<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 August 31, 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 OCTOBER 13, 1999
--------------------------------               -------------------------------
    COMMON STOCK, PAR VALUE                           13,807,015 SHARES
         $0.01 PER SHARE


<PAGE>

                               PURCHASESOFT, INC.

                                      INDEX

<TABLE>
<CAPTION>

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

     Item 1.      Financial Statements

                      Balance Sheets as of August 31, 1999 and May 31, 1999...............................        3

                      Statements of Operations for the three months ended
                      August 31, 1999 and 1998............................................................        4

                      Statements of Cash Flows for the three months ended
                      August 31, 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 ..........................................................     8-11


PART II.          OTHER INFORMATION

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

     Signatures       ....................................................................................       12

</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)
                                                      August 31, 1999         May 31, 1999
                                                     -----------------       ---------------
<S>                                                   <C>                    <C>
Assets

Current Assets:
   Cash and cash equivalents                           $   2,562,327         $   3,824,505
   Accounts receivable, net                                   86,324               115,927
   Prepaid expenses and other current assets                  75,780               121,460
                                                        ------------          ------------
Total Current Assets                                       2,724,431             4,061,892
                                                        ------------          ------------

Property and equipment, net                                  298,875               304,614
                                                        ------------          ------------
Other Assets
   Security deposits                                          39,269                38,879
                                                        ------------          ------------
Total Other Assets                                            39,269                38,879
                                                        ------------          ------------
Total Assets                                           $   3,062,575         $   4,405,385
                                                        ------------          ------------
                                                        ------------          ------------

Liabilities and Stockholders' Equity

Current Liabilities
   Accounts payable                                    $     224,459         $     411,480
   Current obligations under capital leases                   48,226                49,428
   Accrued expenses                                          483,509               528,924
   Deferred revenues                                         108,380               163,804
                                                        ------------          ------------
Total Current Liabilities                                    864,574             1,153,636
                                                        ------------          ------------
Noncurrent Obligations
   Noncurrent obligations under capital leasess               18,370                28,878
   Noncurrent restructuring charges                           85,575               133,332
                                                        ------------          ------------
Total Noncurrent Obligations                                 103,945               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                                      (22,398,149)          (21,402,666)
                                                        ------------          ------------
                                                           2,183,088             3,178,571

Less treasury stock (4,780 shares) at cost                   (89,032)              (89,032)
                                                        ------------          ------------
Total Stockholders' Equity                                 2,094,056             3,089,539
                                                        ------------          ------------

Total Liabilities and Stockholders' Equity             $   3,062,575         $   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
                                                 --------------------------------------
                                                   August 31,            August 31,
                                                      1999                  1998
                                                 ----------------     -----------------
<S>                                              <C>                  <C>
Net revenues:

   Product                                       $       39,975       $       66,250
   Services                                              62,863               93,429
                                                   -------------        -------------
Total net revenues                                      102,838              159,679
                                                   -------------        -------------

Costs and expenses:

   Cost of revenues                                      83,111               32,782
   Selling expenses                                     320,232              330,209
   General and administrative                           485,959              443,987
   Research and development                             246,703              128,173
                                                   -------------        -------------
Total costs and expenses                              1,136,005              935,151
                                                   -------------        -------------

Operating loss                                       (1,033,167)            (775,472)

Interest income (expense), net                           37,684               30,898
                                                   -------------        -------------

Net loss                                         $     (995,483)      $     (744,574)
                                                   -------------        -------------
                                                   -------------        -------------


Net loss per common share
   (Basic and diluted)                           $        (0.07)      $        (0.09)
                                                   -------------        -------------
                                                   -------------        -------------


Weighted average
   shares outstanding                                13,807,015            8,029,761
                                                   -------------        -------------
                                                   -------------        -------------
</TABLE>

                    See accompanying notes to financial statements



                                                 4

<PAGE>


                               PURCHASESOFT, INC.
                             STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                          FOR THE THREE MONTHS ENDED
                                                                ---------------------------------------------
                                                                  August 31, 1999           August 31, 1998
                                                                --------------------      -------------------
<S>                                                             <C>                       <C>
Cash flows from operating activities:
   Net loss                                                      $     (995,483)           $      (744,574)
   Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities:
      Depreciation and amortization                                      19,178                     12,047
      Provision for bad debts                                             2,057                         --
      Stock compensation for shares issued for services                  15,000                         --
   Changes in operating assets and liabilities:
      Accounts receivable                                                27,546                    (71,237)
      Prepaid expenses and other assets                                  30,680                    (68,349)
      Accounts payable                                                 (187,021)                    25,495
      Accrued expenses                                                  (93,172)                   (36,783)
      Deferred revenue                                                  (55,424)                    11,956
                                                                   -------------             --------------
Net cash used in operating activities                                (1,236,639)                  (871,445)
                                                                   -------------             --------------

