<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 November 30, 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 JANUARY 13, 2000
-----------------------------------          -------------------------------
    COMMON STOCK, PAR VALUE                          14,004,515 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 November 30, 1999 and May 31, 1999.............................        3

                      Statements of Operations for the three and six months ended

                      November 30, 1999 and 1998..........................................................        4

                      Statements of Cash Flows for the six months ended

                      November 30, 1999 and 1998..........................................................        5

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

     Item 2.      Management's Discussion and Analysis of Financial Condition

                      and Results of Operations ..........................................................     8-12

PART II.          OTHER INFORMATION

     Item 6.      Exhibits and Reports on Form 8-K........................................................       12

     Signatures       ....................................................................................       13
</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)
                                                               November 30, 1999               May 31, 1999
                                                              ---------------------        ----------------------
<S>                                                            <C>                           <C>
Assets
Current Assets:
   Cash and cash equivalents                                   $      1,576,623              $     3,824,505
   Accounts receivable, net                                              69,027                      115,927
   Prepaid expenses and other current assets                             68,043                      121,460
                                                                 ---------------               --------------
Total Current Assets                                                  1,713,693                    4,061,892
                                                                 ---------------               --------------

Property and equipment, net                                             452,503                      304,614
                                                                 ---------------               --------------

Other Assets
   Security deposits                                                     39,269                       38,879
                                                                 ---------------               --------------
Total Other Assets                                                       39,269                       38,879
                                                                 ---------------               --------------

Total Assets                                                   $      2,205,465              $     4,405,385
                                                                 ---------------               --------------
                                                                 ---------------               --------------

Liabilities and Stockholders' Equity

Current Liabilities
   Accounts payable                                            $        310,789              $       411,480
   Current obligations under capital leases                              64,425                       49,428
   Accrued expenses                                                     500,370                      528,924
   Deferred revenues                                                    146,129                      163,804
                                                                 ---------------               --------------
Total Current Liabilities                                             1,021,713                    1,153,636
                                                                 ---------------               --------------

Noncurrent Obligations
   Noncurrent obligations under capital leases                           65,122                       28,878
   Noncurrent restructuring charges                                      34,850                      133,332
                                                                 ---------------               --------------
Total Noncurrent Obligations                                             99,972                      162,210
                                                                 ---------------               --------------

Commitments and Contingencies

Stockholders' Equity
Common stock, $0.01 par value, 25,000,000
   shares authorized, 13,807,015 and 13,807,015
   issued and outstanding respectively                                  138,070                      138,070
Additional paid-in-capital                                           24,443,167                   24,443,167
Accumulated deficit                                                 (23,408,425)                 (21,402,666)
                                                                 ---------------               --------------
                                                                      1,172,812                    3,178,571
Less treasury stock (4,780 shares) at cost                              (89,032)                     (89,032)
                                                                 ---------------               --------------
Total Stockholders' Equity                                            1,083,780                    3,089,539
                                                                 ---------------               --------------

Total Liabilities and Stockholders' Equity                     $      2,205,465              $     4,405,385
                                                                 ---------------               --------------
                                                                 ---------------               --------------
</TABLE>

                 See accompanying notes to financial statements


                                       3

<PAGE>

                               PURCHASESOFT, INC.
                             STATEMENT OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                            FOR THE THREE MONTHS ENDED                      FOR THE SIX MONTHS ENDED
                                      ---------------------------------------         --------------------------------------
                                       November 30,          November 30,              November 30,          November 30,
                                           1999                  1998                      1999                  1998
                                      ----------------     ------------------         ----------------     -----------------
<S>                                   <C>                   <C>                       <C>                   <C>
Net revenues:
   Product                            $       71,180        $        7,500            $      111,155        $       73,750
   Services                                   67,178                73,120                   130,041               166,549
                                        -------------         -------------             -------------         -------------
Total net revenues                           138,358                80,620                   241,196               240,299
                                        -------------         -------------             -------------         -------------

