<PAGE>

-------------------------------------------------------------------------------
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

(Mark One)

    /X/  Quarterly report under Section 13 or 15(d) of the Securities Exchange 
         Act of 1934

    For the quarterly period ended February 28, 1999

    / /  Transition report under Section 13 or 15(d) of the Exchange Act

    For the transition period from _________________ to ______________________

Commission File Number 0-11791

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

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

                                 7301 OHMS LANE
                                    SUITE 220
                                EDINA, MN 55439 
                    ----------------------------------------
                    (Address of Principal Executive Offices)

                                 (612) 941-1500
                                 --------------
                (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   / /

     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 APRIL 13, 1999
-----------------------------------         -----------------------------
      COMMON STOCK, PAR VALUE                      8,201,842 SHARES
         $0.01 PER SHARE

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

<PAGE>

                               PURCHASESOFT, INC.

                                      INDEX
<TABLE>
<CAPTION>

 ITEM                                                                                    PAGE
NUMBER                                                                                  NUMBER
------                                                                                  ------
<S>                                                                                     <C>
PART I.      FINANCIAL INFORMATION

   Item 1.   Financial Statements

                Balance Sheets as of February 28, 1999 and May 31, 1998............       3

                Statements of Operations for the three months ended
                February 28, 1999 and 1998 and for the nine months ended
                February 28, 1999 and 1998.........................................       4

                Statements of Cash Flows for the nine months ended
                February 28, 1999 and 1998.........................................       5

                Notes to the Financial Statements..................................     6-8

   Item 2.   Management's Discussion and Analysis of Financial Condition
                and Results of Operation...........................................    9-15


PART II.     OTHER INFORMATION

   Item 2.   Changes in Securities.................................................      16

   Item 6.   Exhibits and Reports on Form 8-K......................................      16

   Signatures .....................................................................      17
</TABLE>


                                     2
<PAGE>

PART I.   FINANCIAL INFORMATION

     Item 1.   Financial Statements
               Company for which report is filed:  PurchaseSoft, Inc. 
                 (the "Company")


                               PURCHASESOFT, INC.
                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                       (Unaudited)                       
                                                     February 28, 1999     May 31, 1998  
                                                     -----------------  -----------------
<S>                                                  <C>                <C>              
Assets                                                                                   
Current Assets:                                                                          
  Cash and cash equivalents                          $   1,975,567      $   2,918,548    
  Accounts receivable, net                                 107,989            103,145    
  Prepaid expenses and other current assets                136,730              5,045
                                                     -----------------  -----------------
Total Current Assets                                     2,220,286          3,026,738
                                                     -----------------  -----------------

Property and equipment, net                                272,799             46,067
                                                     -----------------  -----------------

Other Assets
  Security deposits                                         39,234              9,124
                                                     -----------------  -----------------
Total Other Assets                                          39,234              9,124
                                                     -----------------  -----------------

Total Assets                                         $   2,532,319      $   3,081,929
                                                     -----------------  -----------------
                                                     -----------------  -----------------

Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
  Accounts payable                                   $     228,161      $     219,092
  Note payable                                           2,000,000                 --
  Current obligations under capital leases                  47,710                 --
  Accrued expenses                                         682,230            389,781
  Deferred revenues                                        125,904             93,598
                                                     -----------------  -----------------
Total Current Liabilities                                3,084,005            702,471
                                                     -----------------  -----------------

Noncurrent obligation under capital leases                 225,231                 --
                                                     -----------------  -----------------

Commitments and Contingencies

Stockholders' Equity (Deficit):
Common stock, $0.01 par value, 25,000,000
  shares authorized, 8,201,842 and 8,029,761
  issued and outstanding respectively                       82,019             80,298
Additional paid-in-capital                              19,512,261         19,321,482
Accumulated deficit                                    (20,282,165)       (16,933,290)
                                                     -----------------  -----------------
                                                          (687,885)         2,468,490

Less treasury stock (4,780 shares) at cost                 (89,032)           (89,032)
                                                     -----------------  -----------------
Total Stockholders' Equity (Deficit)                      (776,917)         2,379,458
                                                     -----------------  -----------------

Total Liabilities and Stockholders' 
   Equity (Deficit)                                  $   2,532,319      $   3,081,929
                                                     -----------------  -----------------
                                                     -----------------  -----------------
</TABLE>

