<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q/A
                                (Amendment No. 2)

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

                  For the Quarterly Period Ended March 31, 2003
                                                 --------------
                                       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 001-14665

                               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.)

                     12801 N. Central Expressway, Suite 1515
                               Dallas, Texas 75243

               (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,
23,701,180 shares outstanding as of March 26, 2004.


                                       1
<PAGE>

                       CLAIMSNET.COM INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS




PART I.  FINANCIAL INFORMATION

     ITEM 1.   Financial Statements

                  Consolidated Balance Sheets as of March 31, 2003 (unaudited,
                  restated) and December 31, 2002

                  Consolidated Statements of Operations (unaudited) for the
                  Three Months Ended March 31, 2003 (restated) and 2002

                  Consolidated Statements of Changes in Stockholders' Deficit
                  for the Year Ended December 31, 2002 and the Three Months
                  Ended March 31, 2003 (unaudited, restated)

                  Consolidated Statements of Cash Flows (unaudited) for the
                  Three Months Ended March 31, 2003 (restated) and 2002

                  Notes to Consolidated Financial Statements

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

     ITEM 4.   Controls and Procedures


PART II.  OTHER INFORMATION

     ITEM 6.   Exhibits and Reports on Form 8-K


SIGNATURES

CERTIFICATIONS


                                       2
<PAGE>
<TABLE>

PART I -- FINANCIAL INFORMATION

ITEM 1:   FINANCIAL STATEMENTS

                                      CLAIMSNET.COM INC. AND SUBSIDIARIES
                                          CONSOLIDATED BALANCE SHEETS
                                       (In thousands, except share data)
<CAPTION>

                                                                             (Unaudited)
                                                                               March 31,    December 31,
                                                                                 2003           2002
                                                                              (Restated)
                                                                               ---------      ---------
<S>                                                                            <C>            <C>
ASSETS

CURRENT ASSETS
   Cash and equivalents                                                        $     52       $    153
   Accounts receivable, net of allowance for
     doubtful accounts of $6 and $33, respectively                                  122            150
   Prepaid expenses and other current assets                                         33             79
                                                                               ---------      ---------
     Total current assets                                                           207            382

EQUIPMENT, FIXTURES AND SOFTWARE
   Computer hardware and software                                                 1,685          1,685
   Software development costs                                                     1,928          1,922
   Furniture and fixtures                                                           108            108
   Office equipment                                                                  25             25
                                                                               ---------      ---------
                                                                                  3,746          3,740
   Accumulated depreciation and amortization                                     (3,654)        (3,601)
                                                                               ---------      ---------
     Total equipment, fixtures and software                                          92            139
                                                                               ---------      ---------
TOTAL ASSETS                                                                   $    299       $    521
                                                                               =========      =========
LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
   Notes payable to related parties - short term                               $    118       $    118
   Accounts payable                                                                 514            486
   Accrued severance                                                                241            241
   Accrued acquisition costs                                                        500            500
   Accrued payroll and other current liabilities                                    141            228
   Deferred revenues                                                                 56             47
                                                                               ---------      ---------
     Total current liabilities                                                    1,570          1,620

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                                                            1,605          1,655

STOCKHOLDERS' DEFICIT
   Preferred stock, $.001 par value; 4,000,000 shares authorized
     3,471 shares issued and outstanding as of March 31, 2003
     and December 31, 2002, respectively (liquidation preference of $876)            --             --
   Common stock, $.001 par value; 40,000,000 shares authorized;
     15,766,000 shares and 14,816,000 shares issued as of March 31, 2003
     and December 31, 2002, respectively                                             16             15
   Additional capital                                                            41,461         41,275
   Accumulated deficit                                                          (42,783)       (42,424)
                                                                               ---------      ---------
     Total stockholders' deficit                                                 (1,306)        (1,134)
                                                                               ---------      ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                    $    299       $    521
                                                                               =========      =========
</TABLE>
                                See notes to consolidated financial statements.

