<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB


(Mark One)
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended June 30, 2004

                                       OR

[ ]      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

                               CLAIMSNET.COM INC.
                               ------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                                 75-2649230
-------------------------------                              -------------------
(State or other jurisdiction of                                (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                          14860 Montfort Dr, Suite 250
                               Dallas, Texas 75254
                               -------------------
               (Address of principal executive offices) (Zip Code)


Registrant's telephone number, including area code: 972-458-1701

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common Stock, $.001 par value,
24,726,180 shares outstanding as of July 20, 2004.

Transitional Small Business Disclosure Format   Yes [ ]     No [X]


<PAGE>


                       CLAIMSNET.COM INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS




PART I.  FINANCIAL INFORMATION

     ITEM 1.      Financial Statements

                  Consolidated Balance Sheets as of June 30, 2004 (unaudited)
                  and December 31, 2003 (audited)

                  Consolidated Statements of Operations (unaudited) for the
                  Three Months Ended June 30, 2004 and 2003, and for the Six
                  Months Ended June 30, 2004 and 2003

                  Consolidated Statements of Changes in Stockholders' Deficit
                  for the Year Ended December 31, 2003 (audited) and the Six
                  Months Ended June 30, 2004 (unaudited)

                  Consolidated Statements of Cash Flows (unaudited) for the Six
                  Months Ended June 30, 2004 and 2003

                  Notes to Consolidated Financial Statements

     ITEM 2.      Management's Discussion and Analysis of Financial Condition
                  and Results of Operations

     ITEM 3.      Controls and Procedures


PART II.  OTHER INFORMATION

     ITEM 2.      Changes in Securities

     ITEM 6.      Exhibits and Reports on Form 8-K


SIGNATURES

CERTIFICATIONS


                                       2

<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1:   FINANCIAL STATEMENTS
<TABLE>

                                     CLAIMSNET.COM INC. AND SUBSIDIARIES
                                         CONSOLIDATED BALANCE SHEETS
                                      (In thousands, except share data)
<CAPTION>
                                                                                 (Unaudited)       (Audited)
                                                                                   June 30,      December 31,
                                                                                      2004           2003
                                                                                  ------------   ------------
<S>                                                                               <C>            <C>
ASSETS

CURRENT ASSETS
   Cash and equivalents                                                           $        31    $        66
   Accounts receivable, net of allowance for
     doubtful accounts of $6 and $9, respectively                                         102            114
   Prepaid expenses and other current assets                                               30             56
                                                                                  ------------   ------------
     Total current assets                                                                 163            236

EQUIPMENT, FIXTURES AND SOFTWARE
   Computer hardware and software                                                       1,077          1,077
   Software development costs                                                           1,977          1,977
   Furniture and fixtures                                                                  31             31
   Office equipment                                                                        25             25
   Leasehold improvements                                                                  35             26
                                                                                  ------------   ------------
                                                                                        3,145          3,136
   Accumulated depreciation and amortization                                           (3,058)        (3,036)
                                                                                  ------------   ------------
     Total equipment, fixtures and software                                                87            100
                                                                                  ------------   ------------
TOTAL ASSETS                                                                      $       250    $       336
                                                                                  ============   ============
LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
   Accounts payable                                                               $        79    $       162
   Accrued payroll and other current liabilities                                          120            134
   Customer prepayments                                                                    28             --
   Deferred revenues                                                                      190            208
   Notes payable to related parties - short term                                          170            151
                                                                                  ------------   ------------
     Total current liabilities                                                            587            655

LONG TERM LIABILITIES
   Notes payable to related parties - long term                                            10             10
   Notes payable - long term                                                               25             25
                                                                                  ------------   ------------
     Total long term liabilities                                                           35             35
                                                                                  ------------   ------------
     Total liabilities                                                                    622            690

STOCKHOLDERS' DEFICIT
   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 as of June 30, 2004
     and December 31, 2003                                                                 --             --
   Common stock, $.001 par value; 40,000,000 shares authorized;
     24,726,000 shares and 23,201,000 shares issued and outstanding as of
     June 30, 2004 and December 31, 2003, respectively                                     25             23
   Additional capital                                                                  42,885         42,582
   Accumulated deficit                                                                (43,282)       (42,959)
                                                                                  ------------   ------------
     Total stockholders' deficit                                                         (372)          (354)
                                                                                  ------------   ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                       $       250    $       336
                                                                                  ============   ============


                               See notes to consolidated financial statements.

