<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 NOVEMBER 30, 2004

                                       OR

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

                             FOR THE TRANSITION PERIOD FROM        TO

                         COMMISSION FILE NUMBER 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
|_|
         THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON EQUITY, AS OF THE LATEST PRACTICABLE DATE.

   COMMON STOCK, PAR VALUE $0.01 PER SHARE        24,674,338 SHARES at 12/31/05



<PAGE>


                               PURCHASESOFT, INC.
                                   FORM 10-QSB
                         QUARTER ENDED NOVEMBER 30, 2004

                              CROSS REFERENCE SHEET

                          PART 1- FINANCIAL INFORMATION


Item 1      Consolidated Financial Statements                                  3

Item 2      Management's Discussion  and Analysis of Financial Condition and
            Results of Operations                                              8

Item 3      Controls and Procedures                                            9

                           PART II - OTHER INFORMATION

Item 1      Legal Proceedings                                                 10

Item 2      Changes in Securities and Use of Proceeds                         10

Item 3      Defaults Upon Senior Securities                                   10

Item 4      Submission of Matters to a Vote of Security Holder                10

Item 5      Other Information                                                 10

Item 6      Exhibits and Reports On Form 8-K                                  10

Signatures                                                                    11


                                       2


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                               PURCHASESOFT, INC.
                                   FORM 10-QSB
                         QUARTER ENDED NOVEMBER 30, 2004
                                   (UNAUDITED)

                    ITEM 1- CONSOLIDATED FINANCIAL STATEMENTS

                                      INDEX

Consolidated Balance Sheets                                                    4

Consolidated Statements of Income                                              5

Consolidated Statements of Cash Flows                                          6

Consolidated Notes to Financial Statements                                     7





                                       3


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<TABLE>

                                              ITEM I. FINANCIAL INFORMATION

                                                   PURCHASESOFT, INC.
                                               CONSOLIDATED BALANCE SHEET
                                           NOVEMBER 30, 2004 AND MAY 31, 2004
                                                       (UNAUDITED)

                                                         ASSETS
                                                                                     NOVEMBER 30, 2004   MAY 31, 2004
                                                                                     --------------------------------
<S>                                                                                  <C>                <C>
Current Assets
     Cash                                                                            $     47,478       $    127,625
     Accounts receivable                                                                   21,620             55,870
     Prepaid software licenses                                                              2,400              4,530
     Prepaid expenses and other assets                                                      1,647              6,561
                                                                                     --------------------------------
Total current assets                                                                       73,145            194,586

Property and equipment, net of accumulated depreciation of $4,283                          11,373             13,983
Other Assets
     Deposits                                                                               4,144              4,144
     Goodwill                                                                              97,002             97,002
     Customer contracts, net of accumulated amortization of $32,205                        26,900             53,801

                                                                                     --------------------------------
     TOTAL ASSETS                                                                    $    212,564       $    363,516
                                                                                     ================================

               LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
     Accounts payable and accrued expenses                                           $    140,869             84,493
     Deferred maintenance revenues, current portion                                        88,085             77,739
     Notes payable - related parties (Note 6)                                             160,000            213,000
                                                                                     --------------------------------
     Total current liabilities                                                            388,954            375,232

     Long-term deferred maintenance revenues, net of current portion                        7,916

                                                                                     --------------------------------
          Total liabilities                                                               396,870            375,232
                                                                                     --------------------------------
Stockholders' Equity
   Common stock, $0.01 par value, 100,000,000 shares authorized,
     15,815,387 and 10,051,062 issued and outstanding at
     November 30, 2004 and May 31, 2004, respectively                                     158,154            100,511
   Additional paid-in capital                                                          43,724,837         43,628,184
   Accumulated deficit                                                                (43,978,265)       (43,651,379)
   Treasury stock (4,780 shares), at cost                                                 (89,032)           (89,032)
                                                                                     --------------------------------
     Total stockholders' equity (deficit)                                                (184,306)           (11,716)
                                                                                     --------------------------------


        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                   $    212,564       $    363,516
                                                                                     ================================

                                                           4


<PAGE>

                                                PURCHASESOFT, INC.
                                       CONSOLIDATED STATEMENT OF OPERATIONS
                            FOR THREE AND SIX MONTHS ENDING NOVEMBER 30, 2004 AND 2003
                                                    (UNAUDITED)



                                      THREE MONTHS ENDED  THREE MONTHS ENDED   SIX MONTHS ENDED    SIX MONTHS ENDED
                                       NOVEMBER 30, 2004   NOVEMBER 30, 2003  NOVEMBER 30, 2004   NOVEMBER 30, 2003
REVENUE:

