##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended June 30, 2006
  o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 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.)
 
 
 
 þ o
 o þ
  o þ




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##### 



PART I. FINANCIAL INFORMATIONITEM 1.
    
    Financial StatementsConsolidated Balance Sheets as of June 30, 2006 (unaudited) and December 31, 2005 (audited)Consolidated Statements of Operations (unaudited) for the Three Months Ended June 30, 2006 and 2005, and for the Six Months Ended June 30, 2006 and 2005Consolidated Statements of Changes in Stockholders Deficit for the Year Ended December 31, 2005 (audited) and the Six Months Ended June 30, 2006 (unaudited)Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2006 and 2005Notes to Consolidated Financial StatementsITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of OperationsITEM 3.
    
    Controls and ProceduresPART II. OTHER INFORMATIONITEM 6.
    
    ExhibitsSIGNATURESCERTIFICATIONS31.1
    
    
    
    
    
    
    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. BrayForm of WarrantNote - $50,000 loanCertificationCertificationCertification Pursuant to Section 906Certification Pursuant to Section 906




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##### Table of Contents



(Unaudited)
    
    
    (Audited)June 30,
    
    
    December 31,2006
    
    
    2005ASSETSCURRENT ASSETSCash and equivalents
    
    $
    11
    
    
    $
    28Accounts receivable, net of allowance for
doubtful accounts of $5 and $2, respectively
    
    
    167
    
    
    
    161Prepaid expenses and other current assets
    
    
    36
    
    
    
    28Total current assets
    
    
    214
    
    
    
    217EQUIPMENT, FIXTURES AND SOFTWAREComputer hardware and software
    
    
    1,085
    
    
    
    1,078Software development costs
    
    
    2,059
    
    
    
    2,045Furniture and fixtures
    
    
    31
    
    
    
    31Office equipment
    
    
    25
    
    
    
    25Leasehold improvements
    
    
    35
    
    
    
    353,235
    
    
    
    3,214Accumulated depreciation and amortization
    
    
    (3,152
    )
    
    
    (3,124
    )Total equipment, fixtures and software
    
    
    83
    
    
    
    90TOTAL ASSETS
    
    $
    297
    
    
    $
    307LIABILITIES AND STOCKHOLDERS DEFICITCURRENT LIABILITIESAccounts payable
    
    $
    185
    
    
    $
    165Accrued payroll and other current liabilities
    
    
    145
    
    
    
    124Deferred revenues
    
    
    104
    
    
    
    134Notes payable to related parties  short term
    
    
    90
    
    
    
    75Notes payable  short term
    
    
    24
    
    
    
    24Total current liabilities
    
    
    548
    
    
    
    522LONG TERM LIABILITIESConvertible notes payable to related parties  long term
    
    
    450
    
    
    
    300Convertible notes payable  long term
    
    
    200
    
    
    
    200Total long term liabilities
    
    
    650
    
    
    
    500Total liabilities
    
    
    1,198
    
    
    
    1,022STOCKHOLDERS DEFICITPreferred 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, 2006
and December 31, 2005
    
    
    
    
    
    
    Common stock, $.001 par value; 40,000,000 shares authorized; 25,976,180
shares issued and outstanding as of June 30, 2006 and December 31, 2005
    
    
    26
    
    
    
    26Additional capital
    
    
    43,159
    
    
    
    43,154Accumulated deficit
    
    
    (44,085
    )
    
    
    (43,895
    )Total stockholders deficit
    
    
    (900
    )
    
    
    (715
    )TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
    
    $
    297
    
    
    $
    307




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005REVENUES
    
    $
    342
    
    
    $
    326
    
    
    $
    673
    
    
    $
    614COST OF REVENUES
    
    
    232
    
    
    
    203
    
    
    
    450
    
    
    
    371GROSS PROFIT
    
    
    110
    
    
    
    123
    
    
    
    223
    
    
    
    243OPERATING EXPENSESSelling, general and administrative
    
    
    207
    
    
    
    208
    
    
    
    386
    
    
    
    410Total operating expenses
    
    
    207
    
    
    
    208
    
    
    
    386
    
    
    
    410LOSS FROM OPERATIONS
    
    
    (97
    )
    
    
    (85
    )
    
    
    (163
    )
    
    
    (167
    )OTHER INCOME (EXPENSE)Interest expense  related parties
    
    
    (9
    )
    
    
    (5
    )
    
    
    (16
    )
    
    
    (10
    )Interest expense  other
    
    
    (6
    )
    
    
    (5
    )
    
    
    (11
    )
    
    
    (10
    )Total other income (expense)
    
    
    (15
    )
    
    
    (10
    )
    