                                                      3
</TABLE>


<PAGE>
<TABLE>

                             CLAIMSNET.COM INC. AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF OPERATIONS
                            (In thousands, except per share data)
                                         (Unaudited)
<CAPTION>

                                                 Three Months Ended       Six Months Ended
                                                      June 30,                June 30,
                                               ---------------------   ---------------------
                                                 2004        2003        2004        2003
                                               ---------   ---------   ---------   ---------
<S>                                            <C>         <C>         <C>         <C>
REVENUES                                       $    225    $    168    $    440    $    330

Cost of Revenues                                    168         174         308         374
                                               ---------   ---------   ---------   ---------
Gross PROFIT (Loss)                                  57          (6)        132         (44)
                                               ---------   ---------   ---------   ---------
OPERATING EXPENSES:
   Research and development                          --           4          --          14
   Selling, general and administrative              269         506         536         817
                                               ---------   ---------   ---------   ---------
     Total operating expenses                       269         510         536         831
                                               ---------   ---------   ---------   ---------

LOSS FROM OPERATIONS                               (212)       (516)       (404)       (875)

OTHER INCOME (EXPENSE)
   Gain on settlement of liabilities                 91         912          91         916
   Interest expense - related parties                (4)         (3)         (8)         (5)
   Interest expense - other                          (1)         (2)         (2)         (4)
                                               ---------   ---------   ---------   ---------
     Total other income                              86         907          81         907
                                               ---------   ---------   ---------   ---------
NET INCOME (LOSS)                              $   (126)   $    391    $   (323)   $     32
                                               ---------   ---------   ---------   ---------

NET INCOME (LOSS) PER COMMON SHARE - BASIC     $  (0.01)   $   0.02    $  (0.01)   $   0.00
                                               =========   =========   =========   =========
WEIGHTED AVERAGE COMMON SHARES
     OUTSTANDING - BASIC                         24,182      17,730      23,795      16,533
                                               =========   =========   =========   =========

NET INCOME (LOSS) PER COMMON SHARE - DILUTED   $  (0.01)   $   0.02    $  (0.01)   $   0.00
                                               =========   =========   =========   =========
WEIGHTED AVERAGE COMMON SHARES
     OUTSTANDING - DILUTED                       24,182      22,136      23,795      20,097
                                               =========   =========   =========   =========


                       See notes to consolidated financial statements.

                                             4
</TABLE>

<PAGE>
<TABLE>

                                                 CLAIMSNET.COM INC. AND SUBSIDIARIES
                                                CONSOLIDATED STATEMENTS OF CHANGES IN
                                    STOCKHOLDERS' DEFICIT Year Ended December 31, 2003 (audited)
                                         and the Six Months Ended June 30, 2004 (unaudited)
                                                           (In thousands)
<CAPTION>

                                 Number of                    Number of
                                 Preferred                    Common                                                   Total
                                 Shares          Preferred    Shares                       Additional   Accumulated    Stockholders'
                                 Outstanding     Stock        Outstanding    Common Stock  Capital      Deficit        Deficit
                                 -------------   ------------ -------------  ------------  ------------ ------------   -------------
<S>                                         <C>       <C>          <C>            <C>        <C>        <C>               <C>
Balances at January 1, 2003                 3         $   -        14,816         $   15     $ 41,275   $ (42,424)        $  (1,134)

Sale of common stock                        -             -         3,425              3          680           -               683

Issuance of common stock in
payment of notes payable and
accrued interest - related
party                                       -             -           375              -           75           -                75

Warrants exercised for common
stock                                       -             -         1,875              2          373           -               375

Preferred stock converted into
common stock                               (2)            -         2,701              3           (3)          -                 -

Issuance of warrants and
options for services                        -             -             9              -            2           -                 2

Issuance of warrants and
options to related parties for
services                                    -             -             -              -          180           -               180