Costs and expenses:
   Cost of revenues                           94,046                45,457                   177,157                78,239
   Selling expenses                          419,104               345,317                   739,336               675,526
   General and administrative                428,372               513,852                   914,331               957,839
   Research and development                  228,427               147,262                   475,130               275,435
                                        -------------         -------------             -------------         -------------
Total costs and expenses                   1,169,949             1,051,888                 2,305,954             1,987,039
                                        -------------         -------------             -------------         -------------

Operating loss                            (1,031,591)             (971,268)               (2,064,758)           (1,746,740)

Interest income (expense), net                21,315                16,351                    58,999                47,249
                                        -------------         -------------             -------------         -------------

Net loss                              $   (1,010,276)       $     (954,917)           $   (2,005,759)       $   (1,699,491)
                                        -------------         -------------             -------------         -------------
                                        -------------         -------------             -------------         -------------

Net loss per common share
   (Basic and diluted)                $        (0.07)       $        (0.12)           $        (0.15)       $        (0.21)
                                        -------------         -------------             -------------         -------------
                                        -------------         -------------             -------------         -------------

Weighted average
   shares outstanding                     13,807,015             8,154,761                13,807,015             8,092,261
                                        -------------         -------------             -------------         -------------
                                        -------------         -------------             -------------         -------------
</TABLE>

                 See accompanying notes to financial statements


                                       4

<PAGE>

                               PURCHASESOFT, INC.
                             STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                          FOR THE SIX MONTHS ENDED
                                                               -----------------------------------------------
                                                                November 30, 1999         November 30, 1998
                                                               --------------------      ---------------------
<S>                                                             <C>                       <C>
Cash flows from operating activities:
   Net loss                                                      $  (2,005,759)           $    (1,699,491)
   Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities:
      Depreciation and amortization                                     42,757                     28,437
      Provision for bad debts                                            4,823                        - -
      Stock compensation for shares issued for services                 30,000                        - -
   Changes in operating assets and liabilities:
      Accounts receivable                                               42,077                    (73,284)
      Prepaid expenses and other assets                                 23,417                    (93,518)
      Accounts payable                                                (100,691)                    63,522
      Accrued expenses                                                (127,035)                    (6,770)
      Deferred revenue                                                 (17,675)                    19,870
                                                                   ------------             --------------
Net cash used in operating activities                               (2,108,086)                (1,761,234)
                                                                   ------------             --------------

Cash flows from investing activities:
   Additions to property and equipment                                (113,701)                  (198,930)
   Increase in security deposits                                          (390)                   (30,110)
                                                                   ------------             --------------
Net cash used in investing activities                                 (114,091)                  (229,040)
                                                                   ------------             --------------

Cash flows from financing activities:
   Net proceeds from exercise of warrant                                   - -                    142,500
   Proceeds from financing equipment                                       - -                     50,508
   Payment of capital leases                                           (25,705)                   (11,520)
                                                                   ------------             --------------
Net cash provided by (used in) financing activities                    (25,705)                   181,488
                                                                   ------------             --------------

Net decreases in cash and cash equivalents                          (2,247,882)                (1,808,786)
Cash and cash equivalents, beginning of year                         3,824,505                  2,918,548
                                                                   ------------             --------------
Cash and cash equivalents, end of period                         $   1,576,623            $     1,109,762
                                                                   ------------             --------------
                                                                   ------------             --------------

Supplemental disclosure of cash flow information:
   Cash paid for interest                                        $       6,369            $         3,973
   Cash paid for income taxes                                    $          --            $            --
                                                                   ------------             --------------
                                                                   ------------             --------------

Supplemental disclosure of non-cash transaction:
   Capital lease obligation incurred                             $      76,946            $        61,533
                                                                   ------------             --------------
                                                                   ------------             --------------
</TABLE>

                 See accompanying notes to financial statements


                                       5

<PAGE>

                               PURCHASESOFT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                NOVEMBER 30, 1999

         NOTE 1.  GENERAL INFORMATION:

         The Financial Statements included herein have been prepared by the
Company without audit except the May 31, 1999 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, 1999.

         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.

         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," as amended
by SOP 98-4 and SOP 98-9. The Company recognizes software license revenue at the
point when evidence of an arrangement exists, the software product has been
shipped, there are no uncertainties surrounding product acceptance, the fees are
fixed and determinable and collection of the related receivable is considered
probable. 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 twelve months. Professional service revenue is recognized as the
services are performed.