                   See accompanying notes to financial statements


                                     3
<PAGE>

                               PURCHASESOFT, INC.
                            STATEMENT OF OPERATIONS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                 FOR THE THREE MONTHS ENDED    FOR THE NINE MONTHS ENDED 
                                 --------------------------    ------------------------- 
                                                                                         
                                 February 28,  February 28,    February 28,  February 28,
                                     1999          1998            1999          1998    
                                 ------------  ------------    ------------  ------------
<S>                              <C>           <C>             <C>           <C>         
Net revenues                                                                             
  Product                        $      3,000  $    183,352    $     76,750  $    280,477
  Services                             45,680        51,488         212,229       143,115
                                 ------------  ------------    ------------  ------------
Total net revenues                     48,680       234,840         288,979       423,592
                                 ------------  ------------    ------------  ------------
                                                                                         
Costs and expenses:                                                                      
  Cost of revenues                     43,604       154,743         121,843       436,212
  Selling expenses                    358,146       104,015       1,033,672       353,524
  General and administrative          451,131       331,375       1,408,970       938,251
  Research and development            235,592        62,894         511,027       148,173
  Restructuring charge                610,453            --         610,453            --
                                 ------------  ------------    ------------  ------------
Total costs and expenses            1,698,926       653,027       3,685,965     1,876,160
                                 ------------  ------------    ------------  ------------

Operating loss                     (1,650,246)     (418,187)     (3,396,986)   (1,452,568)

Interest income (expense), net            862        (5,438)         48,111       (12,014)
                                 ------------  ------------    ------------  ------------

Net loss                         $ (1,649,384) $   (423,625)   $ (3,348,875) $ (1,464,582)
                                 ------------  ------------    ------------  ------------
                                 ------------  ------------    ------------  ------------


Net loss per common share
  (Basic and diluted)            $      (0.20) $      (0.14)   $      (0.41) $      (0.56)
                                 ------------  ------------    ------------  ------------
                                 ------------  ------------    ------------  ------------


Weighted average
  shares outstanding                8,169,408     3,094,967       8,117,788     2,617,159
                                 ------------  ------------    ------------  ------------
                                 ------------  ------------    ------------  ------------
</TABLE>

                   See accompanying notes to financial statements


                                     4
<PAGE>

                                 PURCHASESOFT, INC.
                              STATEMENT OF CASH FLOWS
                                    (UNAUDITED)

<TABLE>
<CAPTION>
                                                                          FOR THE NINE MONTHS ENDED
                                                                  ----------------------------------------
                                                                  February 28, 1999      February 28, 1998
                                                                  -----------------      -----------------
<S>                                                               <C>                     <C>           
Cash flows from operating activities:
  Net loss                                                           $ (3,348,875)           $ (1,464,582)
  Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
     Depreciation and amortization                                         50,661                  28,580
     Amortization of deferred software cost                                    --                 370,010
  Change in operating assets and liabilities:
     Accounts receivable                                                   (9,870)                 45,957
     Prepaid expenses and other assets                                    (76,659)                 34,154
     Accounts payable                                                       9,069                 169,730
     Accrued expenses                                                     475,782                 187,328
     Deferred revenue                                                      32,306                  12,838
                                                                     ------------            ------------
Net cash used in operating activities                                  (2,867,586)               (615,985)
                                                                     ------------            ------------

Cash flows from investing activities:
  Additions to property and equipment                                    (215,860)                 (7,940)
  Increase in security deposits                                           (30,110)                     --
  Additions to capitalized software development costs                          --                 (75,361)
                                                                     ------------            ------------
Net cash used in investing activities                                    (245,970)                (83,301)
                                                                     ------------            ------------

Cash flows from financing activities:
  Net proceeds from private placement of common stock                          --                 385,389
  Net proceeds from private placement of convertible note                      --                  50,000
  Net proceeds from exercise of warrant                                   142,500                        
  Proceeds from financing equipment                                        50,508
  Proceeds from issuance of note payable                                2,000,000                  50,000
  Repayment of capital leases                                             (22,433)
  Repayment of note payable                                                    --                 (30,000)
                                                                     ------------            ------------
Net cash provided by financing activities                               2,170,575                 455,389
                                                                     ------------            ------------

