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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-KSB
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 000-50309
 Clearant, Inc.
 
  Delaware
    
    91-2190195(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)1801 Avenue of the Stars, Suite 435
    
    Los Angeles, California 90067(Address of principal executive offices)
    
    (City, State and Zip Code)
 (310) 479-4570
  None
 
  Common stock, $0.0001 par value per share
 
  o
 þ o
 o
 o þ
    o þ




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##### 



TABLE OF CONTENTS
 PageForward Looking Statements
    
    
    1PART I.Item 1. Description of Business
    
    
    2Item 2. Description of Property
    
    
    24Item 3. Legal Proceedings
    
    
    25Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25PART II.Item 5. Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities
    
    
    26Item 6. Managements Discussion and Analysis or Plan of Operation
    
    
    27Item 7. Financial Statements
    
    
    F-1Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    34Item 8A. Controls and Procedures
    
    
    34PART III.Item 9. Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act
    
    
    35Item 10. Executive Compensation
    
    
    37Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    40Item 12. Certain Relationships and Related Transactions; Director Independence
    
    
    42Item 13. Exhibits
    
    
    42Item 14. Principal Accountant Fees and Services
    
    
    43EXHIBITSExhibit 3.1Exhibit 10.2Exhibit 31.1Exhibit 32.1




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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 SEC.
    1




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PART I
 
 Item 1. Description of 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 HIV, West Nile, 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.
 ® ® ® ®
 ®
 ® ®
  2




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® ® ®
 ® ®
 
    
    Plasma protein therapeutics;
    
    Recombinant protein therapeutics;
    
    Medical devices; and
    
    Blood and blood-related products.
  Area of Focus: The Tissue Market
 ® ® ®
  ® ® ®
  3




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® ®
 ®
 Commercialization Strategy
 ® ® ® ® ®
  
    
    Two direct sales representatives and approximately eleven indirect sales groups,
for a total of approximately 94 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
 ® ® ® ®
 ® ®
  4




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Market Opportunity
    
    
    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.
 ® ® ® ®
  5




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® ® ®
 Competition: Existing Methods
  ®
  ® ®
 Other Potential Commercialization Markets: The Plasma Protein Therapeutics Market
  ®
  6




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®
 Other Potential Commercialization Markets: The Recombinant Products Market
   ®
 Other Potential Commercialization Markets: The Medical Device Market
 ® ®
 Competition
   7




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® ®
    8




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Regulatory Strategy
 ® ® ®
 ® ® ® ® ®
  ® ® ® ® ®
 Intellectual Property
  ®
   9




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®
 Employees
  Reports to Security Holders
    RISK FACTORS
 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.
   10




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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.
  ® ®
 ®
 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;
  11




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
    
    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.
  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.
 ® ® ® ®
  12




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® ®
 Our success will depend on our ability to retain our managerial personnel and to attract additional
personnel.
  ®
   We need to develop our financial and reporting processes, procedures and controls to support our
anticipated growth.
    13




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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®.
 ® ® ® ® ® ® ®
  ®
  14




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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.
 ® ®
 ®
  ® ®
  15




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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.
 ® ®
 ® ® ®
 ®
 We face environmental and other liabilities related to certain hazardous materials used in our
operations.
   16




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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.
 ® ® ® ® ® ®
 ® ®
  17




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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.
 ®
  18




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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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® ® ® ® ®
 ®
 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.
 ® ® ®
  ®
  20




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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.
   21




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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;
  22




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
    
    risk of entering new markets;
    
    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 audit opinion could 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.
   23




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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 2: Description of Property
    24




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Investment Policies
   
 Item 3: Legal Proceedings
  ®
 ®
 
 Item 4: Submission of Matters to a Vote of Security Holders
   25




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PART II
 
 Item 5: Market for Common Equity and Related Stockholder Matters and Small Business Issuer
Purchases of Equity Securities
 Market Information
  High
    
    
    LowFiscal year ended December 31, 20061First quarter
    
    $
    2.39
    
    
    $
    1.36Second quarter
    
    
    1.31
    
    
    
    0.48Third quarter
    
    
    0.53
    
    
    
    0.34Fourth quarter
    
    
    0.42
    
    
    
    0.27Fiscal year ended December 31, 20071First quarter
    
    $
    0.28
    
    
    $
    0.11Second quarter
    
    
    0.17
    
    
    
    0.02Third quarter 2
    
    
    1.99
    
    
    
    0.40Fourth 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
   26




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Securities Authorized For Issuance Under 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 columnand rights1
    
    
    warrants and rights
    
    
    (a))2Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    3,573,624
    
    
    $
    2.20
    
    
    
    7,018,308Equity compensation
plans not approved
by security holders
    
    
    0
    
    
    $
    0.00
    
    
    
    0Total
    
    
    3,573,624
    
    
    $
    2.20
    
    
    