         Accounts receivable is presented net of an allowance for uncollectible
accounts of $49,099 and $55,000 at November 30, 1999 and May 31, 1999,
respectively. Bad debt expense is recorded in general and administrative
expenses.


                                       6

<PAGE>

         (c)      Research and Development

         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. As of May 31,
1998, all capitalized development costs were fully amortized. Since June 1,
1998, the Company's research and development costs primarily relate to software
development during the period prior to technological feasibility and have been
charged to expense as incurred. Costs otherwise capitalizable after
technological feasibility is achieved have also been expensed because they have
been insignificant.

         (d)      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.

         (e)      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 and amortization expense, was $42,758 and
$28,438 for the six months ended November 30, 1999 and 1998, respectively.

         (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 accounts for income (loss) per share in accordance with
SFAS 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 Stock outstanding for the period. Diluted earnings per
share reflects the potential dilution of securities that could share in the
earnings of an entity. 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)      Stock-Based Compensation

         The Company accounts for stock-based compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and complies with the disclosure
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation."


                                       7

<PAGE>

         (i)      Recently Issued Accounting Standards

         In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The new statement establishes accounting
and reporting standards for derivative instruments and hedging activities. SFAS
No. 133 is effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. The Company does not expect SFAS No. 133 to materially affect its
financial position or results of operations.

         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 electronic commerce software solutions 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-TM-, PurchaseSmart-TM-, and SourceSmart-TM- software; (iii) new
management and ability to recruit sales, service, implementation personnel,
resellers and strategic partners and alliances; (iv) the intense competition in
the software field; (v) the dependence on a single product line and rapid
technological change in the industry; (vi) new product development, and (vii)
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, 1999. 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.


                                       8

<PAGE>

RESULTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED NOVEMBER 30, 1999 AND 1998

OVERVIEW

         The Company reported a net loss for the quarter of $1,010,276. The
Company announced on November 15, 1999, that it had added a dynamic new
purchasing feature to its Java- and HTML-based products, PurchaseSmart-TM- and
SourceSmart-TM-: WebQUOTE-TM- Auctioning and is known as reverse auctioning.
This new functionality will extend PurchaseSmart users' capabilities to take
advantage of e-commerce opportunities by enabling them to invite suppliers via
the Internet into a competitive bidding situation and was created as part of
PurchaseSoft's strategy for e-commerce.

         Shortly after the second quarter ended, the Company announced in a
press release dated December 9, 1999, the restructuring of certain positions
within the Company and a redirection of its sales and marketing efforts to give
greater emphasis to the development of strategic partnerships and alliances.
Pamela Cabalka, who served as Vice President of Sales and acting CEO tendered
her resignation from the Company. The position of CEO was eliminated and the
number of direct sales representatives was reduced. Based on the positive
response the Company has received from e-commerce industry experts and input
from potential partners, the Company believes that the development of a larger
indirect sales network is the most effective way to reach customers. The Company
is increasing its efforts to develop these partner-level relationships in key
industries and anticipates that much of its future growth will come through the
leverage gained in these relationships.

REVENUES

         Total revenue for the three months ended November 30, 1999 was
$138,358, compared to revenue of $80,620 for the three months ended November 30,
1998, an increase of $57,738 or 71.6%. Product revenues for the three months
ended November 30, 1999, were $71,180 compared to revenues of $7,500 for the
three months ended November 30, 1998, an increase of $63,680 or 849.1%. Service
revenues were $67,178 for the three months ended November 30, 1999, compared to
$73,120 for the three months ended November 30, 1998, a decrease of $5,942 or
8.1%.

         Total revenue for the six months ended November 30, 1999 was $241,196,
compared to revenue of $240,299 for the six months ended November 30, 1998, an
increase of $897 or 0.4%. Product revenues for the six months ended November 30,
1999, were $111,155 compared to revenues of $73,750 for the six months ended
November 30, 1998, an increase of $37,405 or 50.7%. Service revenues were
$130,041 for the six months ended November 30, 1999, compared to $166,549 for
the six months ended November 30, 1998, a decrease of $36,508 or 21.9%.


