##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the Transition Period from

to
 Commission file number 001-14665
 CLAIMSNET.COM
INC.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    75-2649230
(I.R.S. Employer
Identification No.)14860 Montfort Dr, Suite 250
Dallas, Texas
    
    75254(Address of principal executive offices)
    
    (Zip Code)
 
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller Reporting Company þ
 o þ




---



##### 



PART I. FINANCIAL INFORMATIONITEM 1. Financial StatementsConsolidated Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010
    
    
    3Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31,
2011 and 2010
    
    
    4Consolidated Statements of Changes in Stockholders Deficit for the Year Ended December
31, 2010 and the Three Months Ended March 31, 2011 (unaudited)
    
    
    5Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31,
2011 and 2010
    
    
    6Notes to Consolidated Financial Statements
    
    
        7ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9ITEM 4. Controls and Procedures
    
    
    13PART II. OTHER INFORMATIONITEM 6. Exhibits
    
    
    14SIGNATURES
    
    
    1631.1 Certification of Don Crosbie31.2 Certification of Laura M. Bray32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Don Crosbie32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Laura M. Bray
   -2-




---



##### Table of Contents



ITEM 1:
    
    FINANCIAL STATEMENTS
  
 
 (Unaudited) 
March 31,
    
    
    December 31,2011
    
    
    2010ASSETSCURRENT ASSETSCash and equivalents
    
    $
    25
    
    
    $
    23Accounts receivable, net of allowance for
doubtful accounts of $5 and $6
    
    
    336
    
    
    
    339Prepaid expenses and other current assets
    
    
    20
    
    
    
    31Total current assets
    
    
    381
    
    
    
    393EQUIPMENT, FIXTURES AND SOFTWARETotal equipment, fixtures and software, net
    
    
    1
    
    
    
    4INTANGIBLE AND OTHER ASSETSGoodwill
    
    
    
    
    
    
    138TOTAL ASSETS
    
    $
    382
    
    
    $
    535LIABILITIES AND STOCKHOLDERS DEFICITCURRENT LIABILITIESAccounts payable
    
    $
    409
    
    
    $
    375Accrued payroll and other current liabilities
    
    
    61
    
    
    
    102Accrued interest  related parties
    
    
    103
    
    
    
    99Deferred revenues  current portion
    
    
    11
    
    
    
    10Notes payable to related parties
    
    
    1,070
    
    
    
    1,040Convertible notes payable to related parties
    
    
    10
    
    
    
    10Total current liabilities
    
    
    1,664
    
    
    
    1,636LONG-TERM LIABILITIESDeferred revenues  long-term portion
    
    
    9
    
    
    
    10Total long-term liabilities
    
    
    9
    
    
    
    10Total liabilities
    
    
    1,673
    
    
    
    1,646STOCKHOLDERS DEFICITConvertible preferred stock, $.001 par value; 4,000,000 shares authorized; 720
Shares of Series D (liquidation preference of $180) and 50 shares of Series E
(liquidation preference of $15) issued and outstanding, convertible into common
shares at 1,000 common shares per 1 convertible preferred share as of March 31,
2011 and December 31, 2010
    
    
    
    
    
    
    Common stock, $.001 par value; 40,000,000 shares authorized; 34,874,696
shares issued and outstanding as of March 31, 2011 and December 31, 2010
    
    
    35
    
    
    
    35Additional capital
    
    
    44,896
    
    
    
    44,896Accumulated deficit
    
    
    (46,222
    )
    
    
    (46,042
    )Total stockholders deficit
    
    
    (1,291
    )
    
    
    (1,111
    )TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
    
    $
    382
    
    
    $
    535
   -3-




---



##### Table of Contents



Three Months EndedMarch 31,2011
    
    
    2010REVENUES
    
    $
    573
    
    
    $
    578COST OF REVENUES
    
    
    434
    
    
    
    414GROSS PROFIT
    
    
    139
    
    
    
    164OPERATING EXPENSESSelling, general and administrative
    
    
    176
    
    
    
    173Impairment of Goodwill
    
    
    138
    
    
    
    Total operating expenses
    
    
    314
    
    
    
    173LOSS FROM OPERATIONS
    
    
    (175
    )
    
    
    (9
    )OTHER INCOME (EXPENSE)Interest expense  related parties
    
    
    (5
    )
    
    
    (7
    )NET LOSS
    
    $
    (180
    )
    