    7,018,308
 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, 2007, there were 156,780 shares of
our common stock reserved for issuance upon the exercise of warrants and 3,416,844 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 7,018,306 shares were available for issuance under the 2005 Stock Award Plan. 
 Item 6: Managements Discussion and Analysis or Plan of Operation
 Managements Discussion and Analysis of Financial Condition and Results of Operations
 Results of Operations for the years ended December 31, 2007 and 2006
  Revenues
 ®
  27




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®
 Cost of Revenues
  Sales, General and Administrative Expenses
    ®
  28




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Research and Development Expenses
 ®
 Other Income/Expense
  Liquidity and Capital Resources
     29




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Going Concern
  Contractual Obligations and Commercial Commitments
 
 MoreLess than
    
    
    1 - 3
    
    
    3 - 5
    
    
    than 5Contractual Obligations
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsLease obligations
    
    $
    143
    
    
    $
    123
    
    
    $
    20
    
    
    
    
    
    
    
    Bridge loan
    
    $
    106
    
    
    $
    106
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    249
    
    
    $
    229
    
    
    $
    20
    
    
    
    
    
    
    
    
  30




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Critical Accounting Policies and Estimates
   Revenue Recognition and Deferred Revenue
 ® ® ®
 Cost of Revenues
 ®
 Inventories and Inventory Related Prepayments
 ®
  Identifiable Intangibles
   31




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Research and Development Costs
  Income Taxes
  Stock-Based Compensation
   Fair Value of Financial Instruments
  Legal Proceedings
  Recent Accounting Pronouncements
    32




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" "
  Off-Balance Sheet Arrangements
    33




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Item 7: Financial Statements
 CONTENTS
 PAGEREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    F-2FINANCIAL STATEMENTSBALANCE SHEET
    
    F-3STATEMENTS OF OPERATIONS
    
    F-4STATEMENTS OF STOCKHOLDERS EQUITY
    
    F-5STATEMENTS OF CASH FLOWS
    
    F-6NOTES TO FINANCIAL STATEMENTS
    
    F-7  F-19
  F-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
        
  F-2




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CLEARANT, INC.
 
 BALANCE SHEET
 (in thousands, except par value amounts)
 December 31,2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    1,062Accounts receivable, net of allowances of $26
    
    
    341Inventory, net of $849 inventory allowance
    
    
    0Inventory related prepayments, net of $406 inventory allowance
    
    
    0Prepaids and other assets
    
    
    68Total current assets
    
    
    1,471Property and equipment, net of $83 of accumulated depreciation
    
    
    87Identifiable intangibles, net of $1,217 of accumulated amortization
    
    
    991Deposits and other assets
    
    
    60Total assets
    
    $
    2,609Liabilities, Redeemable Preferred Stock and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    1,210Accrued liabilities
    
    
    733Bridge loans, net
    
    
    106Deferred revenue
    
    
    7Total current liabilities
    
    
    2,056Deferred revenue  noncurrent
    
    
    4Total liabilities
    
    
    2,060Stockholders equity (deficit):Common stock ($0.0001 par value; 200,000 shares authorized; 48,957
shares issued and outstanding)
    
    
    5Additional paid-in capital
    
    
    86,360Accumulated deficit
    
    
    (85,816
    )Total stockholders equity
    
    
    549Total liabilities, redeemable preferred stock and stockholders equity
    
    $
    2,609
 See accompanying notes to financial statements.
  F-3




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CLEARANT, INC.
 
 STATEMENTS OF OPERATIONS
 (in thousands, except per share amounts)
 Fiscal Year Ended December 31,2007
    
    
    2006Revenues:Licensing
    
    $
    90
    
    
    $
    327Direct distribution
    
    
    696
    
    
    
    232Fee for service
    
    
    115
    
    
    
    90Contract research and milestones
    
    
    183
    
    
    
    94Grants
    
    
    
    
    
    
    27Total revenues
    
    
    1,084
    
    
    
    770Cost of revenues
    
    
    981
    
    
    
    1,209Gross profit (Loss)
    
    
    103
    
    
    
    (439
    )Operating expenses:Sales, general and administrative
    
    
    3,374
    
    
    
    8,217Stock based compensation
    
    
    368
    
    
    
    490Research and development
    
    
    80
    
    
    
    926Total operating expenses
    
    
    3,822
    
    
    
    9,633Loss from operations
    
    
    (3,719
    )
    
    
    (10,072
    )Other income (expense):Interest income (expense), net
    
    
    20
    
    
    
    192Gain on settlement of obligation
    
    
    382
    
    
    
    117Loss on disposal of property and equipment
    
    
    (130
    )
    
    
    (35
    )Loss before provision (benefit) for income taxes
    
    
    (3,447
    )
    
    
    (9,798
    )Provision (benefit) for income taxes
    
    
    
    
    
    
    Net loss attributable to common stock
    
    $
    (3,447
    )
    
    $
    (9,798
    )Net loss per share:Basic and diluted
    
    $
    (0.16
    )
    
    $
    (3.44
    )Number of weighted average shares used in per
share calculation:Basic and diluted
    
    
    21,517
    
    
    
    2,849
 See accompanying notes to financial statements.
  F-4




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CLEARANT, INC.
 
 STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 (in thousands, except par value amounts)
 Stock-Common Stock,
    
    
    Additional
    
    
    
    
    
    
    holders$0.0001 par value
    
    
    Paid-in
    
    
    Accumulated
    
    
    EquityShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    (Deficit)Balance at December 31,
2005
    
    
    2,840
    
    
    $
    
    
    
    $
    82,183
    
    
    $
    (72,571
    )
    
    $
    9,612Exercise of common
stock options
    
    
    3
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    26Issuance of common
stock to consultants
for services
    
    
    27
    
    
    
    
    
    
    
    254
    
    
    
    
    
    
    
    254Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    490
    
    
    
    
    
    
    
    490Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,798
    )
    
    
    (9,798
    )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
    )
    
    $
    549
 See accompanying notes to financial statements.
  F-5




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CLEARANT, INC.
 
 STATEMENTS OF CASH FLOWS
 (in thousands, except for share and per share data)
 Year Ended December 31,2007
    
    
    2006Operating activitiesNet loss
    
    $
    (3,447
    )
    
    $
    (9,798
    )Adjustments to reconcile net loss to net cash used in operating activities:Provision for inventory and inventory related prepayments write down
    
    
    444
    
    
    
    811Loss on sale of property and equipment
    
    
    130
    
    
    
    35Depreciation and amortization
    
    
    407
    
    
    
    532Stock-based compensation
    
    
    368
    
    
    
    490Issuance of common stock to consultants for accounts payable
    
    
    109
    
    
    
    124Issuance of common stock to consultants for services rendered
    
    
    103
    
    
    
    154Non-cash interest expense associated with convertible debt financings
    
    
    
    
    
    
    Gain on settlement of obligations
    
    
    (382
    )
    
    
    (117
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (67
    )
    
    
    (66
    )Inventory
    
    
    (59
    )
    
    
    (683
    )Inventory related prepayments
    
    
    
    
    
    
    (513
    )Prepaids
    
    
    (82
    )
    
    
    3Accounts payable
    
    
    12
    
    
    
    616Accrued liabilities
    
    
    (37
    )
    
    
    (1,038
    )Deferred revenue
    
    
    (61
    )
    
    
    (37
    )Other assets and liabilities
    
    
    32
    
    
    
    234Net cash used in operating activities
    
    
    (2,530
    )
    
    
    (9,253
    )Investing activitiesCost of identified intangibles
    
    
    (58
    )
    
    
    (203
    )Capital expenditures
    
    
    (10
    )
    
    
    (134
    )Proceeds from sales of property and equipment, net
    
    
    22
    
    
    
    Net cash used in investing activities
    
    
    (46
    )
    
    
    (337
    )Financing activitiesIssuance of
common stock, net of costs of $344
    
    
    2,875
    
    
    
    Issuance of bridge loan
    
    
    200
    
    
    
    Exercise of common stock options
    
    
    
    
    
    
    26Principal payments on capital lease obligations
    
    
    
    
    
    
    (14
    )Net cash provided by financing activities
    
    
    3,075
    
    
    
    12Change in cash and cash equivalents
    
    
    499
    
    
    
    (9,578
    )Cash and cash equivalents, beginning of period
    
    
    563
    
    
    
    10,141Cash and cash equivalents, end of period
    
    $
    1,062
    
    
    $
    563Supplemental Disclosure of Cash Flow Information:Issuance of common stock for accounts payable
    
    $
    109
    
    
    $
    124Issuance of common stock to consultants for services
    
    $
    103
    
    
    $
    154Conversion of debt to equity
    
    $
    200
    
    
    $
    Cash paid for interest
    
    $
    
    
    
    $
    2
 See accompanying notes to financial statements.
  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 1  DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
 ® ® ® ® ® ® ® ®
     NOTE 2  GOING CONCERN
   F-7




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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
 ® ® ®
 Grants
 ®
 Cost of Revenues
 ®
 Settlement of Obligation
  Use of Estimates
   F-8




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 Cash Equivalents and Concentration of Credit Risk
  Inventories and Inventory Related Prepayments
 ®
  Property and Equipment
  Long-Lived Assets
  Identifiable Intangibles
  Research and Development Costs
   F-9




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 Income Taxes
    Stock-Based Compensation
      Expected volatility
    
    
    102.3%-201.0
    %Risk-free interest rate
    
    
    4.04%-4.60
    %Expected life in years
    
    
    5-9.88Expected dividend yield
    
    
    0
    %
   F-10




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 Fair Value of Financial Instruments
  New Accounting Pronouncements
       F-11




