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                                  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 AUGUST 31, 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                   24,674,338 SHARES
            $0.01 PER SHARE                           at 12/31/05



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                               PurchaseSoft, Inc.
                                   Form 10-QSB
                          Quarter ended August 31, 2004

                              Cross Reference Sheet


                         PART I - 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 August 31, 2004
                                   (Unaudited)


                   ITEM I - 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>
                                    <S> <C>
                                          ITEM 1. FINANCIAL STATEMENTS

                                               PURCHASESOFT, INC.
                                           CONSOLIDATED BALANCE SHEET
                                        AUGUST 31, 2004 and MAY 31, 2004
                                                  (Unaudited)
===============================================================================================================

                                ASSETS
                                ------
                                                                                 AUGUST 31,          MAY 31,
                                                                                   2004               2004
                                                                               -------------      -------------

Current Assets
   Cash                                                                        $      51,830      $     127,625
    Accounts receivable                                                               48,210             55,870
    Prepaid software licenses                                                          2,680              4,530
    Prepaid expenses and other assets                                                  1,647              6,561
                                                                               -------------       ------------
          Total current assets                                                       104,367            194,586


Property and equipment, net of accumulated depreciation of $2,978                     12,678             13,983
    Deposits                                                                           4,144              4,144
    Goodwill                                                                          97,002             97,002
    Customer contracts, net of accumulated amortization of $18,755                    40,351             53,801
                                                                               -------------      -------------
        Total assets                                                           $     258,542      $     363,516
                                                                               =============      =============


                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                 ----------------------------------------------

Current Liabilities
   Accounts payable and accrued expenses                                       $     101,920      $      84,493
   Deferred maintenance revenues, current portion                                     75,624             77,739
   Notes payable - related parties (Note 6)                                          183,000            213,000
                                                                               -------------      -------------
     Total current liabilities                                                       360,544            375,232


   Long-term deferred maintenance revenues, net of current portion                    10,032                 --
                                                                               -------------      -------------
          Total liabilities                                                    $     370,576      $     375,232
                                                                               -------------      -------------

Stockholders' Equity
   Common stock, $0.01 par value, 100,000,000 shares authorized,
     12,901,387 and 10,051,062 shares issued and outstanding at August 31,
     2004 and May 31, 2004, respectively                                             129,014            100,511
   Subscribed stock (250,000 common shares) (Note 8)                                  25,000                 --
   Additional paid-in capital                                                     43,632,077         43,628,184
   Accumulated deficit                                                           (43,809,093)       (43,651,379)
   Treasury stock (4,780 shares), at cost                                            (89,032)           (89,032)
                                                                               -------------      -------------
     Total stockholders' equity (deficit)                                           (112,034)           (11,716)
                                                                               -------------      -------------

        Total liabilities and stockholders' equity                             $     258,542      $     363,516
                                                                               =============      =============


                  The accompanying notes are an integral part of these financial statements.

                                                       4


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                                      PURCHASESOFT, INC.
                             CONSOLIDATED STATEMENT OF OPERATIONS
                       For three months ending August 31, 2004 AND 2003
                                           Unaudited


                                                                  Three Months Ended
                                                         August 31, 2004      August 31, 2003
                                                         ---------------      ---------------
Revenue:
   Software sales                                        $        52,343      $            --
   Services                                                       39,286                   --
   Maintenance                                                    11,029                4,250
   Other                                                           2,912                   --
                                                         ---------------      ---------------
     Net revenue                                                 105,570                4,250
                                                         ---------------      ---------------

Costs of revenue:
   Cost of sales and service revenue                             115,383                3,865
                                                         ---------------      ---------------
     Gross profit                                                 (9,813)                 385

Operating expenses:
   General and administrative                                     91,005               71,520
                                                         ---------------      ---------------
Total operating expenses                                          91,005               71,520
                                                         ---------------      ---------------

     Operating (loss)                                           (100,818)             (71,135)
                                                         ---------------      ---------------

Other expense:
     Loss on investment in subsidiary (Note 5)                   (56,896)                  --
                                                         ---------------      ---------------
Total other expense                                              (56,896)                  --
                                                         ---------------      ---------------
Net (loss)                                                      (157,714)             (71,135)
                                                         ===============      ===============

Net (loss) per share, basic and diluted                  $        (0.014)     $        (0.011)
                                                         ===============      ===============

Weighted average number of shares, basic and diluted          11,379,991            6,657,453
                                                         ===============      ===============


          The accompanying notes are an integral part of these financial statements.