                                                      3
<PAGE>

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



                                                         Three Months Ended
                                                               March 31,
                                                       -------------------------
                                                          2003           2002
                                                       (Restated)
                                                        ---------      ---------
REVENUES                                                $    162       $    315

Cost of Revenues                                             200            560
                                                        ---------      ---------
Gross Loss                                                   (38)          (245)
                                                        ---------      ---------
OPERATING EXPENSES:
   Research and development                                   10             95
   Selling, general and administrative                       311            760
                                                        ---------      ---------
     Total operating expenses                                321            855
                                                        ---------      ---------

LOSS FROM OPERATIONS                                        (359)        (1,100)

OTHER INCOME (EXPENSE)
   Gain on settlement of liabilities                           4             --
   Interest expense - related parties                         (2)            (2)
   Interest expense - other                                   (2)            --
                                                        ---------      ---------
     Total other income (expense)                             --             (2)
                                                        ---------      ---------
NET LOSS                                                $   (359)      $ (1,102)
                                                        ---------      ---------

NET LOSS PER COMMON SHARE (BASIC AND DILUTED)           $  (0.02)      $  (0.10)
                                                        =========      =========
WEIGHTED AVERAGE COMMON SHARES
     OUTSTANDING (BASIC AND DILUTED)                      15,323         11,141
                                                        =========      =========


                 See notes to consolidated financial statements.

                                       4
<PAGE>
<TABLE>

                                                CLAIMSNET.COM INC. AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                         Year Ended December 31, 2002 and the Three Months Ended March 31, 2003 (Restated)
                                                          (In thousands)
                                                            (Unaudited)
<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, 2002              --      $       --        11,141      $     11      $ 39,571    $(39,497)    $     85

Sale of preferred stock                   3              --            --            --           875          --          875

Sale of common stock                     --              --         3,675             4           731          --          735

Issuance of warrants and
options for services                     --              --            --            --            98          --           98

Net loss                                 --              --            --            --            --      (2,927)      (2,927)
                                   ---------     -----------     ---------     ---------     ---------   ---------    ---------
Balances at December 31, 2002             3              --        14,816            15        41,275     (42,424)      (1,134)
                                   ---------     -----------     ---------     ---------     ---------   ---------    ---------

Sale of common stock                     --              --           950             1           186          --          187

Net loss (restated)                      --              --            --            --            --        (359)        (359)
                                   ---------     -----------     ---------     ---------     ---------   ---------    ---------
Balances at March 31, 2003
(restated)                                3      $       --        15,766      $     16      $ 41,461    $(42,783)    $ (1,306)
                                   =========     ===========     =========     =========     =========   =========    =========

                                          See notes to consolidated financial statements.
</TABLE>

                                                                5
<PAGE>

                       CLAIMSNET.COM INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
                                                            Three Months Ended
                                                                 March 31,
                                                             2003        2002
                                                          (Restated)
                                                           --------     --------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                $  (359)     $(1,102)
     Adjustments to reconcile net loss to net cash
     used in operating activities:
       Depreciation and amortization                            53          139
       Stock options and warrants issued for services           --           50
       Gain on settlement of liabilities                        (4)          --
       Changes in operating assets and liabilities:
       Accounts receivable                                      28          (65)
       Prepaid expenses and other current assets                46           56
       Current liabilities                                     (46)          (5)
                                                           --------     --------
         Net cash used in operating activities                (282)        (927)
                                                           --------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property and equipment                        --          (10)
     Capitalized software development costs                     (6)        (107)
                                                           --------     --------
       Net cash used in investing activities                    (6)        (117)
                                                           --------     --------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Increase in notes payable to related parties               --          390
     Payment of notes payable to related parties                --         (105)
     Proceeds from issuance of common stock                    187           --
     Proceeds from issuance of preferred stock                  --          276
                                                           --------     --------
       Net cash provided by financing activities               187          561
                                                           --------     --------
NET DECREASE IN CASH AND EQUIVALENTS                          (101)        (483)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD                      153          531
                                                           --------     --------
CASH AND EQUIVALENTS, END OF PERIOD                        $    52      $    48
                                                           ========     ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid for interest                                     $    --      $     2
                                                           ========     ========

                 See notes to consolidated financial statements.