Net decreases in cash and cash equivalents                               (942,981)               (243,897)
Cash and cash equivalents, beginning of year                            2,918,548                 245,649
                                                                     ------------            ------------
Cash and cash equivalents, end of period                             $  1,975,567            $      1,752
                                                                     ------------            ------------
                                                                     ------------            ------------
Supplemental disclosure of cash flow information:
  Cash paid for interest                                             $      7,349            $      4,797
  Cash paid for income taxes                                         $         --            $         --
                                                                     ------------            ------------
                                                                     ------------            ------------

Supplemental disclosure of non-cash transaction:
  Stock compensation award                                           $     50,000            $         --
  Capital lease obligation incurred                                  $     61,533            $         --
                                                                     ------------            ------------
                                                                     ------------            ------------
</TABLE>

                   See accompanying notes to financial statements


                                          5
<PAGE>

                               PURCHASESOFT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                FEBRUARY 28, 1999


     NOTE 1.  GENERAL INFORMATION:

     In November 1998, the Company by way of a migratory merger, was 
reincorporated in the State of Delaware and changed its corporate name to 
PurchaseSoft, Inc. For further information concerning the reincorporation, 
refer to the Company's Form 8-K filed on November 25, 1998.

     The Financial Statements included herein have been prepared by the 
Company without audit except the May 31, 1998 balance sheet, which was 
audited. The Statements have been prepared pursuant to the rules and 
regulations of the Securities and Exchange Commission and reflect all 
adjustments, consisting of only normal recurring accruals which are, in the 
opinion of management, necessary for a fair statement of the results of 
operations for the periods shown. These statements do not include all 
information required by Generally Accepted Accounting Principles to be 
included in a full set of Financial Statements. These Financial Statements 
should be read in conjunction with the Financial Statements and notes thereto 
included in the Company's latest report on Form 10-KSB, dated May 31, 1998.

     The Company is considered a Small Business (SB) filer pursuant to 
Securities and Exchange Commission (SEC) regulations. As such, the 
accompanying financial statements, are not intended to, nor do they, include 
all disclosures required by the SEC's Regulation S-X.


                                     6
<PAGE>

     NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES:

     (a)   Accounting Estimates

     Management is required to make estimates and assumptions during the 
preparation of financial statements in conformity with Generally Accepted 
Accounting Principles. These estimates and assumptions affect the reported 
amounts of assets and liabilities and the disclosure of contingent assets and 
liabilities at the date of the financial statements. They also affect the 
reported amounts of net income (loss) during the period. Actual results could 
differ materially from these estimates and assumptions.

     (b)   Revenue Recognition and Accounts Receivable

     The Company recognizes revenue in accordance with the provisions of 
Statement of Position (SOP) No. 97-2, "Software Revenue Recognition." The 
Company recognizes software license revenue at the time products are shipped 
provided that no significant Company obligations remain outstanding and 
collection of the resulting receivable is deemed probable by management. 
Insignificant obligations remaining at the time of shipment are accrued. 
Revenues related to software licenses for which there are significant 
remaining performance obligations are deferred and recognized once such 
obligations are fulfilled.

     Service revenues are comprised of revenues derived from software 
maintenance agreements and professional services. Maintenance fees are 
recorded as deferred revenue and recognized ratably over the maintenance 
period, which is usually 12 months. Professional service revenue is 
recognized as the services are performed.

     Accounts receivable is presented net of an allowance for  uncollectible 
accounts of $28,750 and $30,000 at February 28, 1999, and May 31, 1998 
respectively.

     (c)   Software Development Costs

     The Company is engaged in research and development activities in the 
area of computer software. In accordance with Generally Accepted Accounting 
Principles, costs incurred prior to determination of technological 
feasibility are considered research and development and expensed as incurred. 
Once technological feasibility has been established, development costs are 
capitalized and amortized over the shorter of an economic life of one to 
three years or the proportion of current period product revenues to total 
expected product revenues. Amortization charged to cost of revenues amounted 
to $0 and $370,010 during the nine months ended February 28, 1999 and 1998, 
respectively.

     (d)   Property and Equipment

     Property and equipment are stated at cost, less accumulated 
depreciation. Depreciation is charged to operations over the estimated useful 
lives of the related assets, generally five to seven years, using the 
straight-line method. Depreciation was $46,011 and $16,583 for the nine 
months ended February 28, 1999 and 1998, respectively.

     (e)   Cash and Cash Equivalents

     The Company considers all highly liquid investments with original 
maturities of 90 days or less to be cash equivalents for financial statement 
purposes.