Net loss                                    -             -             -              -            -        (535)             (535)
                                 -------------   ------------ -------------  ------------  ------------ ------------   -------------
Balances at December 31, 2003               1             -        23,201             23       42,582     (42,959)             (354)
                                 -------------   ------------ -------------  ------------  ------------ ------------   -------------

Issuance of common stock in
payment of notes payable and
accrued interest - related
party                                       -             -            25              -            5           -                 5

Warrants exercised for common
stock                                       -             -         1,500              2          298           -               300

Net loss                                    -             -             -              -            -        (323)             (323)
                                 -------------   ------------ -------------  ------------  ------------ ------------   -------------
Balances at June 30, 2004                   1         $   -        24,726     $       25     $ 42,885   $ (43,282)        $    (372)
                                 =============   ============ =============  ============  ============ ============   =============

                                           See notes to consolidated financial statements.

                                                                 5
</TABLE>


<PAGE>
<TABLE>

                            CLAIMSNET.COM INC. AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       (In thousands)
                                        (Unaudited)
<CAPTION>

                                                                        Six Months Ended
                                                                            June 30,
                                                                       2004         2003
                                                                    ----------   ----------
<S>                                                                 <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                $    (323)   $      32
     Adjustments to reconcile net income (loss) to net cash
     used in operating activities:
       Depreciation and amortization                                       22           73
       Provision for doubtful accounts                                     --           (8)
       Stock options and warrants issued for services                      --          180
       Gain on settlement of liabilities                                  (91)        (916)
     Changes in operating assets and liabilities:
       Accounts receivable                                                 12           47
       Prepaid expenses and other current assets                           26           19
       Current liabilities                                                  8         (202)
                                                                    ----------   ----------
         Net cash used in operating activities                           (346)        (775)
                                                                    ----------   ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property and equipment                                   (9)          --
     Capitalized software development costs                                --          (16)
                                                                    ----------   ----------
       Net cash used in investing activities                               (9)         (16)
                                                                    ----------   ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from notes payable to related parties                        20          100
     Payment of notes payable to related parties                           --           (2)
     Proceeds from notes payable                                           --           --
     Proceeds from issuance of common stock                               300          662
                                                                    ----------   ----------
       Net cash provided by financing activities                          320          760
                                                                    ----------   ----------
NET DECREASE IN CASH AND EQUIVALENTS                                      (35)         (31)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD                                  66          153
                                                                    ----------   ----------
CASH AND EQUIVALENTS, END OF PERIOD                                 $      31    $     122
                                                                    ==========   ==========


SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:

Payment of notes payable and accrued interest through issuance of
     common stock                                                   $       5    $      70
                                                                    ==========   ==========



                      See notes to consolidated financial statements.

                                             6
</TABLE>



<PAGE>

                       CLAIMSNET.COM INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

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 June 30, 2004 and the results of their operations and
         cash flows for the three and six months ended June 30, 2004 and 2003,
         in conformity with generally accepted accounting principles for interim
         financial information applied on a consistent basis. The results of
         operations for the three and six months ended June 30, 2004 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-KSB for the year ended December 31, 2003, as filed with the
         Securities and Exchange Commission on March 26, 2004.

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 will not be
         sufficient to satisfy the Company's capital requirements past August
         31, 2004. 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. REVENUE RECOGNITION

         The Company generally enters into service agreements with its customers
         to provide access to its hosted software platform for processing of
         customer transactions. The Company operates the software application
         for all customers and the customers are not entitled to ownership of
         its software at any time during or at the end of the agreements. The
         end users of the Company's software application access its hosted
         software platform or privately hosted versions of its software
         application via the internet with no additional software required to be
         located on the customer's systems. Customers pay implementation fees,
         transaction fees and time and materials charges for additional
         services. Revenues primarily include fees for implementation and
         transaction fees, which may be subject to monthly minimum provisions.
         Customer agreements may also provide for development fees related to
         private labeling of the Company's software platform (i.e. access to its
         servers through a web site which is in the name of and/or has the look
         and feel of the customer's other web sites) and some customization of
         the offering and business rules. The Company accounts for its service
         agreements by combining the contractual revenues from development,
         implementation, license, support and certain additional service fees
         and recognizing the revenue ratably over the expected period of
         performance. The Company currently uses an estimated expected business
         arrangement term of three years which is currently the term of the

                                       7

<PAGE>

         typical contracts signed by its customers. The Company does not segment
         these services and uses the underlying contractual terms to recognize
         revenue because it does not have objective and reliable evidence of
         fair value to allocate the arrangement consideration to the
         deliverables in the arrangement. To the extent that implementation fees
         are received in advance of recognizing the revenue, the Company defers
         these fees and records deferred revenue. The Company recognizes service
         fees for transactions and some additional services as the services are
         performed. The Company expenses the costs associated with its customer
         service agreements as those costs are incurred.