                                       6
<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 accruals) and present fairly the consolidated
         financial position of Claimsnet.com inc. (the "Company") and
         subsidiaries as of March 31, 2003 and the results of its operations and
         cash flows for the three months ended March 31, 2003 and 2002, in
         conformity with generally accepted accounting principles for interim
         financial information applied on a consistent basis. The results of
         operations for the three months ended March 31, 2003 are not
         necessarily indicative of the results to be expected for the full year.

         Certain information and footnote disclosures normally included in
         financial statements prepared in accordance with generally accepted
         accounting principles have been omitted. These financial statements
         should be read in conjunction with the audited consolidated financial
         statements and notes thereto included in the Company's Annual Report on
         Form 10-K for the year ended December 31, 2002, as filed with the
         Securities and Exchange Commission on April 1, 2003.

2. RESTATEMENT OF PREVIOUSLY REPORTED RESULTS

         The Company is amending and restating its Form 10-Q for the three
         months ended March 31, 2003. Subsequent to the issuance of the
         Company's financial results for the quarters ended March 31, June 30,
         and September 30, 2003, the Company, after consultation with its
         auditors, determined that certain implementation fees previously
         reported as revenue during the quarters did not meet the technical
         requirements to be accounted for as a separate unit of accounting, as
         defined in the Emerging Issues Task Force Issue No. 00-21, "Revenue
         Arrangements with Multiple Deliverables", and as further clarified by
         Staff Accounting Bulletin No. 104, "Revenue Recognition", as issued by
         the SEC on December 17, 2003. As a result, the implementation fees must
         be recognized as revenue ratably over the expected period of the
         customer business arrangement.

         Accordingly, the consolidated financial statements for the three months
         ended March 31, 2003, have been restated to defer implementation fees
         and recognize those fees over the expected life of the customer
         arrangement. The Company expenses costs related to implementation
         services as they are incurred. Therefore, the net loss for the three
         month period ended March 31, 2003 increased by the same amount as the
         increase in the net revenue deferral, approximately $11,000. The
         revenue restatement also resulted in a restatement of deferred revenues
         at March 31, 2003.

         The restatement did not result in a change to the net loss per common
         share of $0.02 as previously reported for the three month period ended
         March 31, 2003.

3. 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 through May
         31, 2003. 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 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.

                                       7
<PAGE>

4. SALE OF COMMON STOCK

         In January, February and March 2003, the Company completed the private
         placement of 950,000 shares of common stock to accredited investors at
         $0.20 per share, for net proceeds of $187,000. In connection with these
         private placements, the Company also issued warrants to the investors
         to purchase an aggregate of 950,000 shares of common stock. The
         warrants contain an exercise price of $0.20 per share and expire
         December 31, 2007. These private placements included 100,000 shares of
         common stock plus warrants to acquire an additional 100,000 shares of
         common stock purchased by National Financial Corporation, a related
         party, and 500,000 shares of common stock plus warrants to acquire an
         additional 500,000 shares of common stock purchased by Elmira United
         Corporation, which owned at the time more than 5% of the outstanding
         shares of common stock of the Company.

5. GAIN ON SETTLEMENT OF LIABILITIES

         During March and April 2003, the Company entered into settlement
         agreements with various creditors, contingent upon the Company making
         payment within ten 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 aggregate amount of the contingent
         agreements entered into required payments totaling $217,000 to settle
         certain accounts payable, accrued severance and accrued acquisition
         cost liabilities totaling $1,134,000. Payments totaling $1,000 pursuant
         to the agreements were made prior to March 31, 2003, resulting in a
         gain on settlement of liabilities totaling $4,000.

6. STOCK-BASED COMPENSATION

         In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based
         Compensation - Transition and Disclosure," which amends SFAS 123,
         "Accounting for Stock-Based Compensation". SFAS 148 provides
         alternative methods of transition for a voluntary change to the fair
         value based method of accounting for stock-based employee compensation.
         In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to
         require more prominent and more frequent disclosures in financial
         statements about the effects of stock-based compensation. SFAS 148 is
         effective for fiscal years ending after December 15, 2002. The adoption
         of SFAS 148 did not impact the Company's financial position or
         operations.

