Fees

    
    
    
    
    
    
    
    
    
    
    Non-Equity
    
    
    Non-QualifiedEarned or
    
    
    
    
    
    
    
    
    
    
    Incentive
    
    
    Deferred
    
    
    AllPaid in
    
    
    Stock
    
    
    Option
    
    
    Plan
    
    
    Compensation
    
    
    OtherCash
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Earnings
    
    
    Compensation
    
    
    TotalName
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)Rowland W. Day II 1
    
    $
    
    
    
    $
    
    
    
    $
    0
    7
    
    $
    
    
    
    $
    
    
    
    $
    75,000
    
    
    $
    75,000Michael Elek 2
    
    $
    
    
    
    $
    
    
    
    $
    0
    7
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0Maurice DeWald 3
    
    $
    
    
    
    $
    
    
    
    $
    0
    7
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0Michael Bartlett 4
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0Kenneth W. Davidson 5
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0Alan S.
Blazei 6
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0
 1
    
    Mr. Day was appointed as a member of our board of directors effective April 5, 2007.
On April 1, 2007, Mr. Day began taking $7,500 a month for his services to the Company.
Payments were made through October 31, 2008. Mr. Day resigned as Chairman of the Board
effective December 9, 2008 and resigned as a member of our board of directors effective
December 31, 2008. As of December 31, 2008, Mr. Day has not exercised any of his options and
300,000 have expired. Mr. Day has taken the position that we owe him compensation for his
services through December 9, 2008.2
    
    Mr. Elek has received no compensation for his services.3
    
    Mr. DeWald resigned as a member of our board of directors effective December 31, 2008.
As of December 31, 2008, Mr. DeWald has not exercised any of his options and 300,000 have
expired. Mr. DeWald has received no compensation for his services.4
    
    Appointed as a member of our board of directors effective July 9, 2008.5
    
    Appointed as a member of our board of directors effective September 11, 2008.6
    
    Appointed as a member of our board of directors effective September 11, 2008.7
    
    On September 13, 2007, Mr. Day, Mr. Elek and Mr. DeWald were each granted 400,000
stock options. These options vest 25% annually over four years. As of December 31, 2008
100,000 of these stock options are vested. The intrinsic value of the options granted is $0.  44




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##### Table of Contents



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
 Equity Compensation Plans
  EQUITY COMPENSATION PLAN INFORMATION
 Number ofsecurities remainingavailable for futureNumber of
    
    
    
    
    
    
    issuance undersecurities to be
    
    
    
    
    
    
    equityissued upon exercise
    
    
    Weighted-average
    
    
    compensation plansof outstanding
    
    
    exercise price of
    
    
    (excluding securitiesoptions, warrants
    
    
    outstanding options,
    
    
    reflected in columnPlan Category
    
    and rights 1
    
    
    warrants and rights
    
    
    (a)) 2(a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    4,870,907
    
    
    $
    1.28
    
    
    
    7,673,723Equity compensation
plans not approved
by security holders
    
    
    
    
    
    $
    0.00
    
    
    
    Total
    
    
    4,870,907
    
    
    $
    1.28
    
    
    
    7,673,723
 1
    
    On August 3, 2007, at our annual meeting, the stockholders approved a 6,000,000 share
increase in our 2005 Stock Award Plan. As of December 31, 2008, there were 2,113,052 shares of
our common stock reserved for issuance upon the exercise of warrants and 2,757,855 shares of
common stock reserved for issuance upon the exercise of options.2
    
    These options were issued under the 2000 and 2005 Stock Award Plans.3
    
    Of this amount, no shares were available for issuance under the 2000 Stock Award Plan
and 7,673,723 shares were available for issuance under the 2005 Stock Award Plan. Security Ownership of Certain Beneficial Owners and Management
  Amount and Nature of
    
    
    Percent ofTitle of Class
    
    
    Name and Address of Beneficial Owner1
    
    Beneficial Owner 1
    
    
    classCommon stock
    
    Michael Elek 2
    
    
    5,714,288
    
    
    
    11.7
    %Common stock
    
    Terren S. Peizer 3
    
    
    4,695,391
    
    
    
    9.6
    %Common stock
    
    John McGinnis 4
    
    
    3,622,451
    
    
    
    7.4
    %Common stock
    
    Rowland W. Day II 5
    
    
    3,137,003
    
    
    
    6.4
    %Common stock
    
    Jay and Mel Seid, JTWROS 6
    
    
    2,869,591
    
    
    
    5.9
    %Common stock
    
    Jon M. Garfield 7
    
    
    1,083,932
    
    
    