                                       9

<PAGE>

EXPENSES

         The cost of revenues for the three months ended November 30, 1999 was
$94,046, compared to $45,457 for the three months ended November 30, 1998, an
increase of $48,589 or 106.9%. This increase was primarily due to higher
compensation costs associated with providing professional services and customer
support.

         The cost of revenues for the six months ended November 30, 1999 was
$177,157, compared to $78,239 for the six months ended November 30, 1998, an
increase of $98,918 or 126.4%. This increase was primarily due to higher
compensation costs associated with providing professional services and customer
support, development of implementation methodologies and strategic partnership
expenses related to imaging software.

         Selling expense for the three months ended November 30, 1999 was
$419,104, compared to $345,317 for the three months ended November 30, 1998, an
increase of $73,787 or 21.4 %. This increase was primarily due to higher
marketing consulting fees, expenses associated with partners and alliances the
Company has formed, trade show expenses and marketing collateral and was offset
in part by lower sales compensation costs and travel expenses.

         Selling expense for the six months ended November 30, 1999 was
$739,336, compared to $675,526 for the six months ended November 30, 1998, an
increase of $63,810 or 9.4 %. This increase was primarily due to higher
marketing consulting fees, expenses associated with partners and alliances the
Company has formed, trade show expenses and marketing collateral and was offset
in part by lower sales compensation costs and travel expenses.

         General and administrative expense for the three months ended November
30, 1999 was $428,372, compared to $513,852 for the three months ended November
30, 1998, a decrease of $85,480 or 16.6%. This decrease was primarily due to
lower recruiting fees, lower legal fees related to the preparation of the
Company's annual proxy materials, and reduced occupancy costs as the Company was
no longer paying rent at its former location in Eden Prairie, and was offset in
part by higher compensation costs.

         General and administrative expense for the six months ended November
30, 1999 was $914,331, compared to $957,839 for the six months ended November
30, 1998, a decrease of $43,508 or 4.5%. This decrease was primarily due to
lower recruiting fees, lower legal fees related to the preparation of the
Company's annual proxy materials, and the absence of stockholder mailing costs
associated with the mailing of the Annual Meeting of Stockholders and was offset
in part by higher compensation costs and other general business expenses.

         Research and development expense for the three months ended November
30, 1999 was $228,427, compared to $147,262 for the three months ended November
30, 1998, an increase of $81,165 or 55.1%. This increase was primarily due to
increased compensation costs.

         Research and development expense for the six months ended November 30,
1999 was $475,130, compared to $275,435 for the six months ended November 30,
1998, an increase of $199,695 or 72.5%. This increase was primarily due to
increased compensation costs.


                                       10

<PAGE>

NET LOSS

         For the three months ended November 30, 1999, the Company reported a
net loss of $1,010,276 (or $0.07 per share) as compared to a net loss of
$954,917 (or $0.12 per share) for the three month period ended November 30,
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
November 30, 1999 was worse than the loss for the same period ended November 30,
1998 primarily due to higher operating expenses. The primary reason the loss per
share decreased was due to an increase in the average outstanding shares for the
three months ended November 30, 1999 to 13,807,015 shares as compared to average
outstanding shares for the three months ended November 30, 1998 of 8,154,761
shares. This increase in average outstanding shares was primarily due to the
shares issued in conjunction with the rights offering which was completed in May
1999.

         For the six months ended November 30, 1999, the Company reported a net
loss of $2,005,759 (or $0.15 per share) as compared to a net loss of $1,699,491
(or $0.21 per share) for the six month period ended November 30, 1998. This loss
was caused by the continuation of low revenues, which were not sufficient to
cover operating costs. The loss for the six months ended November 30, 1999 was
worse than the loss for the same period ended November 30, 1998 primarily due to
higher operating expenses. The primary reason the loss per share decreased was
due to an increase in the average outstanding shares for the six months ended
November 30, 1999 to 13,807,015 shares as compared to average outstanding shares
for the six months ended November 30, 1998 of 8,092,261 shares. This increase in
average outstanding shares was primarily due to the shares issued in conjunction
with the rights offering which was completed in May 1999.