         SFAS 123 requires the disclosure of pro forma net loss and net loss per
         share as if the Company applied the fair value method. The Company's
         calculations for employee grants were made using a Black-Scholes model
         using the following assumptions: expected life, five to ten years; risk
         free rate of 2.5%; no dividends during the expected term; and a
         volatility of 2.8 for 2002. No employee stock options were issued in
         the first quarter of 2003.

         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, net loss would have
         been as follows:

                                                    Three Months Ended March 31,
                                                          2003        2002
                                                       (Restated)
                                                        --------     -------
         Loss as reported (thousands)                   $   359      $1,102

         Stock-based compensation expense:
              As reported                                    --          --
              Determined using the fair value method         --          92
                                                        --------     -------
         Pro forma loss                                 $   359      $1,194
                                                        ========     =======
         Loss per share (basic and diluted)
              As reported                               $  0.02      $ 0.10
              Pro forma                                 $  0.02      $ 0.11


                                       8
<PAGE>

7. SUBSEQUENT EVENTS

         On April 7, 2003, Elmira United Corporation, a 5% shareholder of the
         Company, exercised a previously issued warrant to purchase 1,000,000
         shares of the Company's common stock and tendered payment in the amount
         of $200,000.

         On April 14, 2003, the Company completed the private placement of
         250,000 shares of common stock to Elmira United Corporation at $0.20
         per share for net proceeds of $50,000. In connection with the private
         placement, the Company also issued warrants to Elmira United
         Corporation to purchase an aggregate of 250,000 shares of common stock.
         The warrants contain an exercise price of $0.20 per share and expire
         December 31, 2007.

         The Company used $217,000 of the proceeds from the above transactions
         to make payments pursuant to creditor agreements, as described in Note
         4, resulting in an additional $913,000 gain on settlement of
         liabilities in April.

                                       9
<PAGE>

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.


IN GENERAL

As of March 31, 2003, we had a working capital deficit of $(1,363,000) and
stockholders' deficit of $(1,306,000). We generated revenues of $162,000 for the
three months ended March 31, 2003 and $315,000 for the three months ended March
31, 2002. We have incurred net losses since inception and had an accumulated
deficit of $(42,783,000) at March 31, 2003. We expect to continue to operate at
a loss for the foreseeable future. There can be no assurance that we will ever
achieve profitability.

We have only 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. Much of the cost of revenue and operating expenses reflected in
our consolidated financial statements are associated with people costs, and not
directly related to transaction volumes. Our expenses decreased for the year
ended December 31, 2002 due to staffing and other cost reductions and further
expense reductions were effected at the beginning of 2003. In 2002 we recognized
a significant gain on sale of certain business assets and a significant one-time
expense due to the impairment of in-process software development. The majority
of our revenues in prior years were generated by contracts which have either
terminated or were assigned through an asset sale in September 2002. Our
operating expenses in prior years included a significant one-time charge related
to termination of a business agreement and significant costs associated with an
asset acquisition and the subsequent impairment of purchased assets.
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

During January, February and March 2003, we completed the private placement of
950,000 shares of common stock to accredited investors at $0.20 per share for
net proceeds of $187,000. In connection with these private placements, we also
issued warrants to the investors to purchase an aggregate of 950,000 shares of
common stock. The warrants contain an exercise price of $0.20 per share and
expire December 2007. These private placements included 100,000 shares of common
stock plus warrants to acquire an additional 100,000 shares of common stock
purchased by National Financial Corporation, a related party, and 500,000 shares
of common stock plus warrants to acquire an additional 500,000 shares of common
stock purchased by Elmira United Corporation, which owned at the time more than
5% of the outstanding shares of our common stock.

On April 7, 2003, Elmira United Corporation, a 5% shareholder, exercised a
previously issued warrant to purchase 1,000,000 shares of our common stock and
tendered payment in the amount of $200,000.

On April 14, 2003, we completed the private placement of 250,000 shares of
common stock to Elmira United Corporation at $0.20 per share for net proceeds of
$50,000. In connection with the private placement, we also issued warrants to
Elmira United Corporation to purchase an aggregate of 250,000 shares of common
stock. The warrants contain an exercise price of $0.20 per share and expire
December 31, 2007.