   Software sales                           $     57,616       $         --        $   109,958        $         --
   Services                                       11,314                 --             50,600                  --
   Maintenance                                    24,591              6,043             35,621              10,293
   Other                                           2,912                 --              5,825                  --
                                            ----------------------------------------------------------------------
     Net revenue                                  96,433              6,043            202,004              10,293
                                            ----------------------------------------------------------------------

COSTS OF REVENUE:
   Cost of sales and service revenue              96,324              4,733            212,207               8,333
                                            ----------------------------------------------------------------------

     Gross Profit                                    109              1,310            (10,203)              1,960

OPERATING EXPENSES:
     General and administrative                  169,282             51,887            259,787             123,222
                                            ----------------------------------------------------------------------
      Total operating expenses                   169,282             51,887            259,787             123,222

    OPERATING (LOSS)                            (169,173)           (50,577)          (269,990)           (121,262)
                                            ----------------------------------------------------------------------

 OTHER EXPENSE:
  Interest expense                                                   (1,025)                                (1,475)
                                            ----------------------------------------------------------------------
  Loss on investment in subsidiary
   (note 5)                                           --                 --            (56,896)                 --
                                            ----------------------------------------------------------------------
       Total other expense                            --             (1,025)           (56,896)                 --
                                            ----------------------------------------------------------------------

        NET (LOSS)                          $   (169,173)      $    (51,602)      $   (326,886)       $   (122,737)
                                            ======================================================================

Net (loss) per share-basic and diluted      $     (0.012)      $     (0.008)      $     (0.026)       $     (0.018)
                                            ======================================================================

Weighted average number of shares             14,001,936          6,657,453         12,683,800           6,657,453
                                            ======================================================================


                                                           5


<PAGE>

                                                PURCHASESOFT, INC.
                                       CONSOLIDATED STATEMENT OF CASH FLOWS
                            FOR THREE AND SIX MONTHS ENDING NOVEMBER 30, 2004 AND 2003
                                                    (UNAUDITED)


                                                   THREE MONTHS        THREE MONTHS       SIX MONTHS         SIX MONTHS
                                                       ENDED               ENDED             ENDED             ENDED
                                                NOVEMBER 30, 2004   NOVEMBER 30, 2003  NOVEMBER 30, 2004  NOVEMBER 30, 2003
---------------------------------------------------------------------------------------------------------------------------

Cash Flows from Operating Activities:
   Net Income (loss)                                 $(169,172)        $ (51,602)          $(326,886)        $(122,737)
   Adjustments to reconcile net (loss)
    to net cash used in operating activities:
     Depreciation and amortization                      14,756                84              29,511               210
     Stock issued for services                          76,900                --              77,400                --
     Loss on investment in subsidiary                       --                --              56,896                --
   Increase (decrease) in:
     Accounts receivable                                26,590                --              34,250                --
     Prepaid licenses                                      280                --               2,130                --
     Prepaid expenses and other assets                      --                                 4,914                --
     Accounts payable and accrued expenses              38,949             8,881              56,376            15,051
     Deferred revenue                                   10,345              (200)             18,262            (4,100)
                                                     ------------------------------------------------------------------
       NET CASH FLOW USED IN OPERATING
ACTIVITIES                                              (1,352)          (42,837)            (47,147)         (111,576)
                                                     ------------------------------------------------------------------

Cash Flows from Investing Activities:
   Proceeds from Common Stock Issued                    20,000                --              20,000                --
                                                     ------------------------------------------------------------------
       Net cash flow provided by investing              20,000                --              20,000                --
        activities

Cash Flows from Financing Activities:
     Proceeds from issuance of notes payable                              50,000                               110,000
     Repayment of related party notes                  (23,000)                              (53,000)
                                                     ------------------------------------------------------------------
       Net cash flow provided by financing             (23,000)           50,000             (53,000)          110,000
        activities

     Net (Decrease) in cash                             (4,352)            7,163             (80,147)           (1,576)

Cash balance at beginning of period                     51,830             9,199             127,625            17,938
                                                     ==================================================================

Cash balance at end of period                        $  47,478         $  16,362           $  47,478         $  16,362
                                                     ==================================================================

Non-cash transactions:
     Stock issued for services                          76,900                --              77,400                --
                                                     ==================================================================
</TABLE>


                                                           6


<PAGE>

                               PURCHASESOFT, INC.
               NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.       BUSINESS AND ORGANIZATION - PurchaseSoft, Inc. (the Company) develops
         and markets business software solutions for procurement, automation and
         document imaging and management systems. Its document imaging and
         document management solutions are for Microsoft Dynamics SL and
         Microsoft Dynamics GP accounting ERP systems and Sage's MAS 90/200
         accounting ERP systems. The Company acquired Netshare Solutions, GmbH
         on January 28, 2004 and Computer Information Enterprises, Inc. (CIE) on
         February 16, 2004. The Company liquidated the remaining assets of
         Netshare Solutions through a trustee appointed by the German courts in
         the quarter ended November 30, 2004.