4. SALE OF COMMON STOCK

         From February through June 2004, Elmira United Corporation, which owned
         at the time more than 5% of the outstanding shares of common stock of
         the Company, exercised previously issued warrants to purchase 1,500,000
         shares of the Company's common stock at $0.20 per share, for net
         proceeds of $300,000. The offer and sale of the securities in each of
         the transactions referenced in the previous sentence was exempt from
         registration under the Securities Act of 1933, as amended, (the "Act")
         by virtue of Section 4(2) thereof and the rules promulgated thereunder.

         In June 2004, the Company issued, pursuant to the Section 4 (2)
         exemption from registration under the Act, 25,000 shares of common
         stock to a director of the Company at $0.20 per share in satisfaction
         of debt and accrued interest aggregating $5,000. In connection
         therewith, the Company also issued warrants to the director to purchase
         an aggregate of 25,000 shares of common stock. The warrants contain an
         exercise price of $0.20 per share and expire December 31, 2007.

5. ISSUANCE OF OPTIONS

         In March 2004, the Company issued options to acquire an aggregate of
         500,000 shares of common stock to certain employees. These options
         contain an exercise price of $0.35 per share, the fair market value of
         the stock on the date of grant, vest over three years, and expire in
         March 2014.

6. GAIN ON SETTLEMENT OF LIABILITIES

         In May 2004, the Company entered into a settlement agreement with a
         nonaffiliated creditor, contingent upon the Company making payment
         within twenty days of the date of agreement. When the agreed payment
         was made by the Company, the creditor released the Company from all
         other liabilities. The agreement required a payment totaling $20,000 to
         settle certain accounts payable totaling $111,000. Payment pursuant to
         the agreement was made in May 2004, resulting in a gain on settlement
         of liabilities totaling $91,000.

7. LOANS FROM RELATED PARTY

         In May 2004, the Company entered into an unsecured short-term loan
         agreement with National Financial Corp. ("NFC"), a related entity,
         pursuant to which NFC loaned the Company an aggregate amount of
         $20,000. The principal amount plus interest, at 9.5% per annum on the
         unpaid principal, is due on demand.

8. STOCK-BASED COMPENSATION

         The Company accounts for its stock-based employee compensation plan
         using the intrinsic value-based method prescribed by Accounting
         Principles Board Opinion No. 25, "Accounting for Stock Issued to
         Employees," and related interpretations. As such, compensation expense
         is recorded on the date of grant to the extent the current market price
         of the underlying stock exceeds the exercise price. The Company
         recorded no compensation expense associated with options issued to
         employees during the three or six months ended June 30, 2004 and 2003.
         The Company's calculations for employee grants were made using a
         Black-Scholes model using the following assumptions:

                                                          2004         2003
                                                         ------       ------
        Expected life                                   10 years     10 years
        Risk free rate                                    3.84%       4.77%
        Dividends                                         None         None
        Volatility                                        1.78         2.04

                                       8

<PAGE>

         If the computed values of all the Company's stock based awards were
         calculated and expensed (over the vesting period of the awards) using
         the fair value method specified under SFAS 123 "Accounting for
         Stock-Based Compensation," as amended by SFAS No. 148 "Accounting for
         Stock-Based Compensation - Transition and Disclosure," net loss would
         have been as follows (in thousands, except per share data):