    $
    (16
    )NET LOSS PER COMMON SHARE (BASIC AND DILUTED)
    
    $
    (0.01
    )
    
    $
    (0.00
    )WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (BASIC AND DILUTED)
    
    
    34,875
    
    
    
    34,875
   -4-




---



##### Table of Contents



Number of
    
    
    
    
    
    
    Number ofPreferred
    
    
    
    
    
    
    Common
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalShares
    
    
    Preferred
    
    
    Shares
    
    
    Common
    
    
    Additional
    
    
    Accumulated
    
    
    StockholdersOutstanding
    
    
    Stock
    
    
    Outstanding
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    DeficitBalances at
December 31, 2009
    
    
    1
    
    
    $
    
    
    
    
    34,875
    
    
    $
    35
    
    
    $
    44,896
    
    
    $
    (45,755
    )
    
    $
    (824
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (287
    )
    
    
    (287
    )Balances at
December 31, 2010
    
    
    1
    
    
    
    
    
    
    
    34,875
    
    
    
    35
    
    
    
    44,896
    
    
    
    (46,042
    )
    
    
    (1,111
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (180
    )
    
    
    (180
    )Balances at March
31, 2011
    
    
    1
    
    
    $
    
    
    
    
    34,875
    
    
    $
    35
    
    
    $
    44,896
    
    
    $
    (46,222
    )
    
    $
    (1,291
    )
   -5-




---



##### Table of Contents



Three Months EndedMarch 31,2011
    
    
    2010CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (180
    )
    
    $
    (16
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    3
    
    
    
    3Impairment of goodwill
    
    
    138
    
    
    
    Bad debt expense
    
    
    1
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    2
    
    
    
    1Prepaid expenses and other current assets
    
    
    24
    
    
    
    4Current liabilities and deferred revenue
    
    
    (16
    )
    
    
    (28
    )Net cash used in operating activities
    
    
    (28
    )
    
    
    (36
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from notes payable to related parties
    
    
    30
    
    
    
    115Net cash provided by financing activities
    
    
    30
    
    
    
    115NET INCREASE IN CASH AND EQUIVALENTS
    
    
    2
    
    
    
    79CASH AND EQUIVALENTS, BEGINNING OF PERIOD
    
    
    23
    
    
    
    18CASH AND EQUIVALENTS, END OF PERIOD
    
    $
    25
    
    
    $
    97SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    
    
    
    $
    Cash paid for taxes
    
    $
    
    
    
    $
    
   -6-




---



##### Table of Contents



1.
    
    BASIS OF PRESENTATION
 In the opinion of management, the accompanying unaudited consolidated financial statements
include all necessary adjustments (consisting of normal recurring adjustments) and present
fairly the consolidated financial position of Claimsnet.com inc. and subsidiaries (the
Company) as of March 31, 2011 and the results of their operations and cash flows for the
three months ended March 31, 2011 and 2010, in conformity with generally accepted accounting
principles for interim financial information applied on a consistent basis. The results of
operations for the three months ended March 31, 2011 are not necessarily indicative of the
results to be expected for the full year.
 Certain information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been omitted.
These financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Companys Annual Report on Form 10-K
for the year ended December 31, 2010, as filed with the Securities and Exchange Commission
on February 24, 2011.
 2.
    
    NEED FOR ADDITIONAL CAPITAL AND LIQUIDITY
 Management believes that available cash resources, together with anticipated revenues from
operations and the proceeds of recently completed financing activities and funding
commitments may not be sufficient to satisfy the Companys capital requirements past
September 30, 2011. Necessary additional capital may not be available on a timely basis or
on acceptable terms, if at all. In any of these events, the Company may be unable to
implement current plans for expansion or to repay debt obligations as they become due. If
sufficient capital cannot be obtained, the Company may be forced to significantly reduce
operating expenses to a point which would be detrimental to business operations, sell
business assets or discontinue some or all of its business operations, take other actions
which could be detrimental to business prospects and result in charges which could be
material to its operations and financial position, or cease operations altogether. In the
event that any future financing should take the form of the sale of equity securities, the
holders of the common stock and preferred stock may experience additional dilution. In the
event of a cessation of operations, there may not be sufficient assets to fully satisfy all
creditors, in which case the holders of equity securities will be unable to recoup any of
their investment.
 3.
    
