<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              ____________________

                                   FORM 10-QSB

(MARK ONE)

|X|      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED FEBRUARY 29, 2004

                                       OR

|_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

        FOR THE TRANSITION PERIOD FROM JUNE 1, 2003 TO FEBRUARY 29, 2004

                         COMMISSION FILE NUMBER 0-11791

                              ____________________

                               PURCHASESOFT, INC.
                               ------------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)

           DELAWARE                                             13-2897997
           --------                                             ----------
(State or Other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)

                      2091 BUSINESS CENTER DRIVE, SUITE 100
                                IRVINE, CA 92612
                                ----------------
                    (Address of Principal Executive Offices)

                                 (949) 263-0910
                                 --------------
                (Issuer's Telephone Number, Including Area Code)

                              ____________________

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|

     STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
              OF COMMON EQUITY, AS OF THE LATEST PRACTICABLE DATE.

              CLASS                            OUTSTANDING AT FEBRUARY 29, 2004
---------------------------------------        --------------------------------
COMMON STOCK, PAR VALUE $0.01 PER SHARE                41,287,267 SHARES



<PAGE>



                               PURCHASESOFT, INC.
                                      INDEX

ITEM
NUMBER
-----------------

PART I.         FINANCIAL INFORMATION
        Item 1. Financial Statements
                Balance Sheet as of February 29, 2004
                Statement of Operations as of February 29, 2004
                  For the period from June 1, 2003 to February 29, 2004
                Statement of Changes in Net Liabilities in Liquidation
                  For the period from June 1, 2003 to February 29, 2004
                Statement of Cash Flows For the period from June 1, 2003
                  to February 29, 2004
                Notes to the Financial Statements
        Item 2. Management's Discussion and Analysis of Financial Condition
        Item 3. Controls and Procedures
PART II.        OTHER INFORMATION
        Item 1. Legal Proceedings
        Item 6. Exhibits and Reports on Form 8-K
Signatures


                                        2

<PAGE>



                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
COMPANY FOR WHICH REPORT IS FILED: PURCHASESOFT, INC. (THE "COMPANY")

                               PURCHASESOFT, INC.
                            BALANCE SHEET (UNAUDITED)
                                FEBRUARY 29, 2004

                                     ASSETS
Current Assets
   Cash                                                            $     97,209
   Accounts Receivable                                                  261,560
                                                                   -------------
   Prepaid Expenses and Other                                             6,973
                                                                   -------------
     Total current assets                                               365,742

Property and equipment, net of accumulated depreciation of $9,141       195,848

Goodwill                                                                320,606
                                                                   -------------
Identifiable intangible assets, net                                     132,536
                                                                   -------------

        TOTAL ASSETS                                               $  1,014,732
                                                                   =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
   Accounts payable and accrued expenses                           $     76,473
   Accrued expenses                                                     293,505
   Deferred revenue                                                      88,045
   Short-term note payable                                              265,000
                                                                   -------------
     Total current liabilities                                          723,023
                                                                   -------------

                                                                   -------------
    Guaranty of debt                                                     62,274
                                                                   -------------

Stockholders' Equity
   Common stock, $0.01 par value, 100,000,000 shares authorized,
     41,287,267 shares issued and outstanding                           412,873
   Common stock to be issued                                             90,000
   Paid-in capital                                                   42,208,822
   Accumulated deficit                                              (43,390,592)
                                                                   -------------
   Accumulated other comprehensive loss                                  (2,636)
                                                                   -------------
                                                                        318,467
   Treasury stock (4,780 shares), at cost                               (89,032)
                                                                   -------------
     Total stockholders' equity                                         229,435
                                                                   -------------

        TOTAL LIABILITIES AND STOCKHOLERS' EQUITY                  $  1,014,732
                                                                   =============

                                        3


<PAGE>


                               PURCHASESOFT, INC.
                       STATEMENT OF OPERATIONS (UNAUDITED)
                    FOR NINE MONTHS ENDING FEBRUARY 29, 2004

                                                 THREE MONTHS       NINE MONTHS
                                                    ENDED              ENDED
                                                 FEBRUARY 29,       FEBRUARY 29,
                                                     2004               2004
                                                 -------------     -------------
REVENUE:
   Software licenses and updates                 $     12,950      $     12,950
                                                 -------------     -------------
   Maintenance contracts                              177,776           186,676
                                                 -------------     -------------
   Consulting services                                  6,470             7,863
                                                 -------------     -------------
     Total revenue                                    197,196           207,489
                                                 -------------     -------------

COSTS AND EXPENSES:
   Hardware and materials                               2,291             2,291
   Cost of service                                     65,679            74,011
   Sales and marketing                                 35,067            35,436
   General and administrative                         131,843           253,071
   Research and development                                --             1,625
                                                 -------------     -------------
     Total costs and expenses                         234,880           366,434
                                                 -------------     -------------

     OPERATING (LOSS)                                 (37,684)         (158,945)
                                                 -------------     -------------

                                                 -------------     -------------
 Other Income (expense)
    Other income                                       29,599            29,599
   Interest expense                                    (2,709)           (4,184)
                                                 -------------     -------------
     Total other income (expense)                      26,890            25,415
                                                 -------------     -------------