<TABLE>
<CAPTION>

                                                     Three Months Ended   Six Months Ended
                                                          June 30,           June 30,
                                                       2004     2003      2004      2003
                                                      -------  -------   -------   -------
<S>                                                   <C>      <C>       <C>       <C>
        Net income (loss), as reported                $(126)   $   391   $ (323)   $   32
        Stock-based compensation expense:
             Included in reported net income (loss)      --        --        --        --
             Determined using the fair value method     (60)      (17)     (105)      (17)
                                                      -------  -------   -------   -------
        Pro forma net income (loss)                   $ (186)  $  374    $ (428)   $   15
                                                      -------  -------   -------   -------
        Net income (loss) per share - basic
             As reported                              $(0.01)  $ 0.02    $(0.01)   $ 0.00
             Pro forma                                $(0.01)  $ 0.02    $(0.02)   $ 0.00

        Net income (loss) per share - diluted
             As reported                              $(0.01)  $ 0.02    $(0.01)   $ 0.00
             Pro forma                                $(0.01)  $ 0.02    $(0.02)   $ 0.00
</TABLE>

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS AND OTHER PORTIONS OF THIS REPORT CONTAIN FORWARD-LOOKING INFORMATION
THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED BY THE FORWARD-LOOKING INFORMATION. FACTORS THAT MAY
CAUSE SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, AVAILABILITY OF
FINANCIAL RESOURCES FOR LONG TERM NEEDS, PRODUCT DEMAND, MARKET ACCEPTANCE AND
OTHER FACTORS DISCUSSED ELSEWHERE IN THIS REPORT. THIS MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD BE READ IN
CONJUNCTION WITH OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES
INCLUDED ELSEWHERE IN THIS REPORT.

GENERAL OVERVIEW

As of June 30, 2004, we had a working capital deficit of $(424,000) and
stockholders' deficit of $(372,000). We generated revenues of $440,000 for the
six months ended June 30, 2004 and $330,000 for the six months ended June 30,
2003. We have incurred net losses since inception and had an accumulated deficit
of $(43,282,000) at June 30, 2004. We expect to continue to operate at a loss
for the near future. There can be no assurance that we will ever achieve
profitability.

We have been in operation since 1996, and have operated under several different
business strategies. As a result, the relationships between revenue and cost of
revenue, and operating expenses reflected in the financial information included
in this report may not represent future expected financial relationships. The
majority of the cost of revenue and operating expenses reflected in our
consolidated financial statements are associated with the cost of personnel and
other expenditures which are fixed or semi-fixed in nature, and not directly
related to the number of clients we serve or transactions we process to generate
revenues. Accordingly, we believe that, at our current stage of operations,
period-to-period comparisons of results of operations are not meaningful.

PRIVATE PLACEMENTS, OPTIONS AND WARRANTS

In June 2004, we completed the private placement of 25,000 shares of common
stock to a member of our Board of Directors at $0.20 per share, for the
satisfaction of $5,000 of notes payable and accrued interest. We also issued
warrants to the Director to purchase an aggregate of 25,000 shares of common
stock at an exercise price of $0.20 per share on or prior to December 31, 2007.

From February through June 2004, Elmira United Corporation, a 5% shareholder,
exercised previously issued warrants to purchase 1,500,000 shares of our common
stock at $0.20 per share or an aggregate amount of $300,000.

                                       9

<PAGE>

In March 2004, we issued options to acquire an aggregate of 500,000 shares of
common stock to certain employees. These options contain an exercise price of
$0.35 per share, the fair market value of the stock on the date of grant, vest
over three years and expire in March 2014.

None of the above sales of securities involved the use of an underwriter and
except as indicated no commissions were paid in connection with the sale of any
securities. The certificates evidencing the common stock issued in each of the
transactions referenced above were appropriately legended.

The offer and sale of the securities in each of the transactions referenced
above was exempt from registration under the Securities Act of 1933 by virtue of
Section 4(2) thereof and the rules promulgated thereunder. Each purchaser
represented to us that the purchaser is an "accredited investor," as defined in
Rule 501 under the Act, as well as highly sophisticated. The shares subject to
the options have been registered under the Act.