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 " "
  NOTE 4  NET LOSS PER SHARE
   For the Year Ended December 31,2007
    
    
    2006Stock Options
    
    
    3,416,844
    
    
    
    285,743Warrants
    
    
    156,780
    
    
    
    393,683
  For the year ended December 31,2007
    
    
    2006Basic and diluted net loss per share:Numerator:Net loss attributable to common stock
    
    $
    (3,447
    )
    
    $
    (9,798
    )Denominator:Weighted average common stock shares outstanding
    
    
    21,517
    
    
    
    2,849Net loss per share, basic and diluted
    
    $
    (0.16
    )
    
    $
    (3.44
    )
 NOTE 5  INVENTORY AND INVENTORY RELATED PREPAYMENTS
   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 6  PROPERTY AND EQUIPMENT
  2007Equipment
    
    $
    69Computer equipment and software
    
    
    66Furniture and fixtures
    
    
    27Leasehold improvements
    
    
    8170Less accumulated depreciation
    
    
    (83
    )$
    87
  NOTE 7  IDENTIFIABLE INTANGIBLES
  2007Trademarks
    
    $
    37Patents
    
    
    2,1712,208Less accumulated amortization
    
    
    (1,217
    )$
    991
   NOTE 8  RESTRICTED CASH
  NOTE 9  INCOME TAXES
   2007
    
    
    2006Deferred tax assets:Net operating loss carryforwards
    
    $
    27,790
    
    
    $
    26,716Purchase in-process research and development
    
    
    521
    
    
    
    496Research and development credits
    
    
    1,369
    
    
    
    1,379Depreciation, accrued expenses and other
    
    
    718
    
    
    
    471Net deferred tax assets
    
    
    30,398
    
    
    
    29,062Less valuation allowance
    
    
    (30,398
    )
    
    
    (29,062
    )$
    
    
    
    $
    
  F-13




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
    2007
    
    
    2006Federal statutory rate
    
    
    (34
    %)
    
    
    (34
    %)State taxes
    
    
    (6
    %)
    
    
    (5
    %)Tax credits & other
    
    
    (9
    %)
    
    
    3
    %Foreign loss with no benefit
    
    
    0
    %
    
    
    0
    %Valuation allowance
    
    
    49
    %
    
    
    36
    %
   NOTE 10  CAPITALIZATION
 Common Stock Transactions and Non-Cash Financing Activities
   F-14




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
      Series A Redeemable 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, 2005
    
    
    171,000
    
    
    $
    8.40-$111.16
    
    
    
    27,000
    
    
    $
    8.40-$101.08
    
    
    
    198,000
    
    
    $
    8.40-$111.16Granted
    
    
    119,000
    
    
    $
    6.16-$22.96
    
    
    
    4,000
    
    
    $
    4.90-$6.72
    
    
    
    123,000
    
    
    $
    4.90-$22.96Exercised
    
    
    
    
    
    $
    
    
    
    
    (3,000
    )
    
    $
    8.40
    
    
    
    (3,000
    )
    
    $
    8.40Change in status
    
    
    (19,000
    )
    
    $
    8.40-$44.38
    
    
    
    19,000
    
    
    $
    8.40-$44.38
    
    
    
    
    
    
    $
    8.40-$44.38Forfeited or expired
    
    
    (28,000
    )
    
    $
    8.40-$63.14
    
    
    
    (4,000
    )
    
    $
    32.20-$57.68
    
    
    
    (32,000
    )
    
    $
    8.40-$63.14Outstanding 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
    
    
    $
    4.90-$57.68
    
    
    
    3,417,000
    
    
    $
    0.35-$63.14
   WeightedWeighted
    
    
    AverageNumber
    
    
    Average
    
    
    RemainingOf
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Life (Years)
    
    
    ValueAs of December 31, 2006:Employees  Outstanding
    
    
    243,000
    
    
    $
    26.46
    
    
    
    7.17
    
    
    $
    692,000Employees  Expected to Vest
    
    
    152,000
    
    
    $
    28.00
    
    
    
    7.16
    
    
    $
    692,000Employees  Exercisable
    
    
    104,000
    
    
    $
    33.60
    
    
    
    6.03
    
    
    $
    692,000Non-Employees  Outstanding
    
    
    43,000
    
    
    $
    30.66
    
    
    
    5.78
    
    
    $
    287,000Non-Employees  Expected to Vest
    
    
    43,000
    
    
    $
    30.66
    
    
    
    5.78
    
    
    $
    287,000Non-Employees  Exercisable
    
    
    41,000
    
    
    $
    31.78
    
    
    
    5.78
    
    
    $
    287,000As 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  Options Outstanding
    
    
    173,000
    
    
    $
    8.09
    
    
    
    8.30
    
    
    $
    Non-Employees  Expected to Vest
    
    
    173,000
    
    
    $
    8.09
    
    
    