     NET (LOSS)                                  $    (10,794      $   (133,530)
                                                 =============     =============

Net (loss) per share-basic and diluted           $      (0.00)     $      (0.00)
                                                 =============     =============

Weighted average number of shares                  35,953,934        34,176,156

                                        4

<PAGE>
<TABLE>


                                    PURCHASESOFT, INC.
                           STATEMENT OF CASH FLOWS (UNAUDITED)
                         FOR NINE MONTHS ENDING FEBRUARY 29, 2004
<CAPTION>

FOR NINE MONTHS ENDED                                                        FEBRUARY 29, 2004
----------------------------------------------------------------                ----------
<S>                                                                             <C>
Cash Flows from Operating Activities:
   Net (loss)                                                                   $(133,530)
   Adjustments to reconcile net (loss) to net cash used
    in operating activities:
     Depreciation and amortization                                                 10,758
     Currency translation adjustment                                               (2,636)
   (Increase) in:
     Accounts payable and accrued expenses                                        346,750
     Deferred revenue                                                              13,368
                                                                                ----------
     NET CASH FLOW USED IN OPERATING ACTIVITIES                                   (33,823)
                                                                                ----------

Cash Flows from Investing Activities:
                                                                                ----------
         Purchase of property and equipment                                      (191,218)
                                                                                ----------
         Purchase of intangible assets                                            (75,259)
         Acquisition of Netshare, net of cash acquired                            (45,429)
         NET CASH FLOW (USED IN) OPERATING ACTIVITIES                            (311,906)

Cash Flows from Financing Activities:
   Proceeds from issuance of notes payable                                        325,000
                                                                                ----------
   Proceeds from private placements                                               100,000
                                                                                ----------
     NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES                               425,000
                                                                                ----------

     NET INCREASE IN CASH                                                          79,271

Cash balance at beginning of period                                                17,938
                                                                                ----------

CASH BALANCE AT END OF PERIOD                                                   $  97,209

Supplemental disclosure of cash flow information:
          Cash paid for interest                                                $   1,500

Supplemental schedule of noncash investing and financing activities:
          Common stock issued in connection with acquisition of Netshare        $  56,000
          Common stock to be issued in connection with the acquisition of CIE   $   7,000
          Conversion of note payable into equity                                $  60,000
                                                                                ==========

                                            5
</TABLE>

<PAGE>
<TABLE>


                                            PURCHASESOFT, INC.
                    STATEMENT OF CHANGES OF NET LIABILITIES IN LIQUIDATION (UNAUDITED)
                                 FOR NINE MONTHS ENDING FEBRUARY 28, 2003
<CAPTION>

                                                       THREE MONTHS                   NINE MONTHS
                                                         ENDED                          ENDED
                                                     FEBRUARY 28, 2003             FEBRUARY 28, 2003
                                                ----------------------------  ----------------------------
<S>                                                            <C>                          <C>
Net (liabilities) in liquidation as of                         $  (265,993)                 $    (207,780)
   beginning of period

Sources of Additional Cash:
   Vendor Refund                                                                                   21,370

Additional Use of Cash:
   Office costs                                       (2,009)                      (8,938)
   Professional fees                                  (8,879)                     (18,370)
   Telephone and utilities                                 --                        (469)
   Other                                              (6,958)       (17,846)       (7,586)       (35,363)
                                                --------------                -------------

Adjustments of estimated values                                     219,124                       157,058
                                                               -------------                --------------

   Net (liabilities) in liquidation as of
     February 29, 2004                                         $   (64,715)                 $    (64.715)
                                                               =============                ==============



                                                     6
</TABLE>


<PAGE>


NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION. On December 21, 2001, the Board of Directors of the
Company approved a plan to wind down the operations of the Company, which
includes salvaging the value of its assets during the wind down. As a result of
the adoption of the Plan and the imminent nature of the liquidation, the Company
adopted the liquidation basis of accounting effective December 1, 2001. The
liquidation basis of accounting requires the Company to accrue an estimate for
all liabilities related to expenses to be incurred during the wind down period.
Additionally, assets are stated at their estimated net realizable value and
liabilities are stated at their anticipated settlement amounts. The estimated
net realizable value of assets represents management's best estimated of the
recoverable value of the assets, net of selling expenses, and without
consideration for the effect that the settlement of any litigation may have on
the value of the assets.

         On November 8, 2002, the Board of Directors approved a plan for the
restart of service and support to previous Company's customers and for the
cessation of the wind down of operations. Under this plan, the Company will
engage certain subcontractors to provide management, sales and support through
commissions and revenue sharing agreements. With the first new revenue generated
in the fourth quarter of fiscal year ended May 31, 2003, the Company changed its
accounting method from liquidating basis to going concern basis effective on
March 1, 2003.

PRESENTATION OF INTERIM INFORMATION. The financial information at February 29,
2004 and for the three and nine months then ended is unaudited but includes all
adjustments (consisting only of normal recurring adjustments) that the Company
considers necessary for a fair presentation of the financial information set
forth herein, in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP") for interim financial information, and
with the instructions to Form 10-QSB. Accordingly, such information does not
include all of the information and footnotes required by U.S. GAAP for annual
financial statements. For further information refer to the Financial Statements
and footnotes thereto included in the Company's Annual Report on Form 10-KSB for
the year ended May 31, 2003.

