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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 September 30, 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
    
    (I.R.S. Employerincorporation or organization)
    
    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 INFORMATIONITEM 1. Financial Statements
    
    
    2Consolidated Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009
    
    
    2Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended
September 30, 2010 and 2009
    
    
    3Consolidated Statements of Changes in Stockholders Deficit for the Year Ended December
31, 2009 and the Nine Months Ended September 30, 2010 (unaudited)
    
    
    4Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September
30, 2010 and 2009
    
    
    5Notes to Consolidated Financial Statements
    
    
    6ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    8ITEM 4. Controls and Procedures
    
    
    12PART II. OTHER INFORMATIONITEM 6. Exhibits
    
    
    13SIGNATURES
    
    
    15CERTIFICATIONSExhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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(Unaudited)September 30,
    
    
    December 31,2010
    
    
    2009ASSETSCURRENT ASSETSCash and equivalents
    
    $
    56
    
    
    $
    18Accounts receivable, net of allowance for
doubtful accounts of $5 and $6
    
    
    293
    
    
    
    313Prepaid expenses and other current assets
    
    
    59
    
    
    
    43Total current assets
    
    
    408
    
    
    
    374EQUIPMENT, FIXTURES AND SOFTWARETotal equipment, fixtures and software, net
    
    
    110
    
    
    
    119INTANGIBLE AND OTHER ASSETSGoodwill
    
    
    138
    
    
    
    138TOTAL ASSETS
    
    $
    656
    
    
    $
    631LIABILITIES AND STOCKHOLDERS DEFICITCURRENT LIABILITIESAccounts payable
    
    $
    390
    
    
    $
    369Accrued payroll and other current liabilities
    
    
    68
    
    
    
    99Accrued interest  related parties
    
    
    92
    
    
    
    70Deferred revenues  current portion
    
    
    11
    
    
    
    18Notes payable to related parties
    
    
    1,040
    
    
    
    875Convertible notes payable to related parties
    
    
    10
    
    
    
    10Total current liabilities
    
    
    1,611
    
    
    
    1,441LONG-TERM LIABILITIESDeferred revenues  long-term portion
    
    
    9
    
    
    
    14Total long-term liabilities
    
    
    9
    
    
    
    14Total liabilities
    
    
    1,620
    
    
    
    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
September 30, 2010 and December 31, 2009
    
    
    
    
    
    
    Common stock, $.001 par value; 40,000,000 shares authorized; 34,874,696
shares issued and outstanding as of September 30, 2010 and December 31, 2009
    
    
    35
    
    
    
    35Additional capital
    
    
    44,896
    
    
    
    44,896Accumulated deficit
    
    
    (45,895
    )
    
    
    (45,755
    )Total stockholders deficit
    
    
    (964
    )
    
    
    (824
    )TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
    
    $
    656
    
    
    $
    631
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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009REVENUES
    
    $
    566
    
    
    $
    565
    
    
    $
    1,741
    
    
    $
    1,646COST OF REVENUES
    
    
    418
    
    
    
    426
    
    
    
    1,266
    
    
    
    1,258GROSS PROFIT
    
    
    148
    
    
    
    139
    
    
    
    475
    
    
    
    388OPERATING EXPENSESSelling, general and administrative
    
    
    233
    
    
    
    200
    
    
    
    593
    
    
    
    671Total operating expenses
    
    
    233
    
    
    
    200
    
    
    
    593
    
    
    
    671LOSS FROM OPERATIONS
    
    
    (85
    )
    
    
    (61
    )
    
    
    (118
    )
    
    
    (283
    )OTHER INCOME (EXPENSE)Interest expense  related parties
    
    
    (8
    )
    
    
    (7
    )
    
    
    (22
    )
    
    
    (21
    )Interest expense  other
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (9
    )Total other income (expense)
    
    
    (8
    )
    
    
    (8
    )
    
    
    (22
    )
    
    
    (30
    )NET LOSS
    
    $
    (93
    )
    
    $
    (69
    )
    
