<PAGE>

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                  ___________________________________________

                                   FORM 10-Q
(Mark One)
[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

For the quarterly period ended          June 30, 2000
                               --------------------------------

                                       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: 0-26245
                                                -------

                                   ESPS, INC.
             (Exact name of registrant as specified in its charter)

                 DELAWARE                           23-2762324
     -------------------------------          --------------------
     (State or other jurisdiction of            (I.R.S. Employer
     incorporation or organization)             Identification No.)

     1300 Virginia Drive, Suite 125, Ft. Washington, PA               19034
     ---------------------------------------------------          ------------
          (Address of principal executive offices)                 (Zip Code)

      Registrant's telephone number, including area code: (215) 619-6000
                                                           ---------------

                                    N/A
                                    ---
   (Former name, former address and former fiscal year, if changed since last
                                    report)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 ____
                                        ---


As of August 9, 2000, 16,843,151 shares of the registrant's Common Stock, par
value $0.001 per share, were outstanding.
<PAGE>

                                   ESPS, INC.

                                   FORM 10-Q
                                QUARTERLY REPORT
                                     INDEX
<TABLE>
<CAPTION>
                                                                                Page No.
                                                                                --------
<S>    <C>                                                                   <C>

Facing Sheet                                                                           1

Index                                                                                  2

PART I - FINANCIAL INFORMATION
----------------------------------------------------

Item 1.   Financial Statements

           Balance Sheets (Unaudited)                                                  3

           Statements of Operations (Unaudited)                                        4

           Statements of Cash Flows (Unaudited)                                        5

           Notes to Unaudited Financial Statements                                     6

Item 2.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations                                         7

Item 3.    Quantitative and Qualitative Disclosure About Market Risk                  12

PART II - OTHER INFORMATION
----------------------------------------------------

Item 1.    Legal Proceedings                                                          12

Item 2.    Changes in Securities and Use of Proceeds                                  13

Item 3.    Defaults upon Senior Securities                                            13

Item 4.    Submission of Matters to a Vote of Security Holders                        13

Item 5.    Other Information                                                          13

Item 6.    Exhibits and Reports on Form 8-K                                           13

           Signatures                                                                 14

Exhibit 27 Financial Data Schedule                                                    15
</TABLE>

                                       2
<PAGE>

PART I - FINANCIAL INFORMATION
------------------------------
Item 1.  FINANCIAL STATEMENTS
-----------------------------

                                  ESPS, INC.
                                  -----------
                                BALANCE SHEETS
                                --------------
                                (In thousands)

<TABLE>
<CAPTION>



                                                                             June 30, 2000          March 31, 2000
                                                                        -----------------------  ---------------------
                                                                              (Unaudited)
Assets
Current assets:
<S>                                                                     <C>                      <C>
   Cash and cash equivalents                                                           $23,315                $22,593
   Accounts receivable, net of allowance of $182 and $239                                6,433                  6,271
   Other current assets                                                                    729                    684
   Prepaid income taxes                                                                    392                  1,282
   Deferred income taxes                                                                   634                    634
                                                                                       -------                -------
     Total current assets                                                               31,503                 31,464
Property and equipment,  net                                                             3,781                  3,869
Purchased software                                                                       1,191                  1,191
Other assets                                                                                40                     40
                                                                                       -------                -------
Total assets                                                                           $36,515                $36,564
                                                                                       =======                =======

Liabilities and stockholders' equity
Current liabilities:
   Current portion of long-term debt                                                   $   119                $   116
   Accounts payable and accrued expenses                                                 2,035                  2,136
   Deferred revenues                                                                     2,826                  3,288
                                                                                       -------                -------
     Total current liabilities                                                           4,980                  5,540

Long-term debt                                                                             404                    435
Deferred income taxes                                                                      142                    142

Stockholders'equity:
   Common stock, $0.001 par value: Authorized shares 50,000
     issued and out standing shares, 16,563 shares at June 30, 2000 and
     16,147 shares at March 31, 2000                                                        17                     16
   Additional paid-in capital                                                           30,699                 30,469
   Retained earnings                                                                       313                     17
   Deferred stock compensation                                                             (40)                   (55)
                                                                                       -------                -------
Stockholders' equity                                                                    30,989                 30,447
                                                                                       -------                -------
Total liabilities and stockholders' equity                                             $36,515                $36,564
                                                                                       =======                =======
</TABLE>

           See accompanying notes to unaudited financial statements.