         The financial statements for the three and nine months ended February
29, 2004 were prepared on the going concern basis of accounting, which
contemplates realization of assets and satisfaction of liabilities in the normal
course of business. The financial statements for the three and nine months ended
February 28, 2003 were prepared on the liquidation basis of accounting, which
contemplates realization of assets at their net realizable value and
satisfaction of liabilities at their anticipated settlement amounts.

         The results for the three and nine months ended February 29, 2004 may
not be indicative of results for the year ending May 31, 2004 or any future
periods.

ACCOUNTS RECEIVABLE. Management of the Company considers accounts receivable to
be fully collectible; accordingly, no allowance for doubtful accounts is
required. If amounts become uncollectible, they will be charged to operations
when that determination is made.

GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS. The Company assesses goodwill for
recoverability if the market capitalization of the Company is less than its net
assets. The Company measures declines in value of goodwill that are other than
temporary using the market value method. The Company measures the market value
based on the quoted market price of the Company that is most representative of
the fair value of the Company's common stock multiplied by the number of common
shares outstanding. The Company did not recognize any impairment loss for
goodwill in the reported period.

         Other intangible assets consist primarily of intellectual property
acquired and purchased intangible assets. Other intangible assets are amortized
using the straight-line method over estimated useful lives ranging from 36
months to 39 months.

FOREIGN CURRENCY TRANSLATION. Assets and liabilities of the Germany subsidiary
that operate in a local currency environment (Euro dollar) are translated into
United States dollars at exchange rates in effect at the balance sheet date. The
effects of foreign currency translation adjustments are included in
stockholders' equity as a component of accumulated other comprehensive income
(loss) in the accompanying consolidated balance sheet. Income and expense
accounts are translated at average exchange rates during the reported period.

                                        7

<PAGE>

NOTE 2 - ACQUISITIONS

Netshare Solutions GmbH
-----------------------

In January 2004, the Company completed the acquisition of Netshare Solutions
GmbH ("Netshare"), a Germany company specializing in e-procurement and e-Sales
solutions in the Business-to Business and Business-to-Consumer environment. The
acquisition of Netshare enhanced the Company's ability to be a robust provider
of Enterprise solutions. Under the terms of acquisition, the Company issued 8
million shares of common stock valued at $56,000 using an average market value
of $0.007 per share, and paid 13,000 Euro in cash (equivalent to $16,141 U.S.
dollar). The average market price was based on the average closing price for a
range of trading days around the announcement date of the acquisition (February
9, 2004). Additional cash payment up to 120,000 Euro is required if certain
cumulative revenue targets are achieved commencing February 1, 2004. The total
purchase cost of the acquisition is summarized as follows:

          Vale of common stock issued          $   56,000
          Cash consideration                       16,141
          Other costs                               6,100
                                               -----------
          Total purchase price                 $   78,241
                                               ===========

The purchase price allocation is as follows:

          Net liabilities assumed              $  (29,288)
          Guaranty of debt                        (62,274)
          Goodwill                                169,803
                                               -----------
          Total purchase price                 $   78,241
                                               ===========

As summarized above, there was $169,803 of goodwill arising from the Netshare
acquisition. In accordance with SFAS No. 141, the Company did not record any
goodwill amortization. However, in accordance with SFAS No. 142, goodwill is
subject to impairment testing on an annual basis. The results of operations of
Netshare have been included in the Company's consolidated financial statements
subsequent to the date of acquisition. Pro forma results of operations have not
been presented because the effect of the acquisition was not material.

Computer Information Enterprises, Inc.
--------------------------------------

In February 2004, the Company acquired the assets of Computer Information
Enterprises, Inc. ("CIE"), a leading provider of seamlessly integrated, powerful
document management and workflow applications, specifically designed for
Microsoft Solutions(R) ERP systems for 1 million shares of the Company's common
stock. This acquisition further expands the Company's role in Microsoft
Solutions(R) ERP systems and enhances the Company's offerings to their
international customer base.

The purchase price consideration of $7,000 was based on estimated fair values of
assets and liabilities of CIE at the acquisition date, and allocated to the
customer-based intangible assets acquired. The following table summarizes the
estimated fair value of the assets acquired and liabilities assumed at the date
of acquisition:

          Fixed Assets                                $  12,508
          Customer-based intangible assets               59,105
          Deferred revenue                              (59,613)
          Other liabilities                              (5,000)
                                                      ----------
          Total purchase consideration                $   7,000
                                                      ==========

Identifiable intangible assets are being amortized on a straight-line basis over
a thirty-nine months period. There was no goodwill arising from this
acquisition. Amortization of Identifiable intangible assets related to the CIE
acquisition was $758 for three and nine months ended February 29, 2004. The
consolidated statement of operations includes the results of operations related
to CIE's business activity subsequent to the acquisition.

                                        8

<PAGE>

NOTE 3 - COMPREHENSIVE LOSS

The Company's accumulated other comprehensive loss consists of foreign currency
translation adjustments only. At February 29, 2004, the Company had $2,636 of
foreign currency translation losses. None at February 28, 2003.