    8.30
    
    
    $
    Non-Employees  Options Exercisable
    
    
    41,000
    
    
    $
    31.47
    
    
    
    3.34
    
    
    $
    
    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
     Warrants OutstandingNumber
    
    
    Exercise
    
    
    Weighted Average of Remainingof Shares
    
    
    Price
    
    
    Contractual Life (Years)133,052
    
    
    $
    4.21
    
    
    
    2.8523,734
    
    
    $
    69.44
    
    
    
    0.15
  Risk-free interest rate
    
    
    3.0%-5.5
    %Expected life in years
    
    
    2-5Dividend yield
    
    
    0
    %Expected volatility
    
    70% to 80
    %
   F-17




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 NOTE 13  COMMITMENTS AND CONTINGENCIES
 Leases
  2008
    
    $
    1232009
    
    
    132010 and thereafter
    
    
    7Net minimum lease payments
    
    $
    143
   Litigation
  Supply and Distribution Agreements
 ®
 ®
 NOTE 14  401K PLAN
   F-18




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##### Table of Contents



CLEARANT, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except for share and per share data)
 NOTE 15  FACILITY CLOSING CHARGES
  NOTE 16  SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
  Quarter endedMar. 31,
    
    
    Jun. 30,
    
    
    Sept. 30,
    
    
    Dec. 31,2007Total 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 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
1
    
    $
    (0.33
    )
    
    $
    (0.11
    )
    
    $
    (0.02
    )
    
    $
    (0.02
    )Number of weighted average shares
    
    
    2,911
    
    
    
    7,778
    
    
    
    25,866
    
    
    
    48,9572006Total revenues
    
    $
    190
    
    
    $
    106
    
    
    $
    191
    
    
    $
    283Gross profit (loss)
    
    
    136
    
    
    
    48
    
    
    
    78
    
    
    
    (701
    )Total operating expenses
    
    
    2,802
    
    
    
    2,455
    
    
    
    2,733
    
    
    
    1,643Loss from operations
    
    
    (2,666
    )
    
    
    (2,407
    )
    
    
    (2,655
    )
    
    
    (2,344
    )Other income (expense), net
    
    
    153
    
    
    
    64
    
    
    
    41
    
    
    
    16Net loss
    
    
    (2,513
    )
    
    
    (2,343
    )
    
    
    (2,614
    )
    
    
    (2,328
    )Net loss attributable to common stock
    
    $
    (2,513
    )
    
    $
    (2,343
    )
    
    $
    (2,614
    )
    
    $
    (2,328
    )Net loss per share  Basic and diluted
    
    $
    (0.88
    )
    
    $
    (0.82
    )
    
    $
    (0.92
    )
    
    $
    (0.82
    )Number of weighted average shares
    
    
    2,840
    
    
    
    2,846
    
    
    
    2,851
    
    
    
    2,857
 1
    
    Due to the significant number of shares issued on
April 25, 2007 and August 23, 2007, the cumulative sum of
the quarterly net loss
per share is different than what is computed for the 12 months net
loss per share. This is due to how shares are weighted for quarterly
computations in accordance with FAS 128.  F-19




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##### Table of Contents



Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 8A. Controls and Procedures
 Disclosure Controls and Procedures
     Changes in Internal Controls
      34




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##### Table of Contents



PART III
 
 Item 9. Directors, Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance with Section 16(a) of the Exchange Act
 Directors and Executive Officers
  Name
    
    Age
    
    Position
    
    Start of TermJon Garfield
    
    
    44
    
    
    Chief Executive Officer
Chief Financial Officer
Director
Secretary
    
    January 25, 2007
August 2, 2005
August 3, 2007
August 2, 2005Rowland W. Day
    
    
    52
    
    
    Chairman of the Board
    
    August 3, 2007Michael Elek
    
    
    46
    
    
    Director
    
    August 3, 2007Maurice J. DeWald
    
    
    68
    
    
    Director
    
    September 13, 2007
 Jon Garfield
 Rowland W. Day II
 Michael Elek
 Maurice J. DeWald
  35




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##### Table of Contents



Family Relationships
  Legal Proceedings
  Section 16(a) Beneficial Ownership Reporting Compliance
     Code of Ethics
  Nominating Committee of the Board of Directors
   Audit Committee of the Board of Directors
   36




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##### Table of Contents



Independent Registered Public Accounting Firm
  
 Item 10. Executive Compensation
  SUMMARY COMPENSATION TABLE
 Name
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Equity
    
    
    Nonqualifiedand
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    Option
    
    
    Incentive Plan
    
    
    Deferred
    
    
    All Otherprincipal
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    Compensationposition
    
    Year
    
    
    ($)
    
    
    ($)1
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    Earnings ($)
    
    
    ($)
    
    
    Total ($)Jon Garfield,
    
    
    2007
    
    
    $
    240,000
    
    
    $
    0
    
    
    $
    
    
    
    $
    0
    3
    
    $
    
    
    