                                              5


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                                      PURCHASESOFT, INC.
                             CONSOLIDATED STATEMENT OF CASH FLOWS
                       For three months ending August 31, 2004 and 2003
                                           Unaudited


                                                                   For Three Months ended
                                                                August 31,         August 31,
                                                                   2004               2003
                                                               ------------       ------------

Cash Flows from Operating Activities:
   Net (loss)                                                  $   (157,714)      $    (71,135)
   Adjustments to reconcile net (loss) to net cash used in
     operating activities:
       Depreciation and amortization                                 14,755                126
       Stock issued for services                                        500                 --
       Loss on investment in subsidiary                              56,896                 --
   Increase (decrease) in:
       Accounts receivable                                            7,660                 --
       Prepaid licenses                                               1,850                 --
       Prepaid expenses and other assets                              4,914                 --
       Accounts payable and accrued expenses                         17,427              6,520
       Deferred revenue                                               7,917             (4,250)
                                                               ------------       -------------
       Net cash flow used in operating activities                   (45,795)           (68,739)
                                                               ------------       ------------

Cash Flows from Financing Activities:
   Proceeds from issuance of notes payable - related party               --             60,000
   Repayment of related party notes                                 (30,000)                --
                                                               ------------       ------------
       Net cash flow provided by financing activities               (30,000)            60,000
                                                               ------------       ------------
       Net (decrease) in cash                                       (75,795)            (8,739)

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

Non-cash transactions:
       Stock issued for services                               $        500       $         --
                                                               ============       ============


          The accompanying notes are an integral part of these financial statements.

                                              6
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                               PURCHASESOFT, INC.
                NOTE 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 accounting ERP
         systems. The Company acquired Netshare Solutions, GmbH on February 9,
         2004 and Computer Information Enterprises, Inc. (CIE) on February 26,
         2004. The Company is in the process of liquidating Netshare Solutions
         through a trustee appointed by the German courts.

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 August 31, 2004 and the results of
         operations and cash flows for the three months ended August 31, 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 three
         months ended August 31, 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 quarter ending August 31, 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 three months ended August 31, 2004 the Company paid down its
         notes payable balance by $30,000 to $183,000 at August 31, 2004.

7.       Common Stocks Issued - The Company issued 2,850,325 shares during the
         quarter ended August 31, 2004. 1,000,000 shares valued at $500 were
         issued for services valued at the closing market price of the Company's
         stock on the date of issue which was at an average of $.0001 per share,
         and 1,850,325 shares were issued for $185,000 in cash which was
         received and subscribed prior to May 31, 2004.


                                        7


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8.       Subscribed Stock - The Company has $25,000 in cash received prior to
         May 31, 2004 for 250,000 common shares subsequently issued September
         17, 2004. As such, this amount was recorded as subscribed stock.

9.       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 $516,055 and $402,042 between
         common stock and additional paid-in-capital have been made as of August
         31, 2004 and May 31, 2004., respectively, to reflect this change.

         After August 31, 2004 the Company issued 550,000 shares of common stock
         for cash of $70,000 at the average price of $0.127 per share, and
         10,423,000 shares of common stock for services valued at the closing
         market price of the Company's stock on the date of issue which was at
         an average of $0.010 per share, which was $104,230.

         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


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Overview

The financial results reflected for the first quarter ended August 31, 2004
represent approximately six and one-half months of activity following
PurchaseSoft's acquisition of Computer Information Enterprises on February 16,
2004. These financial statements should be read in conjunction with the
Company's Form 10-K as of May 31, 2004.

Current Operating Results, Liquidity and Capital Resources

Revenue. For the first quarter ending August 31, 2004 revenue increased to
$105,570 from $4,250 for the prior comparable quarter. The increase was due to
the results of PurchaseSoft's acquisition of Computer Information Enterprises
(CIE) on February 16, 2004. New software license sales totaled $52,343 compared
to zero for the prior comparable period. A significant contributor to revenue in
this quarter was third party consulting that totaled $39,286. This revenue
segment is planned to decline in the months ahead as management focuses its
resources on continued enhancements of its core products and the introduction of
new products within its document imaging software for accounting ERP systems.
Maintenance revenues continue to increase reflecting the new software licenses
sold since the acquisition of CIE. Other income consists of subleasing office
space to third parties on a month-to-month basis.

Operating Expenses. Operating expenses totaling 91,005 reflects a $19,485
increase from the prior comparable period representing the increased overhead
from the acquisition of CIE. The Company expects to lower its overhead costs
over the coming months through continued reductions to staff and better cost
controls. 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 quarter ending
August 31, 2004.

Liquidity. The Company's cash balance was $51,830 at August 31, 2004 compared to
$9,199 at August 31, 2003. The Company raised $570,000 in cash during the past
thirteen months from a combination of shareholder loans with a current balance
of $183,000, and stock issued for cash 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


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                           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

Reports on Form 8-K

         There was one report on Form 8-K filed during the fiscal quarter ended
August 31, 2004. It was filed on June 25, 2004 and related to the then German
subsidiary of PurchaseSoft, Inc., Netshare Solutions GmbH, which filed for
bankruptcy and receivership under the German courts on June 23, 2004..

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


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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: November 28, 2006                        /s/ Steven A. Flagg
                                               ---------------------------------
                                               Steven A. Flagg
                                               President and CEO

Date: November 28, 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 November 28, 2006.

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

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

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


                                       11