2.       GOING CONCERN - The accompanying consolidated financial statements,
         which have been prepared in conformity with accounting generally
         accepted in the United States of America, contemplates the continuation
         of the Company as a going concern. However, the Company has sustained
         loses and has used capital raised through the issuance of stock and
         loans to fund activities. Continuation of the Company as a going
         concern is contingent upon establishing and achieving profitable
         operations. Management believes that actions currently being taken will
         allow the Company to continue its operations. However, there is no
         assurance that the necessary funds will be realized either by securing
         debt or through stock offerings. The consolidated financial statements
         do no include any adjustments that might result from the outcome of
         this uncertainty.

3.       BASIS OF PRESENTATION - In the opinion of the Company, the accompanying
         unaudited consolidated financial statements contain all adjustments
         (consisting of normal recurring adjustments) necessary to present
         fairly the financial position as of November 30, 2004 and the results
         of operations and cash flows for the three and six months ended
         November 30, 2004 and 2003. The accounting policies followed by the
         Company are set forth in the Company's financial statements included in
         its May 31, 2004 Annual Report to Shareholders. The results of
         operations for the six months ended November 30, 2004 are not
         necessarily indicative of the results to be expected for the full year.

         The consolidated financial statements include all the accounts of the
         Company and its subsidiary. All intercompany transactions have been
         eliminated and all adjustments have been made.

4.       USE OF ESTIMATES - The preparation of financial statements in
         conformity with generally accepted accounting principles requires
         management to make estimates and assumptions that affects the reported
         amounts of assets and liabilities and disclosure of contingent assets
         and liabilities at the date of the financial statements and the
         reported amounts of revenues and expenses during the reporting period.
         Actual results could differ from those estimates.

5.       LOSS ON INVESTMENT IN SUBSIDIARY - The extraordinary expense item
         totaling $56,896 is the write-off of the remaining value of Company's
         investment in Netshare, GmbH following the German trustee's liquidation
         of assets that transpired in the six months ended November 30, 2004.

6.       NOTES PAYABLE - RELATED PARTIES - On May 31, 2004, the Company had
         three related party 6% interest bearing demand notes (one to the
         Company's CFO and two to the Company's CEO) payable totaling $213,000.
         During the six months ended November 30, 2004 the Company paid down its
         notes payable balance by $53,000 to $160,000 at November 30, 2004.

                                       7


<PAGE>

7.       COMMON STOCKS ISSUED - The Company issued 5,764,325 shares during the
         six months ended November 30, 2004. 200,000 shares of common stock were
         issued for cash of $20,000 at an average price of $0.100 per share;
         3,464,000 shares valued at $77,400 were issued for services valued at
         the closing market price of the Company's stock on the date issued
         which was at an average of $0.022 per share; and 2,100,325 shares were
         issued for $210,000 in cash which was received and subscribed prior to
         May 31, 2004

8.       SUBSEQUENT EVENTS - On March 1, 2005, the Company's Board of Directors
         authorized a one-for-five reverse split of the common stock to holders
         of record on November 5, 2005. Par value per share remains $0.01. The
         financial statement presentation has been adjusted to reflect this
         reverse stock split. The adjustment of $632,615 and $402,042 between
         common stock and additional paid-in-capital have been made as of
         November 30, 2004 and May 31, 2004, respectively, to reflect this
         change.

         After November 30, 2004 the Company issued 350,000 shares of common
         stock for cash of $50,000 at the average price of $0.143 per share, and
         8,572,675 shares of common stock for services valued at the closing
         market price of the Company's stock on the date of issued which was at
         an average of $0.003 per share, which was $27,330.

         The License Agreement between the Company and CIE requires the Company
         to pay a royalty of $30,000 for fiscal year 2005. On June 23, 2005, in
         lieu of the royalty expense payment, the Company issued 800,000 shares
         of common stock in satisfaction of the royalty payment at an average
         price of $0.038 per share.


