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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, 2010
 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
    
    75-2649230(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 14860 Montfort Dr, Suite 250Dallas, 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




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PART I. FINANCIAL INFORMATION
    
    
    3ITEM 1. Financial Statements
    
    
    3Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December 31, 2009
    
    
    3Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31,
2010 and 2009
    
    
    4Consolidated Statements of Changes in Stockholders Deficit for the Year Ended December
31, 2009 and the Three Months Ended March 31, 2010 (unaudited)
    
    
    5Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31,
2010 and 2009
    
    
    6Notes to Consolidated Financial Statements
    
    
    7ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9ITEM 4T. Controls and Procedures
    
    
    13PART II. OTHER INFORMATION
    
    
    14ITEM 6. Exhibits
    
    
    14SIGNATURES
    
    
    16CERTIFICATIONS31.1  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
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(Unaudited)March 31,
    
    
    December 31,2010
    
    
    2009ASSETSCURRENT ASSETSCash and equivalents
    
    $
    97
    
    
    $
    18Accounts receivable, net of allowance for
doubtful accounts of $5 and $6
    
    
    312
    
    
    
    313Prepaid expenses and other current assets
    
    
    39
    
    
    
    43Total current assets
    
    
    448
    
    
    
    374EQUIPMENT, FIXTURES AND SOFTWARETotal equipment, fixtures and software, net
    
    
    116
    
    
    
    119INTANGIBLE AND OTHER ASSETSGoodwill
    
    
    138
    
    
    
    138TOTAL ASSETS
    
    $
    702
    
    
    $
    631LIABILITIES AND STOCKHOLDERS DEFICITCURRENT LIABILITIESAccounts payable
    
    $
    348
    
    
    $
    369Accrued payroll and other current liabilities
    
    
    91
    
    
    
    99Accrued interest  related parties
    
    
    77
    
    
    
    70Deferred revenues  current portion
    
    
    15
    
    
    
    18Notes payable to related parties  current portion
    
    
    990
    
    
    
    875Convertible notes payable to related parties  current portion
    
    
    10
    
    
    
    10Total current liabilities
    
    
    1,531
    
    
    
    1,441LONG-TERM LIABILITIESDeferred revenues  long-term portion
    
    
    11
    
    
    
    14Total long-term liabilities
    
    
    11
    
    
    
    14Total liabilities
    
    
    1,542
    
    
    
    1,455STOCKHOLDERS 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,
2010 and December 31, 2009
    
    
    
    
    
    
    Common stock, $.001 par value; 40,000,000 shares authorized; 34,874,696
shares issued and outstanding as of March 31, 2010 and December 31, 2009
    
    
    35
    
    
    
    35Additional capital
    
    
    44,896
    
    
    
    44,896Accumulated deficit
    
    
    (45,771
    )
    
    
    (45,755
    )Total stockholders deficit
    
    
    (840
    )
    
    
    (824
    )TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
    
    $
    702
    
    
    $
    631
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Three Months EndedMarch 31,2010
    
    
    2009REVENUES
    
    $
    578
    
    
    $
    519COST OF REVENUES
    
    
    414
    
    
    
    413GROSS PROFIT
    
    
    164
    
    
    
    106OPERATING EXPENSESSelling, general and administrative
    
    
    173
    
    
    
    251Total operating expenses
    
    
    173
    
    
    
    251LOSS FROM OPERATIONS
    
    
    (9
    )
    
    
    (145
    )OTHER INCOME (EXPENSE)Interest expense  related parties
    
    
    (7
    )
    
    
    (8
    )Interest expense  other
    
    
    
    
    
    
    (4
    )Total other income (expense)
    
    
    (7
    )
    
    
    (12
    )NET LOSS
    
    $
    (16
    )
    
    $
    (157
    )NET LOSS PER COMMON SHARE (BASIC AND DILUTED)
    
    $
    (0.00
    )
    
    $
    (0.00
    )WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (BASIC AND DILUTED)
    
    
    34,875
    
    
    
    32,618
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Number of
    
    
    
    
    
    
    Number ofPreferred
    
    
    
    
    
    
    Common
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalShares
    
    
    Preferred
    
    
    Shares
    
    
    Common
    
    
    Additional
    
    
    Accumulated
    
    
    StockholdersOutstanding
    
    
    Stock
    
    
    Outstanding
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    DeficitBalances at December 31, 2008
    