    $
    
    
    
    $
    2,869
    4
    
    $
    242,869Chief Executive
    
    
    2006
    
    
    $
    240,000
    
    
    $
    25,000
    
    
    $
    
    
    
    $
    0
    3
    
    $
    
    
    
    $
    
    
    
    $
    2,869
    4
    
    $
    267,869Officer and Chief
Financial Officer
2Susan Etzel,
    
    
    2007
    
    
    $
    129,896
    
    
    $
    10,000
    
    
    $
    
    
    
    $
    0
    6
    
    $
    
    
    
    $
    
    
    
    $
    115
    7
    
    $
    139,896Controller5
    
    
    2006
    
    
    $
    107,500
    
    
    $
    17,500
    
    
    $
    
    
    
    $
    0
    6
    
    $
    
    
    
    $
    
    
    
    $
    115
    7
    
    $
    125,000Carlo Brigola,
    
    
    2007
    
    
    $
    131,937
    
    
    $
    0
    
    
    $
    
    
    
    $
    0
    9
    
    $
    
    
    
    $
    
    
    
    $
    7,315
    10
    
    $
    139,137Sales Rep8
    
    
    2006
    
    
    $
    16,192
    
    
    $
    0
    
    
    $
    
    
    
    $
    0
    9
    
    $
    
    
    
    $
    
    
    
    $
    715
    10
    
    $
    16,792
 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, no adjustment to his salary has been made to date.3
    
    Mr. Garfield was granted 1,228,572 and 39,287 stock options for the years ended
December 31, 2007 and 2006, 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 2007 and 2006 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 the Controller in July 2005.6
    
    Ms. Etzel was granted 260,258 and 1,608 stock options for the years ended December
31,2007 and 2006, respectively. All options were granted under the 2005 Stock Award Plan. The
intrinsic value of the options granted in 2007 and 2006 is $0.7
    
    Ms. Etzel receives $50,000 worth of life insurance for
which premiums of $115 is paid annually.8
    
    Mr. Brigola joined us as hard tissue sales representative in November 2005.9
    
    Mr. Brigola was granted 136,686 and 0 stock options for the years ended December
31, 2007 and 2006, respectively. All options were granted under the 2005 Stock Award Plan. The
intrinsic value of the options granted in 2007 and 2006 is $0.10
    
    Mr. Brigola receives $50,000 worth of life insurance for
which premiums of $115 is paid annually and a $600 per month car allowance. Employment Agreements
   37




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##### Table of Contents



Material Modification to Stock Options
  Outstanding Equity Awards At Fiscal Year-End
  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 OPTION AWARDS
    
    
    STOCK AWARDSEquityIncentiveEquity
    
    
    PlanIncentive
    
    
    Awards:Market
    
    
    Plan
    
    
    Market orEquity
    
    
    
    
    
    
    
    
    
    
    Number
    
    
    Value
    
    
    Awards:
    
    
    PayoutIncentive Plan
    
    
    
    
    
    
    
    
    
    
    of
    
    
    of
    
    
    Number of
    
    
    Value ofAwards:
    
    
    
    
    
    
    
    
    
    
    Shares
    
    
    Shares
    
    
    Unearned
    
    
    UnearnedNumber of
    
    
    Number of
    
    
    Number of
    
    
    
    
    
    
    
    
    
    
    or Units
    
    
    or Units
    
    
    Shares,
    
    
    Shares,Securities
    
    
    Securities
    
    
    Securities
    
    
    
    
    
    
    
    
    
    
    of Stock
    
    
    of Stock
    
    
    Units or
    
    
    Units orUnderlying
    
    
    Underlying
    
    
    Underlying
    
    
    
    
    
    
    
    
    
    
    That
    
    
    That
    
    
    Other
    
    
    OtherUnexercised
    
    
    Unexercised
    
    
    Unexercised
    
    
    
    
    
    
    
    
    
    
    Have
    
    
    Have
    
    
    Rights That
    
    
    Rights ThatOptions
    
    
    Options
    
    
    Unearned
    
    
    
    
    
    
    
    
    
    
    Not
    
    
    Not
    
    
    Have Not
    
    
    Have Not(#)
    
    
    (#)
    
    
    Options
    
    
    Option Exercise
    
    
    Option Expiration
    
    
    Vested
    
    
    Vested
    
    
    Vested
    
    
    VestedName
    
    Exercisable1
    
    
    Unexercisable2
    
    
    (#)
    
    
    Price ($)
    
    
    Date
    
    
    (#)
    
    
    ($)
    
    
    (#)
    
    
    (#)Jon Garfield
    
    
    46,431
    
    
    
    1,235,714
    
    
    
    
    
    
    
    14,286 @ $54.04
    
    
    
    14,286 @ 8/30/15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chief Executive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,786 @ $22.96
    
    
    
    1,786 @ 1/27/16Officer and Chief
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,786 @ $15.68
    