    
    (27
    )
    
    
    (20
    )NET LOSS
    
    $
    (112
    )
    
    $
    (95
    )
    
    $
    (190
    )
    
    $
    (187
    )NET LOSS PER COMMON SHARE (BASIC AND DILUTED)
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (BASIC AND DILUTED)
    
    
    25,976
    
    
    
    25,751
    
    
    
    25,976
    
    
    
    25,645




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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, 2004
    
    
    1
    
    
    
    
    
    
    
    25,226
    
    
    
    25
    
    
    
    42,985
    
    
    
    (43,616
    )
    
    
    (606
    )Sale of common stock
    
    
    
    
    
    
    
    
    
    
    400
    
    
    
    1
    
    
    
    99
    
    
    
    
    
    
    
    100Warrants exercised
for common stock
    
    
    
    
    
    
    
    
    
    
    350
    
    
    
    
    
    
    
    70
    
    
    
    
    
    
    
    70Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (279
    )
    
    
    (279
    )Balances at
December 31, 2005
    
    
    1
    
    
    
    
    
    
    
    25,976
    
    
    
    26
    
    
    
    43,154
    
    
    
    (43,895
    )
    
    
    (715
    )Stock based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (190
    )
    
    
    (190
    )Balances at June
30, 2006
    
    
    1
    
    
    $
    
    
    
    
    25,976
    
    
    $
    26
    
    
    $
    43,159
    
    
    $
    (44,085
    )
    
    $
    (900
    )




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Six Months EndedJune 30,2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (190
    )
    
    $
    (187
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    28
    
    
    
    18Provision for doubtful accounts
    
    
    3
    
    
    
    4Stock based compensation
    
    
    5
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (9
    )
    
    
    (23
    )Prepaid expenses and other current assets
    
    
    (8
    )
    
    
    (13
    )Current liabilities
    
    
    10
    
    
    
    33Net cash used in operating activities
    
    
    (161
    )
    
    
    (168
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (7
    )
    
    
    Capitalized software development costs
    
    
    (14
    )
    
    
    (51
    )Net cash used in investing activities
    
    
    (21
    )
    
    
    (51
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from notes payable
    
    
    45
    
    
    
    Proceeds from notes payable to related parties
    
    
    187
    
    
    
    Payment of notes payable
    
    
    (45
    )
    
    
    Payment of notes payable to related parties
    
    
    (22
    )
    
    
    (19
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    100Proceeds from exercise of stock warrants
    
    
    
    
    
    
    70Net cash provided by financing activities
    
    
    165
    
    
    
    151NET DECREASE IN CASH AND EQUIVALENTS
    
    
    (17
    )
    
    
    (68
    )CASH AND EQUIVALENTS, BEGINNING OF PERIOD
    
    
    28
    
    
    
    68CASH AND EQUIVALENTS, END OF PERIOD
    
    $
    11
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:Cash paid for interest
    
    $
    1
    
    
    $
    Cash paid for taxes
    
    $
    
    
    
    $
    




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##### Table of Contents



1.
    
    BASIS OF PRESENTATIONIn 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, 2006 and the results of its operations and cash flows for the
three and six months ended June 30, 2006 and 2005, 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, 2006 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, 2005, as filed with the Securities and Exchange
Commission on February 16, 2006.2.
    
    NEED FOR ADDITIONAL CAPITAL AND LIQUIDITYManagement 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, 2006. 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 RECOGNITIONThe 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 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.




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4.
    
    ACCOUNTING CHANGESThe Company adopted Statement of Financial Accounting Standards (SFAS) No. 123R,
Share-Based Payment, as of January 1, 2006, using the modified prospective application
method. This statement requires the recognition of compensation expense when an entity
obtains employee services in stock-based payment transactions.On December 19, 2005, our board of directors approved the acceleration of vesting of certain
unvested equity awards issued to our employees. No stock-based employee compensation cost is
reflected in our statement of operations related to these accelerated awards, as all awards
granted had an exercise price greater than or equal to the market value of the underlying
common stock on the date of grant.As of December 19, 2005, we had a total of 5,208,100 employee and director equity awards
outstanding, of which 3,441,433 were vested and 1,766,667 were unvested. Our board of
directors has authority to accelerate vesting of equity awards. Our board of directors
reviewed details regarding the terms, including the exercise price, and number of shares
subject to outstanding awards. After conducting this review, on December 19, 2005, our board
of directors resolved to immediately vest 1,266,667 of the 1,766,667 previously unvested
equity awards, all of which were out-of-the-money (had an exercise price that was greater
than the closing price of our common stock on that date). This action was taken in
consideration of the interest of our shareholders in not having our earnings impacted by the
approximately $173,000 in compensation expense that we would otherwise have recorded over
two years beginning in the first quarter of 2006, upon the adoption of FAS 123(R). Our board
of directors also considered the potential detrimental effect of early vesting on the
employee retention value of the current vesting schedules for the affected options and
employees. The remaining 500,000 shares were cancelled in the fourth quarter of 2005.Prior to January 1, 2006, the Company recognized compensation cost associated with
stock-based awards under the recognition and measurement principles of Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. Under APB 25, the difference between the quoted market price as of the date
of the grant and the contractual purchase price of shares was charged to operations over the
vesting period on a straight-line basis. No compensation cost was recognized for fixed stock
options with exercise prices equal to the market price of the stock on the dates of grant.Pro forma net loss and earnings per share disclosures as if the Company recorded
compensation expense based on fair value for stock-based awards have been presented in
accordance with the provisions of SFAS No. 148 Accounting for Stock-Based Compensation 
Transition and Disclosure, and are as follows for the three and six months ended June 30,
2005 (in thousands, except per share amounts):
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2005Net loss, as reported
    