    RECENT ACCOUNTING PRONOUNCEMENTS
 In October 2009, the FASB issued guidance that provides principles for allocation of
consideration among a revenue arrangements multiple-elements, allowing more flexibility in
identifying and accounting for separate deliverables under an arrangement. The guidance
introduces an estimated selling price method for valuing the elements of a bundled
arrangement if vendor-specific objective evidence or third-party evidence of selling price
is not available, and significantly expands related disclosure requirements. It is effective
on a prospective basis for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010. Alternatively, adoption may be on a
retrospective basis, and early application is permitted. The adoption did not have a
material impact on our consolidated financial statements or footnote disclosures.
 In December 2010, FASB issued ASU No. 2010-28 When to Perform Step 2 of the Goodwill
Impairment Test for Reporting Units with Zero or Negative Carrying Amounts,which modifies
goodwill impairment testing for reporting units with a zero or negative carrying amount.
Under the new guidance, an entity must consider whether it is more likely than not that
goodwill impairment exists for each reporting unit with a zero or negative carrying amount.
If it is more likely than not that goodwill impairment exists, the second step of the
goodwill impairment test in FASB Accounting Standards CodificationTM (ASC) 350-20-35,
Intangibles  Goodwill and Other: Goodwill, must be performed to measure the amount of
goodwill impairment loss, if any. Under the new guidance, if the carrying amount of a
reporting unit is zero or negative, an entity must assess whether it is more likely than not
that goodwill impairment exists. To make that determination, an entity should consider
whether there are adverse qualitative factors that could impact the amount of goodwill,
including those listed in ASC 350-20-35-30. Those factors include, for example, an adverse
business climate, unexpected competition, a loss of key personnel, or a more-likely-than-not
expectation that part, or all, of the reporting unit will be disposed of. As a result of
the new guidance, an entity can
no longer assert that a reporting unit is not required to perform the second step of the
goodwill impairment test because the carrying amount of the reporting unit is zero or
negative, despite the existence of qualitative factors that indicate goodwill is more likely
than not impaired. The amended guidance in ASU 2010-28 was effective for public entities for
fiscal years, and for interim periods within those years, beginning after December 15, 2010,
with early adoption prohibited. The Companys adoption of this new pronouncement has
resulted in the impairment of $138,000 of goodwill. The goodwill was carried on the
Companys books as a result of the acquisition of Acceptius in fiscal year 2008.
  -7-




---



##### Table of Contents



4.
    
    EQUIPMENT, FIXTURES AND SOFTWARE
 Equipment, fixtures and software consists of the following at March 31, 2011 (in thousands):
 Computer hardware and software
    
    $
    524Software development costs
    
    
    1,999Furniture and fixtures
    
    
    31Office equipment
    
    
    28Leasehold improvements
    
    
    352,617Less accumulated depreciation and amortization
    
    
    (2,616
    )$
    1
 5.
    
    LOANS FROM RELATED PARTIES
 On March 2, 2011, the Company issued an unsecured promissory note upon receipt of $15,000
from Mr. Thomas Michel, a director (Michel). The note bears interest at the rate of
1.75% per annum. Payments equal to the principal and accrued and unpaid interest on the
note are due on demand, with thirty days notice.
 On March 2, 2011, the Company issued an unsecured promissory note upon receipt of $15,000
from Mr. J. R. Schellenberg, a related party (Schellenberg). The note bears interest at
the rate of 1.75% per annum. Payments equal to the principal and accrued and unpaid
interest on the note are due on demand.
 6.
    
    FAIR VALUE OF FINANCIAL INSTRUMENTS
 FASB Accounting Standards Codification Topic 825 requires disclosure about the fair value of
all financial assets and liabilities for which it is practicable to estimate. Cash, accounts
receivable, accounts payable, notes payable and other liabilities are carried at amounts
that reasonably approximate their fair values.
 
  -8-




---



##### Table of Contents



ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    our ability to raise additional capital and secure additional financing;
    
    our ability to market our services;
    
    our ability to develop and maintain strategic partnerships or alliances;
    
    our ability to maintain and increase our customer base;
    
    our ability to protect our intellectual property rights;
    
    our ability to further develop our technology and transaction processing
system;
    
    our ability to respond to competitive developments;
    
    our ability to attract and retain key employees;
    
    our ability to comply with government regulations;
    
    the effects of natural disasters, computer viruses and similar disruptions
to our computer systems;
    
    the ability of our clients to pay their debts when they become due;
    
    threats to Internet security; and
    
    acceptance of the Internet and other online services in the healthcare
industry and in general.
     -9-