    
    
    1,786 @ 4/14/16Financial Officer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,715 @ $12.74
    
    
    
    35,715 @ 5/1/1628,572 @ $0.35
    
    
    
    28,572 @ 4/4/171,200,000 @ .45
    
    
    
    1,200,000 @ 9/12/17Susan Etzel
    
    
    4,143
    
    
    
    258,795
    
    
    
    
    
    
    
    1,072 @ $63.14
    
    
    
    1,072 @ 7/29/15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Controller
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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 @ 9/12/17Carlo Brigola,
    
    
    0
    
    
    
    136,686
    
    
    
    
    
    
    
    2,400 @ $0.35
    
    
    
    2,400 @ 4/4/17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sales Rep
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,286 @ $0.56
    
    
    
    14,286 @ 8/14/17120,000 @ $0.45
    
    
    
    120,000 @ 9/12/17
 1
    
    Represents shares that are vested and/or immediately exercisable. All option shares
were granted under either the 2000 or 2005 Stock Award Plan and are pre-reverse stock split.2
    
    Represents shares that are unvested and not immediately exercisable.  38




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##### Table of Contents



Compensation Of Directors
  DIRECTOR COMPENSATION
 Non-EquityFees
    
    
    
    
    
    
    
    
    
    
    Incentive
    
    
    Non-Qualified
    
    
    AllEarned or
    
    
    Stock
    
    
    Option
    
    
    Plan
    
    
    Deferred
    
    
    OtherPaid in
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    CompensationName
    
    Cash ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    Earnings ($)
    
    
    ($)
    
    
    Total ($)John S. Wehrle 1
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0Nolan H. Sigal 1
    
    $
    7,595
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    7,595
    
    
    $
    15,190Herve de Kergrohen 1
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0Alexander Man-Kit Ngan
2
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0Rowland W. Day II 3
    
    $
    67,500
    
    
    $
    
    
    
    $
    0
    7
    
    $
    
    
    
    $
    
    
    
    $
    45,000
    
    
    $
    112,500Michael Elek 4
    
    $
    
    
    
    $
    
    
    
    $
    0
    7
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0Gaddo Cardini 5
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0Maurice DeWald 6
    
    $
    
    
    
    $
    
    
    
    $
    0
    7
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0
 1
    
    Resigned as a member of our board of directors effective April 26, 2007. As of July
26, 2007, none of the directors has exercised any of his options and all of his options have
expired.2
    
    Resigned as a member of our board of directors effective January 16, 2007. As of May
11, 2007, Mr. Ngan has not exercised any of his options and all of his options have expired.3
    
    Appointed as a member of our board of directors effective April 5, 2007. Since that
time, Mr. Day has earned $66,375 for legal services that he has provided to us. He is paid is
monthly installments. On April 1, 2007, Mr. Day began receiving $7,500 a month for his board
services. Payments are for a twelve-month period ending March 31, 2008.4
    
    Mr. Elek has received no compensation for his services.5
    
    Appointed as a member of our board of directors effective April 5, 2007 and resigned
as such on May 21, 2007.6
    
    Appointed as a member of our board of directors effective September 13, 2007. Mr.
DeWald has received no compensation for his services.7
    
    On September 13, 2007, Mr. Day, Mr. Elek and Mr. DeWald were each granted 400,000
stock options. These options are unvested and not immediately exercisable and vest 25% annually
over four years. The intrinsic value of the options granted is $0.  39




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##### Table of Contents



Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 Securities Authorized For Issuance Under Equity Compensation Plans
  Equity Compensation Plan Information
 Number ofsecurities remainingavailable for futureissuance underNumber of
    
    
    
    
    
    
    equitysecurities to be
    
    
    
    
    
    
    compensation plansissued upon exercise
    
    
    Weighted-average
    
    
    (excludingof outstanding
    
    
    exercise price of
    
    
    securitiesoptions, warrants
    
    
    outstanding options,
    
    
    reflected in columnand rights1
    
    
    warrants and rights
    
    
    (a))2Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    3,573,624
    
    
    $
    2.20
    
    
    
    7,018,306Equity compensation
plans not approved
by security holders
    
    
    
    
    
    $
    
    
    
    
    Total
    
    
    3,573,624
    
    
    $
    2.20
    
    
    
    7,018,306
 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, 2007, there were 156,780 shares of
our common stock reserved for issuance upon the exercise of warrants and 3,416,844 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 7,018,306 shares were available for issuance under the 2005 Stock Award Plan.  40




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##### Table of Contents



Security Ownership of Certain Beneficial Owners and Management
  Amount and Nature
    
    
    Percent ofTitle of Class
    
    Name and Address of Beneficial Owner1
    
    of Beneficial Owner1
    
    
    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
    
    
    769,645
    
    
    
    1.6
    %Common stock
    
    Maurice J. DeWald
    
    
    0
    
    
    