                                     7
<PAGE>

     (f)   Income Taxes

     The Company accounts for income taxes using the liability method in 
accordance with the provisions of the Statement of Financial Accounting 
Standard (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109 requires 
that deferred income taxes reflect the tax consequences on future years of 
differences between the tax bases of assets and liabilities and their 
financial reporting amounts.

     (g)   Loss Per Common Share

     The Company follows the guidelines of the Financial Accounting Standards 
Board Statement No. 128, "Earnings Per Share." SFAS No. 128 requires dual 
presentation of basic and diluted earnings per share for entities with 
complex capital structures. Basic earnings per share includes no dilution and 
is computed by dividing net income (loss) available to common stockholders by 
the weighted average number of common shares outstanding for the period. 
Diluted earnings per share reflects the potential dilution of securities that 
could share in the earnings of an entity, similar to fully diluted earnings 
per share. Due to the Company's continued net losses there has been no impact 
from unexercised stock options and warrants on diluted net loss per share as 
the effect would be anti-dilutive.

     (h)   Reclassifications

     Certain prior year balances have been reclassified to conform with 
current year presentation. There was no impact on the prior year's net loss 
or total stockholders' equity from the reclassification.


                                     8
<PAGE>

     ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
              RESULTS OF OPERATIONS

     Except for the historical information contained herein, this Quarterly 
Report on Form 10-QSB may contain forward-looking statements within the 
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the 
Securities Exchange Act of 1934, including but not limited to (i) the 
Company's belief in the growth of the purchasing and procurement systems 
software market and (ii) expectations for the Company's strategy and future 
performance. Investors are cautioned that forward-looking statements are 
inherently uncertain. Actual performance and results of operations may differ 
materially from those projected or suggested in the forward-looking 
statements due to certain risks and uncertainties, including, but not limited 
to, the following risks and uncertainties: (i) the Company's history of 
losses and accumulated deficit, limited revenues and the uncertainty of 
future profitability; (ii) the uncertainty of market acceptance of 
PurchaseSoft software; (iii) new management and the need to recruit sales, 
service, and implementation personnel; (iv) the intense competition in the 
software field; (v) the dependence on one product and rapid technological 
change in the industry; and (vi) fluctuations in quarterly operating results. 
Additional information concerning certain risks and uncertainties that would 
cause actual results to differ materially from those projected or suggested 
in the forward-looking statements is contained in the Company's filings with 
the Commission, including those risks and uncertainties discussed under the 
caption "Risk Factors" in the Company's Annual Report on Form 10-KSB for the 
year ended May 31, 1998 and also on the Company's Registration Statement on 
Form S-3, File No. 333-73209. The forward-looking statements contained herein 
represent the Company's judgment as of the date of this Quarterly Report on 
Form 10-QSB, and the Company cautions readers not to place undue reliance on 
such statements.


                                     9
<PAGE>

RESULTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 28, 1999 AND 1998

OVERVIEW

     The Company reported a net loss for the quarter of $1,649,384. In a 
press release dated, February 1, 1999, the Company announced the resignation 
of Joseph D. Mooney as CEO, Chairman of the Board and a Director, effective 
February 1, 1999. Michael G. Kerrison, who joined the Company as a Director 
and Consultant in October 1998, was named CEO and Chairman of the Board. Mr. 
Kerrison has considerable experience in the Software and IT Services 
industries, having founded and run two successful software and services 
companies over the last eighteen years.

     The Company reported a restructuring charge of $610,453 in conjunction 
with a reorganization of the Company's management and workforce and its plans 
to refocus the Company on its core competencies, particularly its deep domain 
expertise in end-to-end organizational procurement. The Company's revenues 
have lagged expectations and the sales and marketing organization is 
being restructured and rebuilt.

     In order to obtain additional working capital to implement the Company's 
reorganization and restructuring plans, the Company borrowed $2 million on 
February 9, 1999 from L-R Global Partners, L.P. and signed a demand 
promissory note in return. L-R Global has committed to exercise its basic 
subscription privilege for at least $2,727,000 under the terms of a rights 
offering the Company began on March 23, 1999 after the quarter had ended. L-R 
Global intends to cancel the $2 million debt as partial payment for the 
shares they purchase in the rights offering. L-R Global has also made a 
stand-by commitment that if the rights offering is underscribed and, as a 
result, the Company's proceeds from the rights offering are less than $5 
million, L-R Global will purchase additional shares of common stock to make 
up the shortfall, but only up to a total investment, in the offering, of $3.5 
million.