    2.2
    %Common stock
    
    Maurice J. DeWald
    
    
    0
    
    
    
    0
    %Preferred stock
    
    Michael Bartlett 8
    
    
    45,454,545
    
    
    
    100
    %Common stock
    
    Kenneth W. Davidson
    
    
    0
    
    
    
    0
    %Common stock
    
    Alan S. Blazei
    
    
    0
    
    
    
    0
    %Common stock
    
    Susan Etzel 9
    
    
    69,411
    
    
    
    0
    %Common stock
    
    All directors and executive officers as a group
(4 persons)
    
    
    55,459,179
    
    
    
    58.7
    %
  45




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##### Table of Contents



1
    
    Applicable percentage ownership is based on 94,411,990 shares of total voting stock
outstanding at March 17, 2009. The number of shares of voting stock owned are those
beneficially owned as determined under the rules of the SEC, including any shares of voting
stock as to which a person has sole or shared voting or investment power and any shares of
voting stock which the person has the right to acquire within sixty days through the exercise
of any option, warrant or right. All addresses are c/o 1801 Avenue of the Stars, Suite 435,
Los Angeles, California 90067, unless otherwise noted.2
    
    Includes 1,428,572 shares of common stock held in the name Summerlight Trading Corp.,
1,428,572 shares of common stock held in the name Norpot Corp., 1,428,572 shares of common
stock held in the name Snowball Overseas SA and 1,428,572 shares of common stock held in the
name Cherwell Assets Corp. Excludes 2,571,430 shares beneficially owned by family members of
Michael Elek. Mr. Elek disclaims any controlling or beneficial interest in such shares.3
    
    Excludes 17,858 shares of common stock held of record by Reserva Capital, LLC, which
has been previously pledged as security for a loan as to which interest payments have not been
made. Includes 277,634 shares held by Bowmore, LLC, 14,613 shares held by Porfidio, LLC and
4,285,715 shares held by Advanced Technology Holdings, LLC, all of which Terren S. Peizer is
the sole managing member and options held by Mr. Peizer to purchase 21,286 shares of common
stock at $9.24 per share and 16,143 shares at $31.50 per share which expire July 22, 2012 and
December 1, 20ll, respectively. Assumes the exercise of all options held by Mr. Peizer. Mr.
Peizers business address is 11150 Santa Monica Blvd., Suite 1500, Los Angeles, California
90025.4
    
    Includes 1,785,715 shares issued to West Valley Financial Management. Excludes
1,428,572 shares beneficially owned by RMR Assets Management Co. Mr. McGinnis disclaims any
controlling or beneficial interest in such shares.5
    
    Includes 3,137,003 shares of common stock issued to Rowland W. Day II, as trustee of
the Day Family Trust (2,865,458 shares) and the Rowland W. Day II Rollover IRA (271,545
shares), with Rowland W. Day in his individual capacity as the beneficial owner of all
3,137,003 shares. Mr. Days business address is 1 Hampshire Court, Newport Beach, CA 92660.6
    
    Includes 12,448 shares of common stock held of record by Melvin Seid.7
    
    Includes 714,286 shares of common stock, and outstanding options issued, vested and
exercisable within sixty days of March 17, 2009 to purchase an aggregate 369,646 shares of
common stock.8
    
    Includes 1 share of Series A Preferred Stock held of record by CPI Investments, Inc.
of which Mr. Bartlett is the president. 1 share of Series A Preferred Stock votes together
with our common stock and has votes equal to 45,454,545 shares of common stock.9
    
    Includes 69,411 options issued, vested and exercisable within sixty days of March 17,
2009 to purchase to purchase shares of common stock.   46




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##### Table of Contents



Item 13. Certain Relationships and Related Transactions and Director Independence
 Transactions with Related Persons
  Director Independence
  
 Item 14. Principal Accounting Fees and Services
 Audit Fees
  Fiscal Year
    
    
    Fiscal Year2008
    
    
    2007Audit Fees
    
    $
    115,175
    
    
    $
    146,118Audit-Related Fees
    
    $
    
    
    
    $
    Tax Fees
    
    $
    
    
    
    $
    All Other Fees
    
    $
    
    
    
    $
    
   Tax Fees
   47




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##### Table of Contents



All Other Fees
  Pre-Approval Policy for Audit Services
  
 Item 15. Exhibits, Financial Statement Schedules
 No.
    