 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         This document includes "forward-looking" statements within the meaning
         of the Private Securities Litigation Act of 1995. This Act provides a
         "safe harbor" for forward-looking statements to encourage companies to
         provide prospective information so long as they identify these
         statements as forward-looking and provide meaningful cautionary
         statements identifying important factors that could cause actual
         results to differ from the expected results. All statements other than
         statements of historical fact made in this document are forward
         looking. In some cases, they can be identified by terminology such as
         "may," "will," "should," "expect," "plan," "anticipate," "believe,"
         "estimate," "predict," "potential," or "continue," the negative of such
         terms or other comparable terminology. These statements are only
         predictions. Actual events or results may differ materially. In
         evaluating these statements, you should consider various factors that
         may cause actual results to differ materially from any forward-looking
         statements.

         Although we believe that the expectations reflected in the
         forward-looking statements are reasonable, we cannot guarantee our
         future results, levels of activity, performance or achievement.
         Moreover, neither we nor any other person assumes liability for the
         accuracy and completeness of the forward-looking statements. Actual
         results may differ materially from those projected as a result of
         certain risks and uncertainties, including but not limited to:
         recession and other external economic factors over which the Company
         has no control; the timing and speed with which our major customers and
         prospects execute their plans for the use of our software, continued
         development of the Company's software products; competitive product and
         pricing pressures; use of internally developed software applications;
         patent and other litigation risk; the risk of key staff leaving the
         Company; the risk that major customers of the Company's products may
         terminate use of our software as well as other risks and uncertainties,
         including but not limited to those detailed from time to time in the
         Company's Securities and Exchange Commission filings. These
         forward-looking statements are made only as of the date hereof, and the
         Company undertakes no obligation to update or revise the
         forward-looking statements, whether as a result of new information,
         future events or otherwise.

                                       8


<PAGE>

OVERVIEW

The financial results reflected for the second quarter ended November 30, 2004
represent approximately nine and one-half months of activity following
PurchaseSoft's acquisition of Computer Information Enterprises (CIE) on February
16, 2004.

CURRENT OPERATING RESULTS, LIQUIDITY AND CAPITAL RESOURCES

Revenue. For the quarter ending November 30, 2004 the Company reported revenues
of $96,433 compared to $6,043 for the comparable quarter ending November 30,
2003. The increase in revenues for the quarter is attributable to over six full
months of sales activity following the acquisition of CIE. Year-to-date revenues
for the six month period were $202,004 compared to $10,293 for the prior
comparable six month period. Software sales comprising $57,616 in the quarter
and represent the Company's sale of its core product IMAGELINK directly to
end-users and via reseller channels. Service revenues of $11,314 in the quarter
compared to year-to-date service revenues of $50,600 reflect a planned decline
as a large third-party consulting contract was winding-down in the second
quarter. Service revenues for the remainder of the fiscal year are anticipated
to be nominal as the Company focuses its resources on continued development and
deployment of its core software products.

Operating Expenses. Operating expenses totaling $169,282 and $259,787
respectively, for the quarter and six months year-to-date through November 30,
2004 reflect a moderate increase per full-time employee (FTE). The Company
expects to lower its overhead costs over the coming months through continued
reductions to staff and better cost controls.

Liquidity. The Company's cash balance was $47,478 at November 30, 2004 compared
to $127,625 at fiscal year end May 31, 2004. The Company raised monies from a
combination of loans converted to equity, loans from shareholders, and via a
private placement. As the Company continues to grow it anticipates relying on
internally-generated funds to support its growth.


ITEM 3:  CONTROLS AND PROCEDURES

Within the 90 days prior to the filing of this report, we carried out an
evaluation, under the supervision and with the participation of our President
and Secretary/Treasurer, 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.

                                       9


<PAGE>

                           PART II: OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS:                                             NONE
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS:                     NONE
ITEM 3: DEFAULTS UPON SENIOR SECURITIES:                               NONE
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:           NONE
ITEM 5: OTHER INFORMATION:                                             NONE
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K                               NONE


Exhibits

         31.1 Certification of Steven A. Flagg, Chairman and Chief Executive
Office of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
         31.2 Certification of Kevin A. Yanoscik, Chief Financial officer of the
Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
         32.1 Certification of Steven A. Flagg, Chairman and Chief Executive
Officer of the Company, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
         32.2 Certification of Kevin A. Yanoscik, Chief Financial Officer of the
Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



                                       10


<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: December 22, 2006                       /s/ Steven A. Flagg
                                              ----------------------------------

                                              Steven A. Flagg
                                              President and CEO

Date: December 22, 2006                       /s/ Kevin A. Yanoscik
                                              ----------------------------------

                                              Kevin A. Yanoscik
                                              Secretary, Treasurer and 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 December 22, 2006.

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

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

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







                                       11