REVENUES

     Total revenues for the three months ended February 28, 1999 were $48,680 
compared to revenue of $234,840 for the three months ended February 28, 1998, 
a decrease of $186,160 or 79.3%. Product revenues for the three months ended 
February 28, 1999, were $3,000 compared to revenues of $183,352 for the three 
months ended February 28, 1998, a decrease of $180,352 or 98.4%. Service 
revenues were $45,680 for the three months ended February 28, 1999, compared 
to $51,488 for the three months ended February 28, 1998.

     Total revenues for the nine months ended February 28, 1999 were $288,979 
compared to revenue of $423,592 for the nine months ended February 28, 1998, 
a decrease of $134,613 or 31.8%. Product revenues for the nine months ended 
February 28, 1999, were $76,750 compared to revenues of $280,477 for the nine 
months ended February 28, 1998, a decrease of $203,727 or 72.6%. Service 
revenues were $212,229 for the nine months ended February 28, 1999, compared 
to $143,115 for the nine months ended February 28, 1998, an increase of 
$69,114 or 48.3%. Service revenue increases reflect growth in both 
maintenance revenue and professional services performed as the Company 
continues to emphasize these activities as value added services.

                                     10
<PAGE>

EXPENSES

     The cost of revenues for the three months ended February 28, 1999 was 
$43,604 compared to $154,743 for the three months ended February 28, 1998, a 
decrease of $111,139 or 71.8%. This decrease was due to expensing rather than 
capitalizing software development costs during the quarter and was offset in 
part by increased compensation costs of providing professional services and 
customer support.

     The cost of revenues for the nine months ended February 28, 1999 was 
$121,843 compared to $436,212 for the nine months ended February 28, 1998, a 
decrease of $314,369 or 72.1%. This decrease was due to expensing rather than 
capitalizing software development costs during the nine months ended February 
28, 1999 and was offset in part by increased compensation costs of providing 
professional services and customer support.

     Selling expense for the three months ended February 28, 1999 was 
$358,146 compared to $104,015 for the three months ended February 28, 1998, 
an increase of $254,131 or 244.3%. This increase was primarily due to the 
addition of executive sales management, increased costs of sales personnel, 
increased sales travel and increased marketing expenses.

     Selling expense for the nine months ended February 28, 1999 was 
$1,033,672 compared to $353,524 for the nine months ended February 28, 1998, 
an increase of $680,148 or 192.4%. This increase was primarily due to the 
addition of executive sales management, increased costs of sales personnel, 
increased sales travel and increased marketing expenses.

     General and administrative expense for the three months ended February 
28, 1999 was $451,131 compared to $331,375 for the three months ended 
February 28, 1998, an increase of $119,756 or 36.1%. This increase was 
primarily due to increases in recruiting fees, increased occupancy costs in 
connection with the Company's relocation of its corporate office from Eden 
Prairie, MN to Edina, MN in August 1998, the addition of high speed 
communications capabilities between the Company's offices and to the 
internet, and increases in the areas of benefits and other general business 
expenses.

     General and administrative expense for the nine months ended February 
28, 1999 was $1,408,970 compared to $938,251 for the nine months ended 
February 28, 1998, an increase of $470,719 or 50.2%. This increase was 
primarily due to increases in recruiting fees, legal fees associated with the 
Company's reincorporation in the state of Delaware and other legal matters, 
increased occupancy costs in connection with the Company's relocation of its 
corporate office from Eden Prairie, MN to Edina, MN in August 1998, the 
addition of high speed communications capabilities between the Company's 
offices and to the internet, and increases in the areas of benefits and other 
general business expenses.

     Research and development expense for the three months ended February 28, 
1999 was $235,592 compared to $62,894 for the three months ended February 28, 
1998, an increase of $172,698 or 274.6%. This increase was primarily due to 
the addition of an R&D manager, additional R&D personnel and higher 
compensation costs for R&D personnel and as well as contract personnel.

     Research and development expense for the nine months ended February 28, 
1999 was $511,027 compared to $148,173 for the nine months ended February 28, 
1998, an increase of $362,854 or 244.9%. This increase was primarily due to 
the addition of an R&D manager, additional R&D personnel and higher 
compensation costs for R&D personnel and contract personnel.