    Description2.1
    
    
    Merger Agreement and Plan of Reorganization, dated March 31, 2005, by and among
Clearant, Inc., Bliss Essentials Corp., and Thomas Gelfand, Howard Gelfand and
Kathleen Rufh, Incorporated by reference to Exhibit 10.1 on our Current Report on
Form 8-K, filed with the SEC on April 4, 2005.2.2
    
    
    Asset Purchase Agreement, dated March 31, 2005, by and among Clearant, Inc., Bliss
Essentials Corp., and Thomas Gelfand, Howard Gelfand and Kathleen Rufh,
Incorporated by reference to Exhibit 10.2 on our Current Report on Form 8-K, filed
with the SEC on April 4, 2005.2.3
    
    
    Merger Agreement and Plan of Merger, dated June 30, 2005, by and between Clearant,
Inc. and CI Merger Corporation, Incorporated by reference to our Proxy Statement
on Form DEF14A for our annual meeting of stockholders held on June 30, 2005, filed
with the SEC on April 4, 2005.3.1
    
    
    Amended and Restated Certificate of Incorporation Clearant, Inc., a Delaware
corporation, Incorporated by reference to Exhibit 3.1 on our Current Report on
Form 10-KSB filed with the SEC on April 1, 2008.3.2
    
    
    Bylaws of Clearant, Inc., a Delaware corporation,Incorporated by
reference to our Proxy Statement on Form DEF14A for our annual meeting of
stockholders held on June 30, 2005, filed with the SEC on April 4, 2005.4.1
    
    
    Specimen Common Stock Certificate,Incorporated by reference to Exhibit
4.2 on our Registration Statement on Form S-3, filed with the SEC on November 23,
2005.10.1
    *
    
    2005 Stock Award Plan,Incorporated by reference to Appendix F to our
Proxy Statement on Form DEF14A for our annual meeting of stockholders held on June
30, 2005, filed with the SEC on April 4, 2005.10.2
    
    
    Amended and Restated Employment Agreement between Clearant, Inc. and Jon M.
Garfield dated as of June 7, 2006, effective as of August 1, 2005, Incorporated by
reference to Exhibit 10.2 on our Current Report on Form 10-KSB filed with the SEC
on April 1, 2008.10.3
    
    
    Purchase Agreement, dated April 3, 2007 and August 3, 2007,Incorporated by reference to our Current Report on Form 8-K, filed with the
SEC on April 4, 2008.10.4
    
    
    Amendment No.1 to Subscription and Purchase Agreement, dated February 20, 2009,
Incorporated by reference to Exhibit 10.1 on our Current Report on Form 8-K filed
with the SEC on February 25, 2009.
  48




---



##### Table of Contents



No.
    
    Description10.5
    
    
    Registration Rights Agreement, dated April 3, 2007 and August 3, 2007,
Incorporated by reference to Exhibit 10.2 on our Current Report on Form 8-K, filed
with the SEC on April 4, 2007.10.6
    
    
    Subscription and Purchase Agreement, dated July 8, 2008 by and between Clearant,
Inc. and CPI Investments, Inc, Incorporated by reference to Exhibit 1.1 on our
Current Report on Form 8-K, filed with the SEC on July 11, 2008.10.7
    
    
    Conversion Agreement, dated August 3, 2007 by and between Clearant, Inc. and John
McGionnis, Incorporated by reference to Exhibit 10.1 on our Current Report on Form
8-K, filed with the SEC on August 6, 2007.10.8
    
    
    Strategic Services Agreement, dated August 1, 2008 by and between Clearant, Inc.
and Cameron & Associates Corporate Finance, Inc., Incorporated by reference to
Exhibit 10.1 on our Current Report on Form 10-Q filed on November 14, 2008.14.1
    
    
    Codes of Ethics,Incorporated by reference to our Proxy Statement on
Form DEF14A for our annual meeting of stockholders held on June 30, 2005, filed
with the SEC on April 4, 2005.23.1
    
    
    Consent of Independent Registered Accountants.31.1
    
    
    Rule 13a-14(a) Certification of Chief Executive Officer and Chief Financial Officer.32.1
    
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to
18 U.S.C. Section 1350, as Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 *
    
    The referenced exhibit is a compensatory contract, plan or arrangement.  49




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##### Table of Contents



SIGNATURES
  CLEARANT, INC.By:

/s/ Jon GarfieldJon Garfield,Chief Executive Officer and Chief Financial Officer  Signature
    
    Title(s)
    
    Date/s/ Jon Garfield
    
    Chief Executive Officer,
    
    March 24, 2009Jon Garfield
    
    Chief Financial Officer and Director/s/ Michael Elek
    
    Director
    
    March 24, 2009Michael Elek/s/ Michael Bartlett
    
    Chairman of the Board and
    
    March 24, 2009Michael Bartlett
    
    Director/s/ Kenneth W. Davidson
    
    Director
    
    March 24, 2009Kenneth W. Davidson/s/ Alan S. Blazei
    
    Director
    
    March 24, 2009Alan S. Blazei/s/ Susan E. Etzel
    
    Chief Accounting Officer and
    
    March 24, 2009Susan E. Etzel
    
    Controller
  50




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##### Table of Contents



EXHIBIT INDEX
 No.
    