LIQUIDITY AND CAPITAL RESOURCES

         As of November 30, 1999, the Company had cash and cash equivalents
totaling $1,576,623 and working capital of $691,980. The Company used $2,108,086
of cash in operating activities during the six month period ended November 30,
1999, of which a substantial portion was used to fund the net loss for the
period of $2,005,759. The Company used $114,091 of cash in investing activities
primarily to acquire property and equipment during the six month period ended
November 30, 1999. The Company used $25,705 of cash in financing activities
during the six month period ended November 30, 1999 for payments of capital
lease obligations.

         The Company made $190,647 in capital expenditures during the six month
period ended November 30, 1999, which included a $76,946 investment financed as
a capitalized lease over a thirty-six month term with a monthly payment of
$2,452. The Company had no significant commitments as of November 30, 1999 for
capital expenditures.

         The Company believes that its existing capital resources and
anticipated revenue from software sales and services will be sufficient to fund
its planned operating expenses and capital requirements through the end of
fiscal 2000. In addition, early in the third quarter, the Company received
proceeds of approximately $197,800 from the exercise of stock options. There can
be no assurance that the existing capital resources and anticipated revenue from
software sales and services 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 and develop new
customers, and activities of competitors and other factors. The Company has also
begun discussions with strategic partners and other sources to raise additional
capital to fund the Company's operations for fiscal year 2001.


                                       11

<PAGE>

YEAR 2000 ISSUES

         The Company believes that its currently supported products are Year
2000 compliant. This means that, based on reasonable investigation and
remediation efforts, the Company anticipates that it will be able to provide
uninterrupted Year 2000 compliant goods and services to its customers throughout
the period that includes the change in century and the following leap year
calculations. As of January 2000, the Company has not found any Year 2000
problems that would affect the mission critical functionality of its products,
GT Purchase PRO v6.1.x, PurchaseSoft-TM- v5.x, PurchaseSmart-TM- v1.x and
SourceSmart-TM- v1.x.

         The Company has also researched its mission critical business partners.
As of January 2000, the Company is not aware of any Year 2000 related problems
in its mission critical business partners. In particular, the Company in not
aware of any reported problems with the Sybase tools that have been used to
build its products. Likewise, the Company is not aware of any reported Year 2000
related problems with the SilverStream development tools that it is using to
build its newest products.

         The Company has conducted a comprehensive review of the Year 2000
compliance of its significant internal information systems. The Company's
financial accounting software package is stated to be to be Year 2000 compliant
and appears to be working correctly. The Company's voice mail system currently
in use in its Minneapolis office has been rendered Year 2000 compliant. To date,
the Company believes that the significant business, accounting and operations
software and equipment it uses internally are compliant.

         Some of the Company's customer's hardware systems on which the
Company's product is installed contain other software applications, some of
which are integral to the function of the system or inter-operate with its
product that may not be year 2000 compliant. To date, the Company is not aware
of any such system but the potential does exist. Any failure of such equipment
or its installed base of software is likely to adversely affect the operation of
the Company's product.

         The Company believes the most reasonably likely worst case scenario,
the failure of our products or the failure of hardware or software products
provided by other parties to properly manage dates beyond 1999, has not
transpired. The next potentially significant event would be for the Company's
products to incorrectly perform the Year 2000 leap year calculations. The
Company is not aware of any such problem at this time. However, any prolonged
failure could have a material adverse affect the Company's business, financial
condition or results of operations.

PART II. OTHER INFORMATION

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

                   27.1    Financial Data Schedule filed herewith

         (b)      Reports on Form 8-K

                  None


                                       12

<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.

                                           /s/  Jeffrey B. Pinkerton
Date:  January  14, 2000            By:
                                       -----------------------------------------
                                    Name:  Jeffrey B. Pinkerton
                                    Title: President





                                             /s/  Philip D. Wolf
Date:  January 14, 2000             By:
                                       -----------------------------------------
                                    Name:  Philip D. Wolf
                                    Title: Treasurer and Chief Financial Officer


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