    $
    (95
    )
    
    $
    (187
    )Stock-based compensation expense:Included in reported net loss
    
    
    
    
    
    
    Determined using the fair value method
    
    
    (70
    )
    
    
    (135
    )Pro forma net loss
    
    $
    (165
    )
    
    $
    (322
    )Net loss per
share  basic and dilutedAs reported
    
    $
    (0.00
    )
    
    $
    (0.01
    )Pro forma
    
    $
    (0.01
    )
    
    $
    (0.01
    )
 Upon the adoption of SFAS 123(R), the Company began recording compensation cost related to
all new stock based compensation grants after our adoption date. The compensation cost to be
recorded is based on the fair value at the grant date.Determining Fair Value Under SFAS No. 123(R)Valuation and Amortization Method.The Company estimates the fair value of share-based
awards granted using the Black-Scholes option evaluation model. The Company amortizes the
fair value of all awards on a straight-line basis over the requisite service periods, which
are generally the vesting periods.




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Expected Life.The expected life of awards granted represents the period of time that they
are expected to be outstanding. The Company determines the expected life using the
simplified method in accordance with Staff Accounting Bulletin No. 107.Expected Volatility.Using the Black-Scholes option valuation model, the Company estimates
the volatility of its common stock at the date of grant based on the historical volatility
of our common stock.Risk-Free Interest Rate.The Company bases the risk-free interest rate used in the
Black-Scholes option valuation model on the implied yield currently available on U.S.
Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of
the award.Expected Dividend Yield.The Company has not paid any cash dividends on its common stock in
the last ten years and does not anticipate paying any cash dividends in the foreseeable
future. Consequently, the Company uses an expected dividend yield of zero in the
Black-Scholes option valuation model.Expected Forfeitures.The Company uses historical data to estimate pre-vesting option
forfeitures and recorded stock-based compensation only for those awards that are expected to
vest.The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model. A summary of the weighted average assumptions and
results for options granted during the three months ended June 30, 2006 are as follows:
 Three Months EndedJune 30,2006Volatility
    
    
    105
    %Weighted-average expected lives
    
    7 yearsExpected dividend yields
    
    
    Weighted-average risk-free interest rates
    
    
    5.03
    %Weighted-average fair value of options granted
    
    $
    .06
 Share-Based Compensation Under SFAS No. 123(R)The following table summarizes share-based compensation expense related to share-based
awards under SFAS No. 123(R) for the three months ended June 30, 2006 which is recorded in
the statement of operations as follows (in thousands):
 Three Months EndedJune 30, 2006Unvested
    
    
    Unvested WarrantsStock Options
    
    
    for Common Stock
    
    
    TotalSelling, general and
administrative expense
    
    
    
    
    
    
    5
    
    
    
    5Total share-based compensation
    
    $
    
    
    
    $
    5
    
    
    $
    5
 On May 30, 2006, the Company granted an employee options under its 1997 Stock Option Plan to
purchase an aggregate of 50,000 shares of common stock. The options contain an exercise
price of $0.15
per share, expire on the tenth anniversary of the grant, and vest ratably over three years.
The market price on the date of grant was $0.07.On May 30, 2006, the Company granted an employee warrants to purchase an aggregate of
1,000,000 shares of common stock. The warrants contain an exercise price of $0.15 per
share, expire on the tenth anniversary of the grant, and vest ratably over three years. The
market price on the date of grant was $0.07.The unrecognized compensation costs are expected to be amortized over the following
indicated fiscal years ending December 31 (in thousands):
 Unvested Stock
    