Cash flows from investing activities:
   Additions to property and equipment                                  (13,439)                  (148,276)
   Increase in security deposits                                           (390)                   (30,110)
                                                                   -------------             --------------
Net cash used in investing activities                                   (13,829)                  (178,386)
                                                                   -------------             --------------

Cash flows from financing activities:
   Net proceeds from exercise of warrant                                     --                    142,500
   Payment of capital leases                                            (11,710)                    (2,215)
                                                                   -------------             --------------
Net cash provided by (used in) financing activities                     (11,710)                   140,285
                                                                   -------------             --------------

Net decreases in cash and cash equivalents                           (1,262,178)                  (909,546)
Cash and cash equivalents, beginning of year                          3,824,505                  2,918,548
                                                                   -------------             --------------
Cash and cash equivalents, end of period                         $    2,562,327            $     2,009,002
                                                                   -------------             --------------
                                                                   -------------             --------------


Supplemental disclosure of cash flow information:

   Cash paid for interest                                        $        2,581            $           769
   Cash paid for income taxes                                    $           --            $            --
                                                                   -------------             --------------
                                                                   -------------             --------------

Supplemental disclosure of non-cash transaction:
   Capital lease obligation incurred                             $           --            $        61,533
                                                                   -------------             --------------
                                                                   -------------             --------------

</TABLE>

                              See accompanying notes to financial statements



                                                        5

<PAGE>

                               PURCHASESOFT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 AUGUST 31, 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 $51,957 and $55,000 at August 31, 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 $19,178 and
$12,047 for the three months ended August 31, 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 the purchasing and procurement systems
software market and (ii) expectations for the Company's strategy and future
performance. Investors are cautioned that forward-looking statements are
inherently uncertain. Actual performance and results of operations may differ
materially from those projected or suggested in the forward-looking
statements due to certain risks and uncertainties, including, but not limited
to, the following risks and uncertainties: (i) the Company's history of
losses and accumulated deficit, limited revenues, and the uncertainty of
future profitability; (ii) the uncertainty of market acceptance of
PurchaseSoft-TM- software; (iii) new management and ability to recruit sales,
service, and implementation personnel; (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.


RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED AUGUST 31, 1999 AND 1998

OVERVIEW

         The Company reported a net loss for the quarter of $995,483. In a press
release dated September 9, 1999, the Company announced the resignation of
Michael G. Kerrison as CEO, Chairman of the Board and a Director, effective
September 10, 1999. Pamela Cabalka, who joined the Company as Vice President of
Sales in March 1999, was named acting CEO. Existing board member, J. Murray
Logan was elected acting Chairman of the Company's Board of Directors. Mr.
Kerrison's decision to resign was for reasons unrelated to business operations.
Ms. Cabalka was one of the key executives recruited by Mr. Kerrison. She was
most recently Senior Vice President of Sales and Marketing at Allen Interactions
where she was responsible for strategic cross-functional sales of the company's
customized multimedia-training applications. She has also held senior management
positions with Sylvan Prometric, Drake Training and Technologies, and InfoSpan.



                                       8

<PAGE>

REVENUES

         Total revenue for the three months ended August 31, 1999 was
$102,838, compared to revenue of $159,679 for the three months ended August
31, 1998, a decrease of $56,841 or 35.6%. Product revenues for the three
months ended August 31, 1999, were $39,975 compared to revenues of $66,250
for the three months ended August 31, 1998, a decrease of $26,275 or 39.7%.
Service revenues were $62,863 for the three months ended August 31, 1999,
compared to $93,429 for the three months ended August 31, 1998, a decrease of
$30,566 or 32.7%. The reorganization of the Company's sales organization that
occurred at the end of the third quarter of fiscal 1999 continued to
negatively impact the Company's revenues. The Company believes that the
marketing initiatives it has begun is creating increased interest in its
products and services.

EXPENSES

         The cost of revenues for the three months ended August 31, 1999 was
$83,111, compared to $32,782 for the three months ended August 31, 1998, an
increase of $50,329 or 153.5%. This increase was due to increased compensation
costs of 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 August 31, 1999 was
$320,232, compared to $330,209 for the three months ended August 31, 1998, a
decrease of $9,977 or 3.0%.