                                     11
<PAGE>

     A restructuring charge of $610,453 was taken in the three months ended 
February 28, 1999 as the result of a reorganization of the Company's 
executive management and workforce in order to refocus the Company on its 
core competencies, particularly its deep domain expertise in end-to-end 
organizational procurement. This charge covers severence pay and other 
restructuring costs.

NET LOSS

     For the three months ended February 28, 1999 the Company reported a net 
loss of $1,649,384 (or $0.20 per share) as compared to a net loss of $423,625 
(or $0.14 per share) for the three month period ended February 28, 1998. This 
loss was caused by the continuation of low revenues which were not sufficient 
to cover operating costs. The loss for the three months ended February 28, 
1999 was worse than the loss for the same period ended February 28, 1998 
primarily due to higher operating expenses, including a restructuring charge 
of $610,453 as described in the discussion of expenses. The loss per share 
increased as a result of the higher operating expenses and restructuring 
charge and was offset in part due to an increase in the average outstanding 
shares for the three months ended February 28, 1999 to 8,169,408 shares as 
compared to average outstanding shares for the three months ended 
February 28, 1998 of 3,094,967 shares.

     For the nine months ended February 28, 1999, the Company reported a net 
loss of $3,348,875 (or $0.41 per share) as compared to a net loss of 
$1,464,582 (or $0.56 per share) for the nine month period ended February 28, 
1998. This loss was caused by the continuation of low revenues which were not 
sufficient to cover operating costs. The loss for the nine months ended 
February 28, 1999 was worse than the loss for the same period ended February 
28, 1998 primarily due to increased operating expenses, including a 
restructuring charge of $610,453, as described in the discussion of expenses. 
The decrease in the loss per share resulted from an increase in the average 
outstanding shares for the nine months ended February 28, 1999 to 8,117,788 
shares as compared to average outstanding shares for the nine months ended 
February 28, 1998 of 2,617,159 shares.

LIQUIDITY AND CAPITAL RESOURCES

     The Company had a working capital deficit of $863,719 at February 28, 
1999 as compared with working capital of $2,324,267 at May 31, 1998, a 
decrease in working capital of $3,187,986. This decrease resulted primarily 
from the loss for the nine month period of $3,348,875 and the use of working 
capital to acquire property and equipment of $215,860 offset in part by the 
proceeds received from the exercise of a warrant of $142,500 and proceeds of 
$50,508 from financing of equipment. Cash decreased from $2,918,548 at May 
31, 1998, to $1,975,567 at February 28, 1999, a decrease of $942,981.

     In connection with the resignation of Joseph D. Mooney, the Company is 
obligated under a termination agreement to continue to pay Mr. Mooney's 
salary through January 31, 2001. The unpaid obligation as of February 28, 
1999 was $383,333 of which $200,000 is classified as current and $183,333 is 
classified as noncurrent.

     The Company made $277,393 in capital expenditures during the nine month 
period ended February 28, 1999 and $7,940 in the nine month period ended 
February 28, 1998.


                                     12
<PAGE>

     On March 23, 1999, the Company began a rights offering whereby it has 
distributed subscription rights to persons who owned shares of the Company's 
common stock on March 22, 1999. During this rights offering, the Company may 
issue up to 6,151,382 shares of common stock. The gross proceeds to the 
Company will be $5,536,244 if all shares are subscribed for. The Company 
expects to receive minimum proceeds of approximately $3.6 million, in light 
of a stand-by commitment made by L-R Global Partners, L.P., as well as the 
commitment of Michael G. Kerrison, CEO of PurchaseSoft to exercise his 
subscription privileges for up to $100,000 of subscription rights, in each 
case to the extent that available shares are not fully subscribed for by 
other stockholders.

     In order to obtain working capital to implement the Company's 
reorganization and restructuring plans, the Company borrowed $2 million on 
February 9, 1999 from L-R Global Partners, L.P. and signed a demand 
promissory note in return. Under the terms of this note, the Company must 
repay the principal and interest due at any time upon the demand of L-R 
Global. L-R Global has agreed to exercise its basic subscription privilege in 
the rights offering for at least $2,727,000 and cancel the debt represented 
by the note as part of the purchase price for shares purchased in the rights 
offering. L-R Global has also made a stand-by commitment that if the rights 
offering is undersubscribed and, as a result, the Company's proceeds from the 
rights offering are less than $5,000,000, L-R Global will purchase additional 
shares of common stock to make up the shortfall, but only up to a total 
investment, in this offering, of $3,500,000. The Company believes that the 
expected minimum proceeds from the rights offering of approximately $3.6 
million, its existing capital resources, interest income, and revenue from 
software sales and services will be sufficient to fund its planned operating 
expenses and capital requirements for at least the next twelve months.