                                       3
<PAGE>

                                   ESPS, INC.
                                   ----------
                            STATEMENTS OF OPERATIONS
                            ------------------------
                     (In thousands, except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                            Three months ended
                                                                              ---------------
                                                                                  June 30,
                                                                              ---------------
<S>                                                                <C>              <C>
                                                                             2000             1999
                                                                           -------          -------

Revenues:
   Software licenses                                                       $ 4,038          $ 3,829
   Services and maintenance                                                  2,406            2,085
                                                                           -------          -------
         Total  revenues                                                     6,444            5,914

Cost of revenues:
  Software licenses                                                             90               97
  Services and maintenance                                                   1,673            1,401
                                                                           -------          -------
         Total  cost of revenues                                             1,763            1,498
                                                                           -------          -------

Gross profit                                                                 4,681            4,416
Operating expenses:
   Research and development                                                  1,344            1,198
   Sales and marketing                                                       2,232            2,326
   General and administrative                                                  982              792
                                                                           -------          -------
          Total operating expenses                                           4,558            4,316
                                                                           -------          -------

Income from operations                                                         123              100
Interest, net                                                                  336               71
                                                                           -------          -------
Income before income taxes                                                     459              171
Income tax provision                                                           163               65
                                                                           -------          -------
Net income                                                                 $   296          $   106
                                                                           =======          =======

Earnings per share:
          Basic                                                              $0.02            $0.02
                                                                           =======          =======
          Diluted                                                            $0.02            $0.01
                                                                           =======          =======
Shares used in computation of earnings per share:
          Basic                                                             16,319            5,179
                                                                           =======          =======
          Diluted                                                           18,249           15,455
                                                                           =======          =======
</TABLE>

           See accompanying notes to unaudited financial statements.

                                       4
<PAGE>

                                   ESPS, INC.
                                  -----------
                            STATEMENTS OF CASH FLOWS
                            ------------------------
                                 (In thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                                                      Three months ended
                                                                                      -----------------
                                                                                           June 30,
                                                                                      -----------------
<S>                                                                      <C>                <C>
                                                                                     2000               1999
                                                                                  -------            -------

Operating activities:
   Net income                                                                     $   296            $   106
   Adjustments to reconcile net income to net cash provided in
        Operating activities:
           Depreciation and amortization                                              303                166
           Amortization of deferred stock compensation                                 10                 17
        Changes in operating assets and liabilities:
                   Accounts receivable                                               (162)               367
                   Other assets                                                       (45)              (132)
                   Prepaid taxes                                                      890                  -
                   Accounts payable and accrued expenses                             (101)               580
                   Deferred revenues                                                 (462)               183
                                                                                  -------            -------
   Net cash provided by  operating activities                                         729              1,287
                                                                                  -------            -------

Investing activities:
Purchases of property and equipment                                                  (215)              (467)

Financing activities:
Proceeds from the sale of common stock                                                  -             22,241
Repayments of long-term debt                                                          (28)                (9)
Proceeds from exercise of stock options                                               236                  5
                                                                                  -------            -------
  Net cash provided by financing activities                                           208             22,237

Net increase in cash and cash equivalents                                             722             23,057
Cash and cash equivalents balance, beginning of period                             22,593              1,812
                                                                                  -------            -------
Cash and cash equivalents balance, end of period                                  $23,315            $24,869
                                                                                  =======            =======

Supplemental cash flow disclosure:
   Interest paid                                                                  $    11            $     4
   Income taxes paid                                                              $     -            $     5
   Fixed assets financed through capital lease obligations                        $     -            $   642

</TABLE>




           See accompanying notes to unaudited financial statements.