The components of comprehensive loss as of February 29, 2004 were as follows:

          Net loss                                     $  (133,530)
          Foreign currency translation loss                 (2,636)
                                                       ------------
          Comprehensive loss                           $  (136,166)
                                                       ============

Due to the Company's net loss for the period presented above, there is no tax
effects allocated to any components of comprehensive net loss for the reported
period.

NOTE 4 - BALANCE SHEET ITEMS

Other Intangible Assets
-----------------------

The components of other intangible assets were as follows:

                                    Gross
                                   Carrying     Accumulated
                                    Amount      Amortization       Net
                                 ------------   ------------   ------------
     Software                    $    37,936    $    (1,070)   $    36,866
     Customer Contracts               59,105           (758)        58,347
     Name rights domain               37,323             --         37,323
                                 ------------   ------------   ------------
     Total intangible assets     $   134,364    $    (1,828)   $   132,536
                                 ============   ============   ============

Amortization of intangibles was $1,828 for the three and nine months ended
February 29, 2004. There was no amortization for the three months ended February
29, 2003.

Based on the carrying amount of the intangibles as of February 29, 2004, and
assuming no impairment of the underlying assets, the estimated future
amortization is as follows:


     Years ended May 31,
     -----------------------------------
     2004 (March 1, 2004 to May 31, 2004)            $     6,623
     2005                                                 30,831
     2006                                                 30,831
     2007                                                 26,616
                                                     -----------
     Total amortization                              $    94,902
                                                     ===========

Accrued Expenses
----------------

The components of accrued expenses were as follows:

          Accrued interest                               $  2,684
          Payroll tax payable                              39,944
          Sales tax payable                                26,273
          Royalty payable                                   5,000
          Due to purchase of assets                       199,056
          Other accrued expenses                           20,548
                                                        ---------
                                                        $ 293,505
                                                        =========

                                        9

<PAGE>

NOTE 5 - DEFERRED REVENUES

The following sets forth the components of deferred revenues as of February 29,
2004:

          Product support                               $  60,340
          Maintenance contracts                            27,705
                                                        ---------
          Total deferred revenues                       $  88,045
                                                        =========

Deferred product support revenues represent customer payments made in advance
for annual support contracts. Product support services are typically billed on a
per annum basis in advance and revenue is recognized ratably over the support
period. Deferred maintenance contracts revenues include prepayments for
consulting and advanced product services. Revenue for these services is
recognized as the services are performed.

NOTE 6 - SHORT-TERM NOTES PAYABLE

Short-term notes payable at February 29, 2004 consist of the following:

     Promissory note-related party payable on
        4/12/04; interest at 6% per annum; unsecured        $   25,000
     Promissory note-related party payable on
        4/13/04; interest at 6% per annum; unsecured            25,000
     Promissory note-related party payable on
        4/30/04; interest at 6% per annum; unsecured           200,000
     Promissory note-related party payable on
        6/19/04; interest at 6% per annum; unsecured            15,000
                                                            ----------
     Total short-term notes payable                         $  265,000
                                                            ==========

In February 2004, the Company converted a note payable of $60,000 into three (3)
million shares of the Company's common stock.

In addition, the Company granted the creditors stock warrants to purchase up to
aggregate of 375,000 shares at an exercise price of $0.01 per share commencing
October 16, 2003 through June 30, 2004. None of these warrants were exercised at
February 29, 2004.

NOTE 7 - GUARANTY OF DEBT

The former shareholders of Netshare provided to a bank security in the amount of
100,000 Euro for a loan granted to Netshare AG. Under the terms of the Netshare
acquisition, if the bank recourses to this security, the Company agreed to
assume 50% of this security, but in no case more than 50,000 Euro. The Company
recognized a liability of $62,274 for its obligation under the guarantee (see
Note 2).

NOTE 8 - PRIVATE PLACEMENT

On January 30, 2004, the Company conducted a private placement offering of the
Company's common stocks up to $800,000. The stock was sold for $0.02 per share
with a minimum purchase of 1 million shares or $20,000. As of February 29, 2004,
the Company sold 5 million shares and raised $100,000. The private placement
will be closed on May 31, 2004.

NOTE 9 - NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per
share:

                                            Three Months         Nine Months
                                               Ended                Ended
                                          February 29, 2004    February 29, 2004
                                          -----------------    -----------------
Numerator:
  Net (loss)                                $    (10,794)        $   (133,530)
                                          -----------------    -----------------
Denominator:
  Weighted average shares                     35,993,954           34,176,156
                                          -----------------    -----------------

Net (loss) per share-basic and diluted      $       0.00         $      (0.00)

                                        10

<PAGE>

As the Company incurred net losses for three and nine months ended February 29,
2004, the effect of dilutive securities totaling 1,654,286 and 551,429
equivalent shares, respectively, has been excluded from the diluted net loss per
share computation as it was antidilutive.