     The Company cannot assure you, however, that its funds including any 
funds raised in the rights offering will be sufficient to meet the Company's 
operating expenses and capital requirements during such period. The Company's 
actual cash requirements may vary materially from those now planned and will 
depend upon numerous factors, including the results of the Company's software 
development efforts, the level of resources the Company commits to marketing 
and sales efforts, the ability of the Company to maintain existing customers 
and develop new ones, and activities of competitors and other factors.

                                     13
<PAGE>

YEAR 2000 READINESS DISCLOSURES 

     The statements in this section are "Year 2000 Readiness Disclosures" as 
defined in the Year 2000 Information and Readiness Disclosure Act and are 
subject to the terms thereof and are meant for information purposes and not 
as a form of covenant, warranty, representation or guarantee of any kind.

     The Year 2000 issue results from computer programs written using two 
digits rather than four to define the applicable year. Any of the Company's 
computer programs that have date-sensitive software may recognize a date 
using "00" as the year 1900 rather than the year 2000. This could result in a 
system failure or miscalculations causing disruptions of operations, 
including, among other things, a temporary inability to process transactions 
or engage in normal business activities.

     The Company is engaged in an ongoing review of its computer systems, 
software applications, and related equipment used in connection with its 
internal operations for Year 2000 problems. Since the majority of the 
computer programs used by the Company are off-the-shelf, recently developed 
programs from third-party vendors, the Company believes such programs are 
less likely to have Year 2000 problems. Although some vendors make verbal 
assurances of Year 2000 compliance, there can be no certainty that the 
systems used by the Company will not be affected. The Company intends to 
continue monitoring, testing, replacing or enhancing its internal 
applications to ensure that risks related to such systems are minimized. This 
process is expected to be completed over the next several quarters.

     In addition to computers and related systems, the Year 2000 problem may 
affect the operation of office and facilities equipment, such as fax 
machines, photocopiers, telephone switches, security systems, and other 
common devices. The Company is currently assessing the potential effect of, 
and costs of remediating, the Year 2000 problem on its office and facilities 
equipment. The Company estimates the total cost to the Company of completing 
any required modifications, upgrades, or replacements of these internal 
systems will not have a material adverse effect on the Company's business or 
results of operations and anticipates that this process will be completed 
over the next several quarters. The estimated costs to bring internal 
operations into compliance is approximately $20,000. These estimates are 
being monitored and will be revised as additional information becomes 
available.

     The Company believes, based on an internal assessment, that Year 2000 
issues will not affect the mission critical functionality of GT Purchase Pro 
v6.1x and PurchaseSoft v5.x when used in accordance with their documentation, 
all date data is entered properly, and all software and hardware used in 
connection with the Company's products are fully Year 2000 compliant 
including properly exchanging date data with the Company's software products. 
The Company continues to test the current versions of its products for Year 
2000 compliance, and in the event problems are discovered, the Company 
intends to issue product updates to correct such anomalies. The Company's 
research and development personnel's responsibilities include, among other 
responsibilities, attention to Year 2000 compliance. The Company does not 
separately track the internal costs incurred for Year 2000 projects, which 
are principally related to payroll costs for such personnel.

     The Company intends to review certain older versions of its products and 
make a determination as to whether they are Year 2000 compliant. It will also 
determine whether to make the necessary updates to these products to make 
them Year 2000 compliant.

     The Company's products are generally integrated with other systems its 
customers may have, and such systems may not be Year 2000 compliant. Year 
2000 problems in these systems might significantly limit the ability of the 
Company's customers to realize the intended benefits offered by the Company's 
products. The Company has no plans to ascertain whether the internal systems 
of its customers are Year 2000 compliant.


                                     14
<PAGE>

     The Company monitors and reviews the communications of certain 
significant third party vendors with which it does business to evaluate their 
Year 2000 compliance plans and state of readiness in order to determine the 
extent to which the Company's systems and products may be affected by the 
failure of others to remediate their own Year 2000 issues. The Company has 
not independently confirmed such information received from other parties with 
respect to Year 2000 issues. As such, there can be no assurance that such 
other parties will complete their Year 2000 conversion in a timely fashion or 
will not suffer a Year 2000 business disruption that may adversely affect the 
Company's financial condition and results of operations.