The Company used $217,000 of the proceeds from the April 7, 2003 and April 14,
2003 transactions to make payments pursuant to creditor agreements, as described
in Note 4 to the consolidated financial statements.

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.

                                       10
<PAGE>

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 of the offerees
and investors in such private placements provided representations to us that the
offeree or investor is an "accredited investor," as defined in Rule 501 under
the Act, as well as highly sophisticated (some of whom were existing
stockholders of us at the time of such transaction.) The shares subject to the
options have been registered under the Act.

PLAN OF OPERATIONS

Our recently modified 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; and
o    to license our technology for other applications, including stand-alone
     purposes, Internet systems and private label use, and for original
     equipment manufacturers.

We anticipate that our primary source of revenues will be fees paid by payers
and vendors for private-label or co-branded licenses and services. Historically,
our primary source of revenues was fees paid by users for insurance claims and
patient statement services, and fees from medical and dental payers for
processing claims electronically. We expect most of our revenues to be recurring
in nature.

Our principal costs to operate are anticipated to be technical and customer
support 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 we hope will 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
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


                                       11
<PAGE>

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 MONTHS ENDED MARCH 31, 2003 COMPARED TO THREE
MONTHS ENDED MARCH 31, 2002

REVENUES

Revenues in the three months ended March 31, 2003 (the "2003 first quarter")
were $162,000 compared to $315,000 in the three months ended March 31, 2002 (the
2002 first quarter), representing a decrease of 49%. Revenues of $285,000 during
the 2002 first quarter were generated by our Internet-based healthcare provider
clients, under contracts which were sold in September 2002. Revenues for the
2003 first quarter from recurring revenue sources totaled $153,000 and
represented 94% of total revenues. Revenues from non-recurring sources totaled
$9,000 and were related to support and other fees.

COST OF REVENUES

Cost of revenues in the 2003 first quarter was $200,000, compared with $560,000
in the 2002 first quarter, representing a decrease of 64%. 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 to $63,000 for the 2003 first quarter compared with
$95,000 for the 2002 first quarter. Transaction processing expenses were $1,000
in the 2003 first quarter compared to $137,000 in the 2002 first quarter, nearly
a 100% decrease. Customer support operations expense decreased by 59% to
$105,000 in the 2003 first quarter from $257,000 in the 2002 first quarter. The
decreases in third party transaction processing expenses and customer support
operations expense were primarily attributable to the assignment of contracts
with a majority of our healthcare provider clients in September 2002. Software
amortization and development project amortization expenses decreased 56% to
$31,000 in the 2003 first quarter from $71,000 in the 2002 first quarter. This
decrease reflects completion in 2002 of amortization for earlier versions of
software for customer use.

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OPERATING EXPENSES

Research and development expenses were $10,000 in 2003 first quarter, compared
with $95,000 in the 2002 first quarter, representing a decrease of 89%. Research
and development expenses are comprised of personnel costs and related expenses.
Research and development efforts were substantially curtailed at the beginning
of 2003, while the 2002 were related to continuous incremental enhancements to
our proprietary software system. Software development expenses of $107,000 were
capitalized during the 2002 first quarter for development efforts required to
comply with provisions of the Health Insurance Portability and Accountability
Act of 1996 ("HIPAA"). In December 2002, we terminated the ongoing HIPAA
remediation in-process development project in order to pursue a more
cost-effective development alternative and we recognized an impairment charge at
that time. During the 2003 first quarter, we began development of the
alternative HIPAA remediation project and capitalized $6,000 for development
costs during the quarter.

Selling, general and administrative expenses were $311,000 in the 2003 first
quarter, compared with $760,000 in the 2002 first quarter, a decrease of 59%.
The reduction is a result of cost containment measures including staff
reductions, salary reductions and other cost containment measures. A one-time
charge of $162,000 was recorded in the 2002 first quarter pursuant to a
severance agreement with our former chief executive officer, of which $50,000
related to the issuance of options and warrants.