    $
    (140
    )
    
    $
    (313
    )NET LOSS PER COMMON SHARE
(BASIC AND DILUTED)
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.01
    )WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (BASIC AND DILUTED)
    
    
    34,875
    
    
    
    34,787
    
    
    
    34,875
    
    
    
    33,836
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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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140
    )
    
    
    (140
    )Balances at September 30, 2010
    
    
    1
    
    
    $
    
    
    
    
    34,875
    
    
    $
    35
    
    
    $
    44,896
    
    
    $
    (45,895
    )
    
    $
    (964
    )
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Nine Months EndedSeptember 30,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (140
    )
    
    $
    (313
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    9
    
    
    
    41Bad debt expense
    
    
    
    
    
    
    3Changes in operating assets and liabilities:Accounts receivable
    
    
    20
    
    
    
    (17
    )Prepaid expenses and other current assets
    
    
    (16
    )
    
    
    (23
    )Current liabilities and deferred revenue
    
    
    
    
    
    
    13Net cash used in operating activities
    
    
    (127
    )
    
    
    (296
    )CASH FLOWS FROM INVESTING ACTIVITIES:Net cash used in investing activities
    
    
    
    
    
    
    CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments on capital lease obligation
    
    
    
    
    
    
    (37
    )Payment of note payable to related parties
    
    
    
    
    
    
    (50
    )Proceeds from notes payable to related parties
    
    
    165
    
    
    
    400Net cash provided by financing activities
    
    
    165
    
    
    
    313NET INCREASE IN CASH AND EQUIVALENTS
    
    
    38
    
    
    
    17CASH AND EQUIVALENTS, BEGINNING OF PERIOD
    
    
    18
    
    
    
    CASH AND EQUIVALENTS, END OF PERIOD
    
    $
    56
    
    
    $
    17SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    
    
    
    $
    30Cash paid for taxes
    
    $
    
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:Payment of accrued interest through issuance of common stock
    
    $
    
    
    
    $
    49Payment of note principal through issuance of common stock
    
    $
    
    
    
    $
    850
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1.
    
    BASIS OF PRESENTATION
   2.
    
    NEED FOR ADDITIONAL CAPITAL AND LIQUIDITY
  3.
    
    EQUIPMENT, FIXTURES AND SOFTWARE
  Computer hardware and software
    
    $
    524Software development costs
    
    
    2,103Furniture and fixtures
    
    
    31Office equipment
    
    
    28Leasehold improvements
    
    
    352,721Less accumulated depreciation and amortization
    
    
    (2,611
    )$
    110
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4.
    
    ADVISORY AGREEMENT
 st
 5.
    
    LOANS FROM RELATED PARTIES
    6.
    
    FAIR VALUE OF FINANCIAL INSTRUMENTS
 The Company evaluates the fair value of certain of its financial assets and liabilities
under FASB Accounting Standards Codification (ASC) Topic 820, based on the observability
of the inputs used in the valuation techniques. The Company is required to provide the
following information according to the fair value hierarchy. The fair value hierarchy ranks
the quality and reliability of the information used to determine fair values. Financial
assets and liabilities carried at fair value will be classified and disclosed in one of the
following three categories:
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
    
    our ability to raise additional capital and secure additional financing;
 
    
    our ability to successfully implement our 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.
     -8-




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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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st
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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, 2010.10.3 (8)
    
    Unsecured Promissory Note between Claimsnet.com and Novinest
Associated S.A. dated September 9, 2010.10.4 (8)
    
    Client Engagement Letter between Claimsnet.com inc. and Blackhawk Partners dated September 9, 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.(8)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K dated
September 9, 2010 filed on September 14, 2010.  -14-




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CLAIMSNET.COM INC.
(Registrant)October 28, 2010By:
    
    /s/ Don Crosbie
Don Crosbie
Chief Executive OfficerOctober 28, 2010By:
    
    /s/ Laura M. Bray

Laura M. BrayChief Financial Officer
  -15-