         General and administrative expense for the three months ended August
31, 1999 was $485,959, compared to $443,987 for the three months ended August
31, 1998, an increase of $41,972 or 9.4%. This increase was primarily due to
increases in compensation costs, general business expenses, increased
occupancy costs in connection with the Company's relocation of its corporate
office from Eden Prairie, MN to Edina, MN in August 1998, the addition of
high speed communications capabilities between the Company's offices and to
the Internet, and was offset in part by decreases in legal fees that were
incurred in the prior fiscal quarter related to the preparation of the
Company's annual proxy materials and related printing and mailing costs.

         Research and development expense for the three months ended August 31,
1999 was $246,703, compared to $128,173 for the three months ended August 31,
1998, an increase of $118,530 or 92.5%. This increase was primarily due to the
hiring of additional R&D personnel and contract personnel.


NET LOSS

         For the three months ended August 31, 1999, the Company reported a
net loss of $995,483 (or $0.07 per share) as compared to a net loss of
$744,574 (or $0.09 per share) for the three month period ended August 31,
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
August 31, 1999 was worse than the loss for the same period ended August 31,
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 August 31, 1999 to 13,807,015 shares as compared
to average outstanding shares for the three months ended August 31, 1998 of
8,029,761 shares.



                                       9

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         As of August 31, 1999, the Company had cash and cash equivalents
totaling $2,562,327 and working capital of $1,859,857. The Company used
$1,236,639 of cash in operating activities during the three month period ended
August 31, 1999. A substantial portion of this is attributable to the net loss
for the period of $995,483 as well as payments and reductions in accounts
payable and accrued expenses of $280,193. The Company used $13,829 of cash in
investing activities primarily to acquire property and equipment during the
three month period ended August 31, 1999. The Company used $11,710 of cash in
financing activities during the three month period ended August 31, 1999 in
payment of capital lease obligations.

         The Company made $13,439 in capital expenditures during the three month
period ended August 31, 1999. The Company had no significant commitments as of
August 31, 1999 for capital expenditures.

         The Company believes that its existing capital resources, interest
income, and revenue from software sales and services will be sufficient to fund
its planned operating expenses and capital requirements at least through May 31,
2000. However, there can be no assurance that such funds 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.


YEAR 2000 ISSUES

         The Company believes that its PurchaseSoft-TM- 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. As of September 1999, in the course of the
Company's Year 2000 review, it has not found any Year 2000 problems that would
affect the mission critical functionality of its products, GT Purchase PRO
v6.1.x and PurchaseSoft-TM- v5.x.

         The Company has also researched its mission critical business partners.
Most of its suppliers are confident that they will be able to provide Year 2000
compliant products and services. In particular, the Company has researched the
Sybase tools that have been used to build its products, and believe they are in
compliance. The Company is advised that the SilverStream development tools and
the Samson InfoTech software products that it is using to build its newest
products are also Year 2000 compliant.

         The Company has conducted a comprehensive review of the Year 2000
compliance of its significant internal information systems. The Company has
recently upgraded its financial accounting software package to a version that is
Year 2000 compliant. The Company discovered, in the course of its review, that
the voice mail system currently in use in its Minneapolis office is not Year
2000 compliant. The Company has made arrangements to have that system replaced
with a system that Lucent Technologies has represented as compliant. To date,
the Company believes that the significant business, accounting and operations
software it uses internally are either compliant or can be remediated without
material impact on its business operations.

         The Company has budgeted $10,000 to be used for Year 2000 compliance
related issues. The Company believes this sum is sufficient to meet any as yet
undiscovered Year 2000 issues in light of the review that it has just completed.



                                       10

<PAGE>

         The Company does not believe that it will experience any Year 2000
related system failures. However, as a contingency plan, it has made
arrangements to have its technical staff available at both of its development
offices to support its customers in the event of a Year 2000 related failure.
The Company will be notifying its customers directly and through its web-site of
this contingency plan. By taking advantage of its two locations, the Company
expects to be able to provide uninterrupted service to all of its customers that
may be occasioned by local interruptions to either power utilities or telephone
service that is beyond the Company's control.

         Some of the Company's customer's hardware systems on which the
Company's product is installed may 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 is
the failure of our products or the failure of hardware or software products
provided by other parties to properly manage dates beyond 1999. Any prolonged
failure could have a material adverse affect the Company's business, financial
condition or results of operations.



                                      11

<PAGE>

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







                                   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/  Pamela Cabalka
Date:  October  14, 1999        By:
                                   -------------------------------------
                                Name:  Pamela Cabalka
                                Title:  Chief Executive Officer





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




                                      12