PLAN OF OPERATIONS

Our business strategy is as follows:

o    to utilize our state of the art technology to help large healthcare
     organizations achieve more efficient and less costly administrative
     operations;
o    to market our services directly to the payer community and its trading
     partners;
o    to aggressively pursue and support strategic relationships with companies
     that will in turn aggressively market our services to large volume
     healthcare organizations, including insurers, HMO's, third party
     administrators, provider networks, re-pricing organizations, clinics,
     hospitals, laboratories, physicians and dentists;
o    to provide total claim management services to payer organizations,
     including internet claim submission, paper claim conversion to electronic
     transactions, and receipt of EDI transmissions;
o    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;
o    to license our technology for other applications, including stand-alone
     purposes, internet systems and private label use, and for original
     equipment manufacturers; and
o    to seek merger and acquisition opportunities that enhance our growth and
     profitability objectives.

We anticipate that our primary source of revenues will be fees paid by
healthcare payers and vendors for private-label or co-branded licenses and
services. We expect most of our revenues to be recurring in nature.

Our principal costs to operate are anticipated to be technical and customer
support, transaction-based vendor services, sales and marketing, research and
development, acquisition of capital equipment, and general and administrative
expenses. We intend to continue to develop and upgrade our technology and
transaction-processing systems and continually update and improve our website to
incorporate new technologies, protocols, and industry standards. No assurance
can be given that our development and upgrading efforts will be successful.
Selling, general and administrative expenses include all corporate and
administrative functions that serve to support our current and future operations
and provide an infrastructure to support future growth. Major items in this
category include management and staff salaries and benefits, travel,
professional fees, network administration, business insurance, and rent.

CRITICAL ACCOUNTING POLICIES

REVENUE RECOGNITION

We generally enter into services agreements with our customers to provide access
to our hosted software platform for processing of customer transactions. We
operate the software application for all customers and the customers are not
entitled to ownership of our software at any time during or at the end of the
agreements. The end users of our software application access our hosted software
platform or privately hosted versions of our software application via the
internet with no additional software required to be located on the customer's
systems. Customers pay implementation fees, transaction fees and time and

                                       10

<PAGE>

materials charges for additional services. Revenues primarily include fees for
implementation and transaction fees, which may be subject to monthly minimum
provisions. Customer agreements may also provide for development fees related to
private labeling of our software platform (i.e. access to our servers through a
web site which is in the name of and/or has the look and feel of the customer's
other web sites) and some customization of the offering and business rules. We
account for our service agreements by combining the contractual revenues from
development, implementation, license, support and certain additional service
fees and recognizing the revenue ratably over the expected period of
performance. We currently use an estimated expected business arrangement term of
three years which is currently the term of the typical contracts signed by our
customers. We do not segment these services and use the underlying contractual
terms to recognize revenue because we do not have objective and reliable
evidence of fair value to allocate the arrangement consideration to the
deliverables in the arrangement. To the extent that implementation fees are
received in advance of recognizing the revenue, we defer these fees and record
deferred revenue. We recognize service fees for transactions and some additional
services as the services are performed. We expense the costs associated with our
customer service agreements as those costs are incurred.

SOFTWARE FOR SALE OR LICENSE

We begin capitalizing costs incurred in developing a software product once
technological feasibility of the product has been determined. Capitalized
computer software costs include direct labor, labor-related costs and interest.
The software is amortized over its expected useful life of 3 years or the
contract term, as appropriate.

Management periodically evaluates the recoverability, valuation, and
amortization of capitalized software costs to be sold, leased, or otherwise
marketed. As part of this review, management considers the expected undiscounted
future net cash flows. If they are less than the stated value, capitalized
software costs will be written down to fair value.

RESULTS OF OPERATIONS FOR THREE AND SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO
THREE AND SIX MONTHS ENDED JUNE 30, 2003

REVENUES

Revenues for the three months ended June 30, 2004 (the "2004 second quarter")
were $225,000 compared to $168,000 for the three months ended June 30, 2003 (the
"2003 second quarter"), representing an increase of 34%. Revenues for the 2004
second quarter from recurring revenue sources totaled $219,000 and represented
97% of total revenues. Revenues from non-recurring sources totaled $6,000 and
were related to support and other fees. Revenues for the 2003 second quarter
from recurring revenue sources totaled $162,000 and represented 96% of total
revenues. Revenues from non-recurring sources totaled $6,000 and were related to
support and other fees. The increase in revenues for the three month comparable
periods was the result of both the addition of new clients and an increase in
the volume of transactions processed for pre-existing clients.