    
    1
    
    
    $
    
    
    
    
    31,147
    
    
    $
    31
    
    
    $
    44,001
    
    
    $
    (45,391
    )
    
    $
    (1,359
    )Issuance of common stock in payment of accrued interest  related
party
    
    
    
    
    
    
    
    
    
    
    195
    
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    49Issuance of common stock in payment of note principal  related party
    
    
    
    
    
    
    
    
    
    
    3,533
    
    
    
    4
    
    
    
    846
    
    
    
    
    
    
    
    850Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (364
    )
    
    
    (364
    )Balances at December 31, 2009
    
    
    1
    
    
    
    
    
    
    
    34,875
    
    
    
    35
    
    
    
    44,896
    
    
    
    (45,755
    )
    
    
    (824
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    (16
    )Balances at March 31, 2010
    
    
    1
    
    
    $
    
    
    
    
    34,875
    
    
    $
    35
    
    
    $
    44,896
    
    
    $
    (45,771
    )
    
    $
    (840
    )
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Three Months EndedMarch 31,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (16
    )
    
    $
    (157
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    3
    
    
    
    14Bad debt expense
    
    
    
    
    
    
    2Changes in operating assets and liabilities:Accounts receivable
    
    
    1
    
    
    
    12Prepaid expenses and other current assets
    
    
    4
    
    
    
    1Current liabilities and deferred revenue
    
    
    (28
    )
    
    
    44Net cash used in operating activities
    
    
    (36
    )
    
    
    (84
    )CASH FLOWS FROM INVESTING ACTIVITIES:Net cash used in investing activities
    
    
    
    
    
    
    CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments on capital lease obligation
    
    
    
    
    
    
    (12
    )Payment of note payable to related parties
    
    
    
    
    
    
    (50
    )Proceeds from notes payable to related parties
    
    
    115
    
    
    
    200Net cash provided by financing activities
    
    
    115
    
    
    
    138NET INCREASE IN CASH AND EQUIVALENTS
    
    
    79
    
    
    
    54CASH AND EQUIVALENTS, BEGINNING OF PERIOD
    
    
    18
    
    
    
    CASH AND EQUIVALENTS, END OF PERIOD
    
    $
    97
    
    
    $
    54SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    
    
    
    $
    10Cash paid for taxes
    
    $
    
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:Payment of accrued interest through issuance of common stock
    
    $
    
    
    
    $
    15Payment of note principal through issuance of common stock
    
    $
    
    
    
    $
    450
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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, 2010 and the results of their operations and cash flows for the
three months ended March 31, 2010 and 2009, 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, 2010 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, 2009, as filed with the Securities and Exchange Commission
on March 4, 2010.
 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, 2010. 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, curtail
research and development activities, 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.
    
    EQUIPMENT, FIXTURES AND SOFTWARE
 Equipment, fixtures and software consists of the following at March 31, 2010 (in thousands):
 Computer hardware and software
    
    $
    524Software development costs
    
    
    2,103Furniture and fixtures
    
    
    31Office equipment
    
    
    28Leasehold improvements
    
    
    352,721Less accumulated depreciation and amortization
    
    
    (2,605
    )$
    116
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4.
    
    LOANS FROM RELATED PARTIES
 On February 16, 2010, the Company issued an unsecured promissory note upon receipt of
$35,000 from Mr. Thomas Michel, a director (Michel). The note bears interest at the rate
of 3% 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 18, 2010, the Company issued an unsecured promissory note upon receipt of $80,000
from National Financial Corporation, a related party (NFC). The note bears interest at
the rate of 3% per annum. Payments equal to the principal and accrued and unpaid interest
on the note are due on demand.
 5.
    
    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.
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
    
    our ability to raise additional capital and secure additional financing;
 
    
    our ability to successfully implement our revised business strategy;
 
    
    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.
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
    
    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.
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.
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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 February 16, 2010.10.2(7)
    
    Unsecured Promissory Note between Claimsnet.com and National Financial
Corporation dated March 18, 2010.31.1
    
    
    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.
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(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
February 16, 2010 filed on February 18, 2010.(7)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K dated March
18, 2010 filed on March 22, 2010.  -15-




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CLAIMSNET.COM INC.
(Registrant)
April 27, 2010By:
    /s/ Don CrosbieDon CrosbieChief Executive Officer  By:
    /s/ Laura M. BrayLaura M. BrayChief Financial Officer  -16-