NOTE 10 - SEGMENT INFORMATION

FASB Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for reporting information about operating
segments. Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker, or decision making group, in deciding how to
allocate resources and in assessing performance. The Company's chief operating
decision maker is the Chief Executive Officer. The Company is organized by line
of business. While the Chief Executive Officer evaluates results in a number of
different ways, the line of business management structure is the primary basis
for which the allocation of resources and financial results are assessed. The
Company has three major line of business operating segments: software sale,
maintenance contracts, and consulting services.

The software sale line of business includes sale, licensing and updating of the
base program. The maintenance contracts line of business provides customers with
rights to unspecified software product upgrades and maintenance releases,
internet access to technical content, as well as internet and telephone access
to technical support personnel during the support period. The consulting line of
business assists customers in the rapid design, implementation, deployment,
upgrade and migration of the company's database technology and applications
software, as well as on-site technical services.

The Company does not track assets by operating segments. Consequently, it is not
practical to show assets by operating segments.

The following table presents a summary of operating segments:

                                            Three Months         Nine Months
                                               Ended                Ended
                                          February 29, 2004    February 29, 2004
                                          -----------------    -----------------
Software sale:
 Revenues                                   $     12,950         $     12,950
 Hardware and materials                            2,291                2,291
                                          -----------------    -----------------
    Margin                                  $     10,659         $     10,659

Maintenance contracts:
  Revenues                                  $    177,776         $    186,676
  Cost of services                                64,394               71,594
                                          -----------------    -----------------
     Margin                                 $        382         $    115,081

Consulting:
  Revenues                                  $      6,470         $      7,863
  Cost of services                                 1,285                2,417
                                          -----------------    -----------------
     Margin                                 $      5,185         $      5,446

 Totals:
        Revenues                            $    197,196         $    207,489
        Expenses                                  67,970               76,302
                                          -----------------    -----------------
        Margin                              $    129,226         $    131,187

Reconciliation of operating segment margin to net loss:

                                            Three Months         Nine Months
                                               Ended                Ended
                                          February 29, 2004    February 29, 2004
                                          -----------------    -----------------
Total margin for reportable segment         $    129,226         $    131,187
Sales and marketing expenses                     (35,067)             (35,436)
General and administrative expenses             (131,843)            (253,071)
Research and development expenses                     --               (1,625)
Other income, net                                 26,890               25,415
                                          -----------------    -----------------
Net (loss)                                  $    (10,794)        $   (133,530)

                                        11

<PAGE>

NOTE 11 - CONTINGENCIES

As disclosed in Note 2, additional cash payment of 30,000 Euro is required if
the cumulative revenue of Netshare since February 1, 2004 reached (i) 300,000
Euro; (ii) 800,000 Euro; (iii) 1,440,000 Euro and (iv) 2,000,000 Euro. At
February 29, 2004, none of these contingencies occurred.

Netshare agreed to pay additional 20,000 Euro for the assets acquired from
insolvency manager if they win a large contractual transaction with a potential
client. At February 29, 2004, the contingency did not occur.

NOTE 12 - GUARANTEES

The Company from time to time enters into certain types of contracts that
contingently require the Company to indemnify parties against third party
claims. These contracts primarily relate to certain agreements with the
Company's officers, directors and employees, under which the Company be required
to indemnify such persons for liabilities arising out of their employment
relationship.

The terms of such obligations vary. Generally, a maximum obligation is not
explicitly stated. Because the obligated amounts of these types of agreements
often are not explicitly stated, the overall maximum amount of the obligations
cannot be reasonably estimated. Historically, the Company has not been obligated
to make significant payments for these obligations, and no liabilities have been
recorded for these obligations on its balance sheet as of February 29, 2004.

The software license agreements generally include a warranty that the software
products will substantially operate as described in the applicable program
documentation for a period of one year after delivery. The Company also warrants
that services performed will be provided in a manner consistent with industry
standards for a period of 90 days from performance of the service. To date, the
Company has not incurred any material costs associated with these warranties.

NOTE 13 - GOING CONCERN

The Company's consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. In the near
term, the Company expects operating costs to continue to exceed funds generated
from operations. As a result, the Company expects to continue to incur operating
losses and may not have enough money to grow its business in the future. The
Company can give no assurance that it will achieve profitability or be capable
of sustaining profitable operations. As a result, operations in the near future
are expected to continue to use working capital.

To successfully grow the individual segments of the business, the Company must
decrease its cash burn rate, improve its cash position and the revenue base of
each segment, and succeed in its ability to raise additional capital through a
combination of primarily public or private equity offerings or strategic
alliances. The Company also depends on certain important employees, and the loss
of any of those employees may harm the Company's business.

The Company, through its German subsidiary Netshare Solutions GmbH, has been
pursuing a large contractual transaction with a potential client that is to be
executed in June 2004, and is pursing raising 200,000 Euro to support its
on-going working capital requirement. The Company's continued existence depends
on its ability to meet its financing requirements and the success of its future
operations. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


                                        12

<PAGE>

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

         The following discussion of our financial condition and results of
operations should be read in conjunction with our financial statements and
attached notes and the other financial information included elsewhere in this
report. This Management's Discussion and Analysis of Financial Condition and
Results of Operations section contains descriptions of our expectations
regarding future trends affecting our business. These forward-looking statements
and other forward-looking statements made elsewhere in this document are made in
reliance upon the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The discussion below and under the heading "Risk Factors"
sets forth numerous factors we believe could cause actual results to differ
materially from those contemplated by the forward-looking statements. We are not
under any obligation to update the information contained in this section.