Revenues for the six months ended June 30, 2004 (the "2004 first half") were
$440,000 compared to $330,000 for the six months ended June 30, 2003 (the "2003
first half"), representing an increase of 33%. Revenues for the 2004 first half
from recurring revenue sources totaled $423,000 and represented 96% of total
revenues. Revenues from non-recurring sources totaled $17,000 and were related
to support and other fees. Revenues for the 2003 first half from recurring
revenue sources totaled $315,000 and represented 95% of total revenues. Revenues
from non-recurring sources totaled $15,000 and were related to support and other
fees. The increase in revenues for the six month comparable periods was the
result of both the addition of new clients and an increase in the volume of
transactions processed for pre-existing clients.


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<PAGE>

COST OF REVENUES

Cost of revenues for the 2004 second quarter was $168,000, compared with
$174,000 for the 2003 second quarter, representing a decrease of 3%. The four
ordinary components of cost of revenues are data center expenses, transaction
processing expenses, customer support operation expenses and software
amortization. Data center expenses decreased 74% to $16,000 for the 2004 second
quarter compared with $61,000 for the 2003 second quarter due to relocation of
our servers. Transaction processing expenses were $9,000 for the 2004 second
quarter compared to $1,000 in the 2003 second quarter. Customer support
operations expense increased by 26% to $135,000 for the 2004 second quarter from
$107,000 for the 2003 second quarter. The increases in third party transaction
processing expenses and customer support operations expense were primarily
attributable to the signing of new contracts with clearinghouses and additional
personnel. Software amortization and development project amortization expenses
increased to $8,000 for the 2004 second quarter from $5,000 for the 2003 second
quarter.

Cost of revenues for the 2004 first half was $308,000, compared with $374,000
for the 2003 first half, representing a decrease of 18%. Data center expenses
decreased 75% to $31,000 for the 2004 first half compared with $124,000 for the
2003 first half due to relocation of our servers. Transaction processing
expenses were $9,000 for the 2004 first half compared to $2,000 for the 2003
first half. Customer support operations expense increased by 19% to $252,000 for
the 2004 first half from $212,000 for the 2003 first half. The increases in
third party transaction processing expenses and customer support operations
expense were primarily attributable to the signing of new contracts with
clearinghouses and additional personnel. Software amortization and development
project amortization expenses decreased 56% to $16,000 for the 2004 first half
from $36,000 for the 2003 first half.

OPERATING EXPENSES

There were no research and development expenses for the 2004 second quarter or
the 2004 first half, compared with $4,000 and $14,000 for the 2003 second
quarter and 2003 first half, respectively. Research and development expenses are
comprised of personnel costs and related expenses. During the 2003 first
quarter, we began development of a HIPAA remediation project and capitalized
development costs of $10,000 and $16,000 during the 2003 second quarter and 2003
first half, respectively. No costs were capitalized in 2004.

Selling, general and administrative expenses for the 2004 second quarter were
$269,000 compared with $506,000 for the 2003 second quarter, a decrease of 47%
and $536,000 for the 2004 first half, compared with $817,000 for the 2003 first
half, a decrease of 34%. The reductions are a result of cost containment
measures including staff reductions, salary reductions and other cost
containment measures. A one-time charge of $195,000 was recorded in the 2003
second quarter for services performed by two of our directors outside of their
director duties, of which $180,000 related to the issuance of warrants.

OTHER INCOME (EXPENSE)

Interest expense of $5,000 and $10,000 was incurred for the 2004 second quarter
and 2004 first half, respectively, on financing fees and affiliate debt compared
with $5,000 and $9,000 for the 2003 second quarter and 2003 first half,
respectively. A $91,000 gain on settlement of liabilities was recognized during
the 2004 first half related to a settlement agreement with a nonaffiliated
creditor; such agreement being consummated during May 2004. A $916,000 gain on
settlement of liabilities was recognized during the 2003 first half related to
settlement agreements with several nonaffiliated creditors; such agreements
being consummated during March and April 2003.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities of $346,000 for the 2004 first half was
primarily related to net loss of $323,000, less depreciation of $22,000 and
changes in working capital of $46,000, offset by a non-cash gain of $91,000 from
settlement of liabilities. Net cash used in operating activities of $775,000 for
the 2003 first half was primarily related to net income of $32,000, plus
depreciation of $73,000 and non-cash expense of $180,000 from issuance of
options and warrants, less a reduction of $8,000 in the allowance for doubtful
accounts and changes in working capital of $136,000, offset by a non-cash gain
of $916,000 from settlement of liabilities.