---



##### Table of Contents




    
    to utilize our state of the art technology to help large healthcare organizations achieve
more efficient and less costly administrative operations;
 
    
    to market our services directly to the payer community and its trading partners;
 
    
    to aggressively pursue and support strategic relationships with companies that will in turn
aggressively market our services to large volume healthcare organizations, including insurers,
HMOs, third party administrators, provider networks, re-pricing organizations, clinics,
hospitals, laboratories, physicians and dentists;
 
    
    to provide total claim management services to payer organizations, including internet claim
submission, paper claim conversion to electronic transactions, and receipt of EDI
transmissions;
 
    
    to continue to expand our product offerings to include additional transaction processing
solutions, such as HMO encounter forms, eligibility and referral verifications, claim status
inquiries, electronic remittance advices, claim attachments, and other healthcare
administrative services, in order to diversify sources of revenue;
 
    
    to license our technology for other applications, including stand-alone purposes, internet
systems and private label use, and for original equipment manufacturers; and
 
    
    to seek merger and acquisition opportunities that enhance our growth and profitability
objectives.
    -10-




---



##### Table of Contents



st
    -11-




---



##### Table of Contents



.
  -12-




---



##### Table of Contents



ITEM 4.
    
    Controls and Procedures
       -13-




---



##### Table of Contents



ITEM 6.
    
    Exhibits
  3.1
    (1)
    
    Certificate of Incorporation.3.1
    (a)
(1)
    
    Certificate of Amendment to Certificate of Incorporation.3.1
    (b)(3)


    
    Certificate of Designation of Series A Preferred Stock.3.1
    (c)(3)
    
    Certificate of Designation of Series B Preferred Stock.3.1
    (d)(3)
    
    Certificate of Designation of Series C Preferred Stock.3.1
    (e)(3)
    
    Certificate of Designation of Series D Preferred Stock.3.1
    (f)(2)
    
    Certificate of Designation of Series E Preferred Stock.3.2
    (1)
    
    Bylaws, as amended.4.1
    (1)
    
    Form of Common Stock Certificate.4.2
    (3)
    
    Form of Warrant issued to Bo W. Lycke dated February 21, 2002.4.3
    (4)
    
    Form of Warrant issued to Don Crosbie dated June 3, 2003.4.4
    (4)
    
    Form of Warrant issued to certain employees dated June 3, 2003.4.5
    (4)
    
    Form of Warrant issued to Thomas Michel dated June 3, 2003.4.6
    (4)
    
    Form of Warrant issued to Alfred Dubach dated June 3, 2003.4.7
    (5)
    
    Form of Warrant issued to Gary J. Austin dated September 21, 2004.4.8
    (5)
    
    Form of Warrant issued to Laura M. Bray dated September 21, 2004.4.9
    (5)
    
    Form of Warrant issued to Don Crosbie dated September 21, 2004.10.1
    (6)
    
    Unsecured Convertible Promissory Note between Claimsnet.com and
Thomas Michel dated March 2, 2011.10.2
    (6)
    
    Unsecured Promissory Note between Claimsnet.com and J. R.
Schellenberg dated March 2, 2011.31.1
    
    
    Certification of Don Crosbie.31.2
    
    
    Certification of Laura M. Bray.32.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, of Don Crosbie.32.2
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, of Laura M. Bray.
  -14-




---



##### Table of Contents



(1)
    
    Incorporated by reference to the Registrants registration statement on Form S-1
(Registration No. 333-36209).(2)
    
    Incorporated by reference to the Registrants Annual Report on Form 10-K, for the
Year Ended December 31, 2002 filed on April 1, 2003.(3)
    
    Incorporated by reference to the Registrants Annual Report on Form 10-K for the
year ended December 31, 2001 filed on April 15, 2002.(4)
    
    Incorporated by reference to the Registrants Current Report on Form 10-KSB dated
March 29, 2004.(5)
    
    Incorporated by reference to the Registrants Current Report on Form 10-KSB dated
March 16, 2005.(6)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K dated March
2, 2011 filed on March 8, 2011.  -15-




---



##### Table of Contents



CLAIMSNET.COM INC. 
(Registrant)April
    
    29, 2011By:
    
    /s/ Don CrosbieDon CrosbieChief Executive OfficerApril 29, 2011By:
    
    /s/ Laura M. BrayLaura M. BrayChief Financial Officer
  -16-