    Description2.1
    
    
    Merger Agreement and Plan of Reorganization, dated March 31, 2005, by and among
Clearant, Inc., Bliss Essentials Corp., and Thomas Gelfand, Howard Gelfand and
Kathleen Rufh, Incorporated by reference to Exhibit 10.1 on our Current Report on
Form 8-K, filed with the SEC on April 4, 2005.2.2
    
    
    Asset Purchase Agreement, dated March 31, 2005, by and among Clearant, Inc., Bliss
Essentials Corp., and Thomas Gelfand, Howard Gelfand and Kathleen Rufh,
Incorporated by reference to Exhibit 10.2 on our Current Report on Form 8-K, filed
with the SEC on April 4, 2005.2.3
    
    
    Merger Agreement and Plan of Merger, dated June 30, 2005, by and between Clearant,
Inc. and CI Merger Corporation, Incorporated by reference to our Proxy Statement
on Form DEF14A for our annual meeting of stockholders held on June 30, 2005, filed
with the SEC on April 4, 2005.3.1
    
    
    Amended and Restated Certificate of Incorporation Clearant, Inc., a Delaware
corporation, Incorporated by reference to Exhibit 3.1 on our Current Report on
Form 10-KSB filed with the SEC on April 1, 2008.3.2
    
    
    Bylaws of Clearant, Inc., a Delaware corporation,Incorporated by
reference to our Proxy Statement on Form DEF14A for our annual meeting of
stockholders held on June 30, 2005, filed with the SEC on April 4, 2005.4.1
    
    
    Specimen Common Stock Certificate,Incorporated by reference to Exhibit
4.2 on our Registration Statement on Form S-3, filed with the SEC on November 23,
2005.10.1
    *
    
    2005 Stock Award Plan,Incorporated by reference to Appendix F to our
Proxy Statement on Form DEF14A for our annual meeting of stockholders held on June
30, 2005, filed with the SEC on April 4, 2005.10.2
    
    
    Amended and Restated Employment Agreement between Clearant, Inc. and Jon M.
Garfield dated as of June 7, 2006, effective as of August 1, 2005, Incorporated by
reference to Exhibit 10.2 on our Current Report on Form 10-KSB filed with the SEC
on April 1, 2008.10.3
    
    
    Purchase Agreement, dated April 3, 2007 and August 3, 2007,Incorporated by reference to our Current Report on Form 8-K, filed with the
SEC on April 4, 2008.10.4
    
    
    Amendment No.1 to Subscription and Purchase Agreement, dated February 20, 2009,
Incorporated by reference to Exhibit 10.1 on our Current Report on Form 8-K filed
with the SEC on February 25, 2009.10.5
    
    
    Registration Rights Agreement, dated April 3, 2007 and August 3, 2007,
Incorporated by reference to Exhibit 10.2 on our Current Report on Form 8-K, filed
with the SEC on April 4, 2007.10.6
    
    
    Subscription and Purchase Agreement, dated July 8, 2008 by and between Clearant,
Inc. and CPI Investments, Inc, Incorporated by reference to Exhibit 1.1 on our
Current Report on Form 8-K, filed with the SEC on July 11, 2008.10.7
    
    
    Conversion Agreement, dated August 3, 2007 by and between Clearant, Inc. and John
McGionnis, Incorporated by reference to Exhibit 10.1 on our Current Report on Form
8-K, filed with the SEC on August 6, 2007.10.8
    
    
    Strategic Services Agreement, dated August 1, 2008 by and between Clearant, Inc.
and Cameron & Associates Corporate Finance, Inc., Incorporated by reference to
Exhibit 10.1 on our Current Report on Form 10-Q filed on November 14, 2008.14.1
    
    
    Codes of Ethics,Incorporated by reference to our Proxy Statement on
Form DEF14A for our annual meeting of stockholders held on June 30, 2005, filed
with the SEC on April 4, 2005.23.1
    
    

Consent of Independent Registered Accountants.31.1
    
    

Rule 13a-14(a) Certification of Chief Executive Officer and Chief Financial Officer.32.1
    
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to
18 U.S.C. Section 1350, as Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 *
    
    The referenced exhibit is a compensatory contract, plan or arrangement.  51