    
    Unvested WarrantsOptions
    
    
    for Common Stock
    
    
    TotalRemainder of 2006
    
    $
    1
    
    
    $
    9
    
    
    $
    102007
    
    
    1
    
    
    
    19
    
    
    
    202008
    
    
    1
    
    
    
    19
    
    
    
    202009
    
    
    
    
    
    
    5
    
    
    
    5Total
    
    $
    3
    
    
    $
    52
    
    
    $
    55




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The following table summarizes the stock option activity related to employee grants:
 WEIGHTEDAVERAGENUMBER
    
    
    PER SHARE
    
    
    EXERCISEOF SHARES
    
    
    EXERCISE PRICE
    
    
    PRICEOutstanding optionsDecember 31, 2005
    
    
    906,776
    
    
    $
    0.30-8.00
    
    
    $
    1.15Granted
    
    
    50,000
    
    
    
    0.15
    
    
    
    0.15Expired
    
    
    
    
    
    
    
    
    
    
    Outstanding optionsJune 30, 2006
    
    
    956,776
    
    
    $
    0.15-8.00
    
    
    $
    1.10Options exercisableJune 30, 2006
    
    
    906,776
    
    
    $
    0.30-8.00
    
    
    $
    1.15
 Outstanding options as of June 30, 2006, had a weighted average remaining contractual life of
approximately 6.8 years. At June 30, 2006, options available for grant under the Companys
1997 Plan were 375,916, and under the Companys Directors Plan were 336,538.The following table summarizes the warrant activity related to employee grants:
 WEIGHTEDNUMBER
    
    
    PER SHARE
    
    
    AVERAGEOF SHARES
    
    
    EXERCISE PRICE
    
    
    EXERCISE PRICEOutstanding warrants-December 31, 2005
    
    
    2,624,324
    
    
    $
    0.15-3.00
    
    
    $
    0.18Granted
    
    
    1,000,000
    
    
    
    0.15
    
    
    
    0.15Expired
    
    
    
    
    
    
    
    
    
    
    Outstanding warrantsJune 30, 2006
    
    
    3,624,324
    
    
    $
    0.15-3.00
    
    
    $
    0.17Warrants exercisableJune 30, 2006
    
    
    2,624,624
    
    
    $
    0.15-3.00
    
    
    $
    0.18
  5.
    
    LOANS FROM RELATED PARTIESOn June 15, 2006, the Company borrowed an aggregate of $50,000 from Elmira United
Corporation, or Elmira, a 5% shareholder, pursuant to the terms of a convertible promissory
note. The promissory note bears interest at the rate of 7.5% per annum. A payment equal to
the principal and accrued and unpaid interest on the note is due December 31, 2008. At the
option of the holder, at any time or from time to time prior to the maturity date, all or
any portion of the outstanding principal and interest may be converted into a number of
shares of the Companys common stock at a conversion price of $0.25 per share. The
convertible promissory note was issued pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended, by virtue of Section 4(2) therein
and the rules promulgated by the SEC.On April 5, 2006, the Company borrowed an aggregate of $100,000 from Elmira United
Corporation, or Elmira, a 5% shareholder, pursuant to the terms of a convertible promissory
note. The promissory note bears interest at the rate of 7.5% per annum. A payment equal to
the principal and accrued and unpaid interest on the note is due December 31, 2008. At the
option of the holder, at any time or from time to time prior to the maturity date, all or
any portion of the outstanding principal and interest may be
converted into a number of shares of the Companys common stock at a conversion price of $0.25 per share. The
convertible promissory note was issued pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended, by virtue of Section 4(2) therein
and the rules promulgated by the SEC.




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##### 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.




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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 for the year ended December 31, 2005 which was
filed with the Securities and Exchange Commission on February 16, 2006. No assurance can be given
that future results covered by the forward-looking statements will be achieved.




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10.1
    
    Form of Warrant issued to Kent McRee dated May 30, 2006.10.2
    
    Note dated April 5, 2006 between Claimsnet.com and Elmira United Corporation related to
$100,000 loan.(1)10.3
    
    Note dated June 15, 2006 between Claimsnet.com and Elmira United Corporation related to
$50,000 loan.31.1
    
    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
 
 1)
    
    Filed as exhibit 10.1 to the Registrants Quarterly Report on Form 10-QSB,
filed on April 20, 2006, and incorporated herein by reference.




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CLAIMSNET.COM INC.(Registrant)July 24, 2006By:
    
    /s/ Don CrosbieDon CrosbieChief Executive OfficerJuly 24, 2006By:
    
    /s/ Laura M. BrayLaura M. BrayChief Financial Officer