OVERVIEW
         In January, 2004 the Company under its new management made its first
acquisition acquiring Netshare Solutions GmbH ("Netshare"), a German company
specializing in e-procurement and e-Sales solutions in the Business-to Business
and Business-to-Consumer environment.

         In February, 2004 the Company made its second acquisition acquiring
Computer Information Enterprises, Inc. ("CIE"), a leading provider of seamlessly
integrated, powerful document management and workflow applications, specifically
designed for Microsoft Solutions ERP systems.

         In July 2003 the Company successfully settled the last of the remaining
liabilities that had been incurred prior to and during the wind down period.
Management has been completely successful in discharging those liabilities,
preserving the intellectual property and public filing status of the Company for
the future benefit of all its existing shareholders. With a clean and newly
restated balance sheet at May 31, 2003, the Company can now focus on the future
and the task of rebuilding shareholder value.

         There were several significant events that occurred during the first
six months of fiscal year ending May 31, 2003 that render a year over year
comparative discussion of operating results and the Company's financial
condition problematic and essentially useless.

              1.  On August 5th, 2002 the Company announced a change in control
                  in that L-R Global sold its 82% interest to Steven Flagg and
                  Tom Marsh. The Company had been put into wind down status by
                  L-R Global.

              2.  In the Company's 10-QSB for the period ending February
                  28,2003, the Company announced that it would be resuming
                  operations and will begin reporting as a going concern
                  effective March 1st, 2003.

         As a result of this decision, the first six months of the fiscal year
ending May 31, 2003 was reported using a liquidation method of accounting. While
the Company has resumed operations and reporting as a going concern with the
results of the third quarter of the year ending May 31, 2004, the change in
control accounting adjustments, the liquidation of all previous assets,
liabilities, employees and locations, and the change in business strategy make
all comparative analysis with previous years operating financial periods
irrelevant.

CURRENT OPERATING RESULTS, LIQUIDITY AND CAPITAL RESOURCES

         REVENUE. For the third quarter ending February 29, 2004 revenue
increased to $197,196 from $6,043 in the previous quarter. The increase was due
to the results of a full month of revenue from its German acquisition, Netshare
Solutions and two weeks of revenue from its acquisition of CIE. Majority of
revenue reported in the quarter came from maintenance contracts - $177,776,
followed by software licenses and updates - $12,950 and consulting services -
$6,470.

         OPERATING EXPENSES. Operating Expenses for the quarter were $234,880
vs. $56,620 in the previous quarter. The increase was due to higher overall
expenses because of the Company's acquisitions. The Company expects these
expenses to remain comparable over the next few quarters until further
acquisitions are made or reductions to expenses are implemented at Netshare. The
Company does not expect to be profitable or cash flow positive during the final
quarter of the year ending May 31, 2004.

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<PAGE>

         LIQUIDITY. The Company's cash balance was $97,209 at February 29, 2004
compared to $16,362 at November 30, 2003. The Company raised $50,000 during the
quarter from the proceeds of a private placement and $325,000 from the proceeds
of notes payable. The Company has a private placement memorandum issued through
May 31, 2004 to provide working capital for existing and additional
acquisitions.

CERTAIN BUSINESS RISKS

         Stockholders and prospective purchasers of our common stock should
carefully consider the following risk factors in addition to the other
information appearing in this Quarterly Report on Form 10-QSB.

History of Losses and Accumulated Deficit; Uncertainty of Future Profitability.
-------------------------------------------------------------------------------

         The Company has experienced ongoing losses from operations. The Company
only resumed operations as a going concern in March 2003. The Company expects
that such losses may continue for at least some period until product sales are
generated in sufficient volume to offset expenses. The Company does not expect
to be profitable unless and until such time as sales of its software products
and services generate sufficient revenue to fund its operations.

Uncertainty of Market Acceptance of PurchaseSoft Software.
----------------------------------------------------------

         The Company cannot offer any assurance that its PurchaseSoft products
and/or the products of its acquired business's will achieve and sustain market
acceptance. The Company believes that its history of financial performance has
negatively affected its image in the marketplace and that it may have forfeited
business from potential customers who expressed concerns about the Company's
financial status and ability to remain solvent. The Company believes that the
ownership and management changes in PurchaseSoft will help position the Company
to overcome these past objections. The Company believes its largest challenge is
to gain wide spread market acceptance of its products. The failure to obtain
market acceptance would have a material adverse affect on the Company's
business.

New Management, Ability to Recruit Sales, Service, and Implementation Personnel.
--------------------------------------------------------------------------------

         The Company's management has a very limited history in operating the
Company although they are experienced in managing companies with similar
challenges similar. There can be no assurance that the Company's management will
be successful in meeting their planned objectives. The ability to achieve
anticipated revenues is substantially dependent on the ability of the Company to
attract on a timely basis and retain skilled personnel, especially key
management, sales, support, and development personnel. The Company believes that
its future success will depend in large part on its ability to attract and
retain highly skilled technical, managerial, marketing, and professional
services personnel to ensure the high quality of products and services provided
to its customers. The Company competes in the market for such personnel against
numerous companies, including larger, more established companies with
significantly greater financial resources than the Company. There can be no
assurance that the Company will be successful in attracting and retaining
skilled personnel. The Company's inability to attract and retain qualified
employees would have a material adverse effect on the Company's business.