    0
    %Common stock
    
    All directors and executive officers as a group (4 persons)
    
    
    9,620,936
    
    
    
    19.7
    %
 1
    
    Applicable percentage ownership is based on 48,957,445 shares of common stock
outstanding at March 27, 2008. The number of shares of common stock owned are those beneficially
owned as determined under the rules of the SEC, including any shares of common stock as to which a
person has sole or shared voting or investment power and any shares of common 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 27, 2008 to purchase an aggregate 55,359 shares of common
stock.   41




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##### Table of Contents



Item 12. Certain Relationships and Related Transactions
 Transactions with Related Persons
  Director Independence
  
 Item 13: Exhibits
 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
Rufh12.2
    
    
    Asset Purchase Agreement, dated March 31, 2005, by and among Clearant, Inc., Bliss
Essentials Corp., and Thomas Gelfand, Howard Gelfand and Kathleen Rufh12.3
    
    
    Merger Agreement and Plan of Merger, dated June 30, 2005, by and between Clearant, Inc.
and CI Merger Corporation23.1
    
    
    Amended and Restated Certificate of Incorporation Clearant, Inc., a Delaware corporation3.2
    
    
    Bylaws of Clearant, Inc., a Delaware corporation24.1
    
    
    Specimen Common Stock Certificate310.1
    *
    
    2005 Stock Award Plan410.2
    
    
    Amended and Restated Employment Agreement between Clearant, Inc. and Jon M. Garfield
dated as of June 7, 2006, effective as of August 1, 2005.10.3
    
    
    Purchase Agreement, dated April 3, 2007 and August 3, 2007510.4
    
    
    Registration Rights Agreement, dated April 3, 2007 and August 3, 2007514.1
    
    
    Codes of Ethics231.1
    
    
    Rule 13a-14(a) Certification of Chief Executive Officer and Chief Financial Officer32.1
    
    
    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.1
    
    Incorporated by reference to our Current Report on Form 8-K, filed with the
SEC on April 4, 2005.2
    
    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
    
    Incorporated by reference to our Registration Statement on Form S-3, filed
with the SEC on November 23, 2005.4
    
    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, 2005.5
    
    Incorporated by reference to our Current Report on Form 8-K, filed with the
SEC on April 4, 2007.  42




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##### Table of Contents



Item 14: Principal Accountant Fees and Services
 Audit Fees
  Fiscal Year
    
    
    Fiscal Year2007
    
    
    2006Audit Fees
    
    $
    146,118
    
    
    $
    141,746Audit-Related Fees
    
    $
    20,690
    
    
    $
    6,722Tax Fees
    
    $
    16,187
    
    
    $
    17,440All Other Fees
    
    $
    
    
    
    $
    
 
  Tax Fees
  All Other Fees
  Pre-Approval Policy for Audit Services
   43




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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

Jon Garfield
    
    Chief Executive Officer, Chief
Financial Officer and Director
    
    March 31, 2008/s/ Rowland Day

Rowland Day
    
    Director
    
    March 31, 2008/s/
Michael Elek

Michael Elek
    
    Director
    
    March 31, 2008/s/ Maurice J. DeWald

Maurice J. DeWald
    
    Director
    
    March 31, 2008/s/ Susan Etzel

Susan Etzel
    
    Controller
    
    March 31, 2008
  44




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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
Rufh12.2
    
    
    Asset Purchase Agreement, dated March 31, 2005, by and among Clearant, Inc., Bliss
Essentials Corp., and Thomas Gelfand, Howard Gelfand and Kathleen Rufh12.3
    
    
    Merger Agreement and Plan of Merger, dated June 30, 2005, by and between Clearant, Inc.
and CI Merger Corporation23.1
    
    
    Amended and Restated Certificate of Incorporation Clearant, Inc., a Delaware corporation3.2
    
    
    Bylaws of Clearant, Inc., a Delaware corporation24.1
    
    
    Specimen Common Stock Certificate310.1
    *
    
    2005 Stock Award Plan410.2
    
    
    Amended and Restated Employment Agreement between Clearant, Inc. and Jon M. Garfield
dated as of June 7, 2006, effective as of August 1, 2005.10.3
    
    
    Purchase Agreement, dated April 3, 2007 and August 3, 2007510.4
    
    
    Registration Rights Agreement, dated April 3, 2007 and August 3, 2007514.1
    
    
    Codes of Ethics231.1
    
    
    Rule 13a-14(a) Certification of Chief Executive Officer and Chief Financial Officer32.1
    
    
    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.1
    
    Incorporated by reference to our Current Report on Form 8-K, filed with the
SEC on April 4, 2005.2
    
    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
    
    Incorporated by reference to our Registration Statement on Form S-3, filed
with the SEC on November 23, 2005.4
    
    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, 2005.5
    
    Incorporated by reference to our Current Report on Form 8-K, filed with the
SEC on April 4, 2007.  45