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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 March 31, 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
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##### Table of Contents



PART I. FINANCIAL INFORMATIONITEM 1. Financial StatementsConsolidated Balance Sheets as of March 31, 2006 (unaudited) and December 31, 2005 (audited)Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2006 and 2005Consolidated Statements of Changes in Stockholders Deficit for the Year Ended December 31, 2005 (audited) and the Three Months Ended March 31, 2006 (unaudited)Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 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. ExhibitsSIGNATURESCERTIFICATIONSNote - Elmira United CorporationCertification of Don CrosbieCertification of Laura M. BrayCertification Pursuant to Section 906Certification Pursuant to Section 906
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(Unaudited)
    
    
    (Audited)March 31,
    
    
    December 31,2006
    
    
    2005ASSETSCURRENT ASSETSCash and equivalents
    
    $
    3
    
    
    $
    28Accounts receivable, net of allowance for
doubtful accounts of $4 and $2, respectively
    
    
    181
    
    
    
    161Prepaid expenses and other current assets
    
    
    36
    
    
    
    28Total current assets
    
    
    220
    
    
    
    217EQUIPMENT, FIXTURES AND SOFTWAREComputer hardware and software
    
    
    1,082
    
    
    
    1,078Software development costs
    
    
    2,045
    
    
    
    2,045Furniture and fixtures
    
    
    31
    
    
    
    31Office equipment
    
    
    25
    
    
    
    25Leasehold improvements
    
    
    35
    
    
    
    353,218
    
    
    
    3,214Accumulated depreciation and amortization
    
    
    (3,138
    )
    
    
    (3,124
    )Total equipment, fixtures and software, net
    
    
    80
    
    
    
    90TOTAL ASSETS
    
    $
    300
    
    
    $
    307LIABILITIES AND STOCKHOLDERS DEFICITCURRENT LIABILITIESAccounts payable
    
    $
    194
    
    
    $
    165Accrued payroll and other current liabilities
    
    
    137
    
    
    
    124Deferred revenues
    
    
    112
    
    
    
    134Notes payable to related parties  short term
    
    
    112
    
    
    
    75Notes payable  short term
    
    
    39
    
    
    
    24Total current liabilities
    
    
    594
    
    
    
    522LONG TERM LIABILITIESConvertible notes payable to related parties  long term
    
    
    300
    
    
    
    300Convertible notes payable  long term
    
    
    200
    
    
    
    200Total long term liabilities
    
    
    500
    
    
    
    500Total liabilities
    
    
    1,094
    
    
    
    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 March 31, 2006
and December 31, 2005
    
    
    
    
    
    
    Common stock, $.001 par value; 40,000,000 shares authorized; 25,976,180
shares issued and outstanding as of March 31, 2006 and December 31, 2005
    
    
    26
    
    
    
    26Additional capital
    
    
    43,154
    
    
    
    43,154Accumulated deficit
    
    
    (43,974
    )
    
    
    (43,895
    )Total stockholders deficit
    
    
    (794
    )
    
    
    (715
    )TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
    
    $
    300
    
    
    $
    307
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Three Months EndedMarch 31,2006
    
    
    2005REVENUES
    
    $
    331
    
    
    $
    288COST OF REVENUES
    
    
    218
    
    
    
    168GROSS PROFIT
    
    
    113
    
    
    
    120OPERATING EXPENSESSelling, general and administrative
    
    
    180
    
    
    
    202Total operating expenses
    
    
    180
    
    
    
    202LOSS FROM OPERATIONS
    
    
    (67
    )
    
    
    (82
    )OTHER EXPENSEInterest expense  related parties
    
    
    (7
    )
    
    
    (5
    )Interest expense  other
    
    
    (5
    )
    
    
    (5
    )Total other expense
    
    
    (12
    )
    
    
    (10
    )NET LOSS
    
    $
    (79
    )
    
    $
    (92
    )NET LOSS PER COMMON SHARE (BASIC AND DILUTED)
    
    $
    (0.00
    )
    
    $
    (0.00
    )WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (BASIC AND DILUTED)
    
    
    25,976
    
    
    
    25,537
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##### Table of Contents



Number of
    
    
    
    
    
    
    Number ofPreferred
    
    
    
    
    
    
    Common
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalShares
    
    
    Preferred
    
    
    Shares
    
    
    Common
    
    
    Additional
    
    
    Accumulated
    
    
    StockholdersOutstanding
    
    
    Stock
    
    
    Outstanding
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    DeficitBalances at
December 31, 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
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (79
    )
    
    
    (79
    )Balances at March
31, 2006
    
    
    1
    
    
    $
    
    
    
    
    25,976
    
    
    $
    26
    
    
    $
    43,154
    
    
    $
    (43,974
    )
    
    $
    (794
    )
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Three Months EndedMarch 31,2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (79
    )
    
    $
    (92
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    14
    
    
    
    10Bad debt expense
    
    
    (2
    )
    
    
    (4
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (18
    )
    
    
    63Prepaid expenses and other current assets
    
    
    (8
    )
    
    
    (10
    )Current liabilities
    
    
    20
    
    
    
    1Net cash used in operating activities
    
    
    (73
    )
    
    
    (32
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (4
    )
    
    
    Capitalized software development costs
    
    
    
    
    
    
    (31
    )Net cash used in investing activities
    
    
    (4
    )
    
    
    (31
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds of notes
    
    
    25
    
    
    
    Payment of notes
    
    
    (10
    )
    
    
    Proceeds of notes  related parties
    
    
    37
    
    
    
    Payment of notes  related parties
    
    
    
    
    
    
    (19
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    100Net cash provided by financing activities
    
    
    52
    
    
    
    81NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
    
    
    (25
    )
    
    
    18CASH AND EQUIVALENTS, BEGINNING OF PERIOD
    
    
    28
    
    
    
    68CASH AND EQUIVALENTS, END OF PERIOD
    
    $
    3
    
    
    $
    86SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash paid for interest
    
    $
    
    
    
    $
    2Cash paid for taxes
    
    $
    
    
    
    $
    
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Share-Based Payment
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Accounting for Stock Issued to Employees
 Accounting for Stock-Based Compensation 
Transition and Disclosure
 Three Months Ended March 31, 2005Loss as reported
    
    $
    (92
    )Stock-based compensation expense:As reported
    
    
    Determined using the fair value method
    
    
    (66
    )Pro forma loss
    
    $
    (158
    )Loss per share (basic and diluted)As reported
    
    $
    (0.00
    )Pro forma
    
    $
    (0.01
    )
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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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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 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
    
    Note dated April 5, 2005 between Claimsnet.com and Elmira United Corporation related to
$100,000 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
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CLAIMSNET.COM INC.(Registrant)April 20, 2006By:
    
    /s/ Don CrosbieDon CrosbiePresident andChief Executive OfficerApril 20, 2006By:
    
    /s/ Laura M. BrayLaura M. BrayChief Financial Officer
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