Intense Competition.
--------------------

         The software products industry is intensely competitive. The Company
faces competition from several sources ranging from large ERP vendors, medium
sized ERP vendors, industry specific vendors and best-of-breed vendors. These
best-of-breed competitors have focused on certain market segments. These
competitors all offer software products performing functions similar to the
Company's products. The market space in which the Company competes is
experiencing tremendous growth and this will invite new competitors. There can
be no assurance that competitors do not have or will not offer or develop
products that are superior to the Company's products or that achieve greater
market acceptance. In addition, suppliers of database systems and companies that
develop management information software applications for large multinational
manufacturers have begun to target the Company's potential customers and offer
applications that compete in its markets. As a result, competition (including
pricing competition) may increase, which could result in price reductions and


                                        14

<PAGE>

loss of market share. The Company may also face market resistance from potential
customers within the large installed base of legacy systems, who may be
reluctant to commit the time and resources necessary to convert to a web
services, client-server or browser-based software product. As the client-server
and/or browser-based computing market expands, a large number of companies, many
with significantly greater resources than the Company, may enter the market or
increase their market share by acquiring or entering into alliances with
competitors of the Company. There can be no assurance that the Company will be
able to compete successfully against its competitors or that the competitive
pressures faced by the Company will not adversely affect its financial
performance.

Rapid Technological Change and New Products.
--------------------------------------------

         The market for the Company's software products is characterized by
rapid technological advances, evolving industry standards, change in end-user
requirements, and frequent new product introductions and enhancements. The
introduction of products embodying new technologies and the emergence of new
industry standards could render the Company's existing products and products
currently under development as obsolete and unmarketable. Accordingly, the
Company's future success will depend upon its ability to enhance its current
products and develop and introduce new products that keep pace with
technological developments, satisfy varying end-user requirements, and achieve
market acceptance. Any failure by the Company to anticipate or respond
adequately to technological developments or end-user requirements, or any
significant delays in product development or introduction, could severely damage
the Company's competitive position and have a material adverse effect on
revenues. There can be no assurance that the Company will be successful in
developing and marketing new products or product enhancements on a timely basis
or that the Company will not experience significant delays in the future which
could have a material adverse effect on the Company's results of operations. In
addition, there can be no assurance that new products or product enhancements
developed by the Company will achieve market acceptance.

Dependence on a Single Product-Line.
------------------------------------

         Substantially all of the Company's revenues are expected to be derived
from the sale of three lines of software products and related support services.
Accordingly, any event that adversely affects revenue generated from the sale of
software or from the professional fees derived from the installation of such
products, such as competition from other products, significant flaws in the
products, or incompatibility with third party hardware or software products,
negative publicity or evaluation, or obsolescence of the hardware platforms or
software environments in which the products run, could have a material adverse
effect on the Company's results of operations. The Company's future financial
performance will depend on the continued development and introduction of new and
enhanced versions of its software and other products and on customer acceptance
of such new enhanced products.

Fluctuation in Quarterly Operating Results.
-------------------------------------------

         The Company's revenues and operating results can vary substantially
from quarter to quarter. Sales revenues in any quarter are substantially
dependent on aggregate contracting activity and the Company's ability to
recognize revenue in that quarter in accordance with its revenue recognition
policies and generally accepted accounting principles. Revenues may vary from
quarter to quarter due to variances in prior quarter contracting activity, which
may positively or adversely affect the Company's future financial performance.
The Company's sales cycle is relatively long and variable. The Company's ability
to increase revenue is dependent on its ability to grow sales activity which
provides opportunities for consulting, training and subsequent maintenance
revenues. Additionally the Company may not be able to recruit, hire, and train
sufficient numbers of qualified consultants to perform such services. Due to the
forgoing, it is likely that in one or more future quarters the Company's
operating results will be below the expectations of public securities market
analysts. In such event, the price of the Company's Common Stock would likely be
materially adversely affected.


                                        15

<PAGE>

Intellectual Property and Proprietary Rights.
---------------------------------------------

         The Company relies on a combination of copyright, trademark and trade
secret laws, employee and third party nondisclosure agreements, and other
industry standard methods for protecting ownership of its proprietary software
and business practices. There can be no assurance, however, that in spite of
these precautions, an unauthorized third party will not copy or reverse-engineer
certain portions of the Company's products or obtain and use information that
the Company regards as proprietary. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent as
do the laws of the United States. There can be no assurance that the mechanisms
used by the Company to protect its software will be adequate or that the
Company's competition will not independently develop software products that are
substantially equivalent or superior to the Company's software products. The
Company expects that, as the number of software products in the industry
increases and the functionality of these products further overlaps, software
products will increasingly be subject to claims of infringement on third party
proprietary rights. Any such claim, whether with or without merit, could result
in costly litigation and require the Company to enter into royalty or licensing
arrangements. Such royalty or license arrangements, if required, may not be
available on terms acceptable to the Company or at all.