OTHER INCOME (EXPENSE)

Interest expense of $4,000 was incurred in the 2003 first quarter on financing
fees and affiliate debt compared with $2,000 in the 2002 first quarter. A $4,000
gain on settlement of liabilities was recognized during the 2003 first quarter
related to settlement agreements with several creditors that were consummated
during the quarter.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities of $282,000 in the 2003 first quarter was
primarily related to net operating losses of $359,000, less depreciation of
$53,000 and changes in working capital of $28,000, offset by a non-cash gain of
$4,000 from settlement of liabilities. Net cash used in operating activities of
$927,000 in the 2002 first quarter was primarily related to net operating losses
of $1,102,000 and changes in working capital of $14,000, excluding: depreciation
of $139,000, and non-cash expense of $50,000 from issuance of options and
warrants related to a severance agreement.

Net cash used in investing activities in the 2003 first quarter was $6,000
related to the cost of software development capitalized during the quarter. Net
cash used in investing activities in the 2002 first quarter was $117,000, of
which $10,000 was used for the purchase of property and equipment and $107,000
was the cost of software development capitalized during the quarter.

Net cash provided by investing activities in the 2003 first quarter was $187,000
related to the issuance of common stock and warrants. Net cash provided by
financing activities in the 2002 first quarter was $561,000 resulting from the
issuance of preferred stock for net proceeds of $276,000 and proceeds of
$390,000 from debt financing, offset by $105,000 used to repay debt.

In September 2002 we sold certain assets consisting primarily of customer
contracts (the "Assigned Contracts") and related revenue streams thereunder to
ProxyMed, Inc. ("Purchaser") in a negotiated arms-length transaction for a
purchase price consideration of $700,000. We received net proceeds of $690,000
on the sale, recognized a gain of $640,000 and recorded $50,000 as deferred
revenue. The Company and Purchaser also entered into an Affiliate and Partner
Services and License Agreement dated September 11, 2002, pursuant to which (i)
we and Purchaser have agreed to provide certain administrative and support
services for each other in connection with each other's customers, including
without limitation the customers under the Assigned Contracts, in each case
pursuant to an agreed upon fee schedule, (ii) we agreed to assist Purchaser in
establishing a "hot-site" which will permit Purchaser to run from its own
hardware platform, our software application to service Purchaser's customers,


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and (iii) we granted Purchaser a limited, non-exclusive, 5-year license to use
our software application at its "hot-site". We are entitled to receive fees for
our services and use of our software application unless and until the occurrence
of certain bankruptcy and liquidation events set forth in such agreement in
respect of us. We also entered into a Preferred Escrow Agreement with Purchaser
and DSI Technology Escrow Services, Inc., pursuant to which we have agreed to
deposit into escrow our proprietary claims processing software and related
materials for potential release to Purchaser for use pursuant to a limited,
non-exclusive license upon the occurrence of certain bankruptcy and liquidation
events.

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
through May 31, 2003. 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
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 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-Q 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-K WHICH WAS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 2003. NO ASSURANCE
CAN BE GIVEN THAT FUTURE RESULTS COVERED BY THE FORWARD-LOOKING STATEMENTS WILL
BE ACHIEVED.

ITEM 4.  Controls and Procedures

(a)      Evaluation of Disclosure Controls and Procedures

         Within the 90 days prior to the date of this report, 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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PART II - OTHER INFORMATION

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(b) REPORTS:


         During the quarter ended March 31, 2003, the Company filed Reports on
         Form 8-K dated February 27, 2003, and March 17, 2003, containing
         information under item 4.

         In addition, the Company filed Reports on Form 8-K dated April 8, 2003,
         and April 15, 2003, containing information under item 5.


The following Additional Exhibits are filed herewith:

31.1              Certification pursuant to Exchange Act Rules 13a-15(e) and
                  15d-15(e) of the President and Chief Executive Officer

31.2              Certification pursuant to Exchange Act Rules 13a-15(e) and
                  15d-15(e) of the Chief Financial Officer

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
                  the President and Chief Executive Officer

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
                  the Chief Financial Officer

--------------------------------------------------------------------------------

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                                   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


April 1, 2004


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