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<PAGE>

Net cash used in investing activities for the 2004 first half was $9,000 related
to the cost of leasehold improvements made during the period compared with
$16,000 for the 2003 first half related to the cost of software development
capitalized during the period.

Net cash provided by financing activities in the 2004 first half was $320,000,
of which $300,000 was related to the issuance of common stock and $20,000
related to proceeds from debt financing. Net cash provided by financing
activities in the 2003 first half was $760,000, of which $662,000 was related to
the issuance of common stock and $98,000 related to proceeds of $100,000 from
debt financing, offset by $2,000 used to repay debt.

We believe that our available cash resources, together with anticipated revenues
from operations and the proceeds of recently completed financing activities and
funding commitments will not be sufficient to satisfy our capital requirements
past August 31, 2004. Necessary additional capital may not be available on a
timely basis or on acceptable terms, if at all. In any of these events, we may
be unable to implement current plans for expansion or to repay debt obligations
as they become due. If sufficient capital cannot be obtained, we may be forced
to significantly reduce operating expenses to a point which would be detrimental
to business operations, curtail research and development activities, sell
certain business assets or discontinue some or all of our business operations,
take other actions which could be detrimental to business prospects and result
in charges which could be material to our operations and financial position, or
cease operations altogether. In the event that any future financing should take
the form of a 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.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS QUARTERLY REPORT ON
FORM 10-QSB AND IN OTHER SEC FILINGS BY THE COMPANY CONTAINS "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT TO VARIOUS RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THOSE
PROJECTED IN SUCH FORWARD-LOOKING STATEMENTS. THESE RISKS AND UNCERTAINTIES ARE
DISCUSSED IN MORE DETAIL IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB WHICH WAS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 2004. NO
ASSURANCE CAN BE GIVEN THAT FUTURE RESULTS COVERED BY THE FORWARD-LOOKING
STATEMENTS WILL BE ACHIEVED.

ITEM 3. Controls and Procedures

(a)      Evaluation of Disclosure Controls and Procedures

          As of the end of the period, the Company carried out an evaluation,
          under the supervision and with the participation of the Company's
          management, including the Company's Chief Executive Officer and Chief
          Financial Officer, of the effectiveness of the design and operation of
          the Company's disclosure controls and procedures pursuant to Exchange
          Act Rule 13a-14. Based upon that evaluation, the Chief Executive
          Officer and Chief Financial Officer concluded that the Company's
          disclosure controls and procedures are effective in gathering,
          analyzing and disclosing information needed to satisfy the Company's
          disclosure obligations under the Exchange Act.

(b)      Changes in Internal Controls

          There were no significant changes in the Company's internal controls
          or in other factors that could significantly affect those controls
          since the most recent evaluation of such controls.

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<PAGE>



PART II - OTHER INFORMATION

ITEM 2.  Changes in Securities

(c) See Part I, Item 1, Note 4 for a description of equity securities sold by
the Company during the period covered by this Report that were not registered
under the Securities Act of 1933, as amended.

ITEM 6.  Exhibits and Reports on Form 8-K

(b) Reports on Form 8-K:

         During the quarter ended June 30, 2004, the Company filed a Report on
         Form 8-K dated April 28, 2004 containing information under items 4 and
         7.

The following Additional Exhibits are filed herewith:

31.1     Certification of Don Crosbie

31.2     Certification of Paul W. Miller

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 Paul W. Miller



                                       14

<PAGE>





                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


CLAIMSNET.COM INC.
(Registrant)


By:      /s/ Don Crosbie
         -----------------------------
         Don Crosbie
         President and
         Chief Executive Officer, on
         behalf of the Registrant

By:      /s/ Paul W. Miller
         ----------------------------
         Paul W. Miller
         Chief Financial Officer


July 20, 2004

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