Need for Additional Capital
---------------------------

         The Company will need to raise additional capital to finance its
development and acquisition plans. The availability of financing for any plan
will be critical to continue operations. Financing may not be available on terms
that are favorable to us, or at all.

Future Sales of Common Stock
----------------------------

         Our common stock is traded on the National Association of Securities
Dealers OTC:Pink Sheets. Our common stock has historically been highly illiquid.
Steven A. Flagg and Thomas B. Marsh, who serve on our Board of Directors, one of
whom is President, in the aggregate owned approximately 69.2% of our common
stock as of January 10, 2004. If either of these directors were to sell even a
small portion of their total shares in a short time, the market price of our
common stock would likely decline dramatically. Further, sales of a substantial
number of shares of our common stock by any holder in a short time would likely
cause the market price of our common stock to decrease significantly. In
addition, the sale of any of these shares may impair our future ability to raise
capital through the sale of additional stock.

Inability to Influence the Outcome of Key Transactions
------------------------------------------------------

         The two directors of the Company, one of whom is our President, in the
aggregate owned approximately 69.2% of our common stock as of January 10, 2004.
These two directors have enough voting power to approve or disapprove any
matters that are determined by a majority vote of our stockholders, which
severely limits your ability to influence PurchaseSoft through voting your
shares.

Maintenance of a Public Trading Market for Shares of Our Common Stock
---------------------------------------------------------------------

         Although shares of our common stock are presently quoted on the OTC
Pink Sheets, we cannot assure you that they will continue to be quoted in the
future. During the period of the Company's wind down the Company lost its market
makers and has declined to establish new market makers until full and
substantial operations are underway through product sales or an acquisition.
Furthermore, in contrast to stock that is quoted on the NASDAQ National Market
or traded on a national securities exchange, as a result of our stock being
quoted on the OTC Pink Sheets, stockholders may:

         o    Find it more difficult to obtain accurate and timely quotations
              regarding the bid and asked prices;
         o    Experience greater spreads between bid and asked prices;
         o    Be charged relatively higher transactional costs when buying or
              selling our common stock; and
         o    Encounter more difficulty in effecting sales or purchases of
              common stock.


                                        16

<PAGE>

Cost of Compliance with Securities Laws
---------------------------------------

         While securities listed on the NASDAQ National Market System or
national securities exchanges are in many cases exempt from the registration
requirements of state securities laws, securities traded on the OTC Pink Sheets
must comply with the registration requirements of state securities laws, which
increases the time and costs associated with complying with state securities
laws when raising capital. We cannot assure that this cost of compliance will
not have a material adverse effect on the viability of the Company.

Liquidity Reduction due to "Penny Stock" Regulatory Requirements
----------------------------------------------------------------

         The Securities and Exchange Commission has adopted regulations imposing
limitations upon the manner in which certain low priced securities, referred to
as a "penny stock," are publicly traded. Under these regulations, a penny stock
is defined as any equity security that has a market price of less than $5.00 per
share, subject to specified exceptions. Unless an exception is available, the
regulations require the delivery, prior to any transaction involving a penny
stock, of a disclosure schedule explaining the penny stock market and the risks
associated with it. Also, under these regulations, some broker-dealers who
recommend these types of securities to persons other than established customers
and "accredited investors" must make a special written suitability determination
for the purchaser and receive the purchaser's written agreement to a transaction
prior to sale. Trading activities for penny stocks are more difficult for
broker-dealers than in the case of securities not defined as penny stocks.
Because our common stock may be a penny stock this may have the result of
depressing the market for our securities, and a stockholder may find it
difficult to sell shares of our common stock.

ITEM 3:  CONTROLS AND PROCEDURES

         Within the 180 days prior to the filing of this report, we carried out
an evaluation, under the supervision and with the participation of our President
and CFO, of the effectiveness of the design and operation of our disclosure
controls and procedures. Our disclosure controls and procedures are designed
with the objective of ensuring that information required to be disclosed in our
reports filed under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms. Based on this evaluation, our President and Secretary/Treasurer concluded
that our disclosure controls and procedures are effective in timely alerting
them to material information required to be included in our periodic SEC
reports.

         There have been no significant changes in our internal controls or in
other factors which could significantly affect internal controls subsequent to
the date of our most recent evaluation.



                           PART II: OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS.

         NONE.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K


                                        17

<PAGE>



SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the Issuer
caused this report to be signed on its behalf by the undersigned, thereunto to
be duly authorized.

                                             PurchaseSoft, Inc.
                                             (Issuer)

Date: June 22, 2004                          /s/ Steven A. Flagg
                                             ----------------------------------

                                             Steven A. Flagg
                                             President and CEO

Date: June 22, 2004                          /s/ Kevin A. Yanoscik
                                             ----------------------------------

                                             Kevin A. Yanoscik
                                             CFO

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on June 22, 2004.

SIGNATURE                                    TITLE
-----------------------------------          -----------------------------------

/s/ Steven A. Flagg                          Director
---------------------------
Steven A. Flagg

/s/ Kevin A. Yanoscik                        Director
---------------------------
Kevin A. Yanoscik

                                        18