     Year 2000 issues may affect the purchasing patterns of customers and 
potential customers in a variety of ways. Many companies are expending 
significant resources to replace or remedy their current hardware and 
software systems to achieve Year 2000 compliance. These expenditures may 
result in reduced funds available to purchase software products such as those 
offered by the Company. The Company does not believe that there is any 
practical way to ascertain the extent of, and has no plan to address problems 
associated with, such a reduction in purchasing resources of its customers. 
Any such reduction could, however, result in a material adverse effect on the 
Company's business, operating results and financial condition.

     The Year 2000 problem is pervasive and complex, as virtually every 
computer operation will be affected in some way. Although the Company does 
not believe that any additional Year 2000 compliance-related costs will be 
significant, there can be no assurance that costs incurred to address 
unanticipated issues would not have a material adverse effect on the 
Company's business, operating results and financial conditions. Any failure 
of third-party equipment or software comprising any part of the Company's 
systems to operate properly with regard to Year 2000 and thereafter could 
require the Company to incur unanticipated expenses to address associated 
problems, which could have a material adverse effect on the Company's 
business, operating results and financial condition.

     The Company may in the future be subject to claims based on Year 2000 
problems in others' products or issues arising from the integration of 
multiple products within an overall system. Although the Company has not been 
involved in any litigation or proceeding to date involving its products or 
services related to Year 2000 issues, there can be no assurance that the 
Company will not in the future be required to defend its products or services 
or to negotiate resolutions of claims based on Year 2000 issues. The costs of 
defending and resolving Year 2000-related disputes, and any liabilities of 
the Company for Year 2000-related damages, including consequential damages, 
could have a material adverse effect on the Company's business, operating 
results and financial condition.

     The Company does not have any specific contingency plans if any Year 
2000 problems develop with respect to the Company, its embedded systems or 
systems acquired from vendors. Contingency plans will be developed if it 
appears the Company or its key vendors will not be Year 2000 compliant and 
additionally if such noncompliance is expected to have a material adverse 
impact on the Company's operations. The cost of developing and implementing 
such plans may itself be material.

     The discussion above contains certain forward-looking statements. The 
costs of the Year 2000 conversion, and possible risks associated with the 
Year 2000 issue are based on the Company's current estimates and are subject 
to various uncertainties that could cause the actual results to differ 
materially from the Company's expectations. Such uncertainties include, among 
others, the success of the Company in identifying systems that are not Year 
2000 compliant, the nature and amount of programming required to upgrade or 
replace any affected systems, the availability of qualified personnel, 
consultants and other resources, and the success of the Year 2000 conversion 
efforts of others.


                                     15
<PAGE>

PART II.   OTHER INFORMATION

Item 2.    Changes in Securities

                On February 1, 1999, the Company issued 47,081 shares of its 
           common stock to Michael G. Kerrison, its CEO under a compensation 
           agreement. The issuance of the common stock was made in reliance 
           on Section 4(2) of the Securities Act of 1933, as amended.

Item 6.    Exhibits and Reports on Form 8-K

     (a)   Exhibits

           10.1  Demand Promissory Note, dated February 9, 1999, of 
                 PurchaseSoft, Inc. to L-R Global Partners, L.P.*

           10.2  Agreement and General Release, dated as of January 31, 1999, 
                 by and between Joseph D. Mooney and PurchaseSoft, Inc.*

           10.3  Compensation Agreement, dated as of February 1, 1999, by and 
                 between Michael G. Kerrison and PurchaseSoft, Inc.*



           FOOTNOTES:
           * Incorporated herein by reference from the Company's Form S-3 
           Registration Statement, File #333-73209 filed on March 22, 1999.


     (b)   Reports on Form 8-K

           None


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<PAGE>

                                 SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant 
caused this report to be signed on its behalf by the undersigned, thereunto 
duly authorized.


                                         PURCHASESOFT, INC.


                                            
Date:  April 14, 1999              By:  /s/  Michael G. Kerrison
                                      -----------------------------------------
                                      Name:  Michael G. Kerrison
                                      Title: Chairman of the Board of Directors 
                                             and Chief Executive Officer



                                          
Date:  April 14, 1999              By:  /s/  Philip D. Wolf
                                      ------------------------------------------
                                      Name:  Philip D. Wolf
                                      Title: Treasurer and Chief Financial 
                                             Officer




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