                                       5
<PAGE>

Item 1.   FINANCIAL STATEMENTS (Continued)
------------------------------------------

                                   ESPS, INC.
                                   ----------
                    NOTES TO UNAUDITED FINANCIAL STATEMENTS
                    ---------------------------------------


1.     Description of Business and Basis of Presentation
       --------------------------------------------------

ESPS, Inc., a Delaware corporation, is a leading developer of publishing
software solutions for document-intensive industries. ESPS software and
consulting solutions are utilized by a majority of the world's pharmaceutical
manufacturers and serves a growing and diversified customer base requiring a
robust publishing initiative. ESPS' software solutions are recognized as best-
of-breed and have become the most widely used software solution for regulatory
and pre-market approval initiatives.

ESPS is building its presence in a new, growing field-knowledge publishing.
Knowledge publishing utilizes advanced electronic technology to efficiently
manage the collection of raw data, develop it into information, and further
transform it into usable, documented knowledge. With the exponential rise in e-
commerce transactions, businesses are increasingly shifting to the highly
efficient process of electronic publishing and away from the traditional time
consuming and complex paper-based documentation.

Interim Financial Information

The accompanying unaudited financial statements have been prepared in conformity
with generally accepted accounting principles for interim financial information
and with the instructions for Form 10-Q and Article 10 of Regulation S-X.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed, or omitted, pursuant to the rules and
regulations of the Securities and Exchange Commission.  In our opinion, the
statements include all adjustments necessary (which are of a normal and
recurring nature) for the fair presentation of the results of the interim
periods presented. These financial statements should be read in conjunction with
our audited financial statements for the fiscal year ended March 31, 2000,
included in our Form 10-K, filed which are hereby incorporated by reference in
this quarterly report on Form 10-Q.

Our results of operations for any interim period are not necessarily indicative
of the results of operations for any other interim period or for a full fiscal
year.

2.  Accounting Policies
    -------------------

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

3.  Net Income Per Common Share
    ----------------------------

Basic and diluted net income per common share is calculated by dividing the net
income by the weighted average number of common shares outstanding.

Diluted net income per share is computed using the weighted average number of
common and dilutive common equivalent shares outstanding during the period.
Common equivalent shares consist of the incremental common shares issuable upon
the exercise of stock options using the treasury stock method.

                                       6
<PAGE>

The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                                Three months ended
                                                                              ----------------------
                                                                                     June 30,
                                                                              ---------------------
<S>                                                                      <C>           <C>
                                                                                2000          1999
                                                                              -------       -------
Net income                                                                    $   296       $   106
                                                                              =======       =======
Weighted average number of common shares outstanding                           16,319         5,179
Effect of dilutive securities:
   Stock options                                                                1,930         3,010
   Series A preferred stock                                                         -         7,266
                                                                              -------       -------
Adjusted weighted average shares outstanding and assumed conversions           18,249        15,455
                                                                              =======       =======
Earnings per share:
   Basic                                                                      $  0.02       $  0.02
                                                                              =======       =======
   Diluted                                                                    $  0.02       $  0.01
                                                                              =======       =======
</TABLE>

4.  Long-Term Debt
    --------------

In June, 1999, the Company entered into a $642,000 capital lease agreement,
consisting of software and hardware to support the Company's infrastructure.
The term of the lease is 60 months with monthly payments of approximately
$13,000.

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

Certain statements in this Form 10-Q contain "forward-looking" information (as
defined in Section 27A of the Securities Act of 1933, as amended) that involve
risks and uncertainties which may cause actual results to differ materially from
those predicted in the forward-looking statements.  If any of our assumptions on
which the statements are based prove incorrect or should unanticipated
circumstances arise, our actual results could materially differ from those
anticipated by such forward-looking statements.  The differences could be caused
by a number of factors or combination of factors, including, but not limited to,
those listed under the caption  "Factors Affecting Operating Results" described
herein and the Risk Factors set forth in our filings with the Securities and
Exchange Commission, including our Form 10-K for March 31, 2000.

Overview
--------

ESPS is a leading developer of publishing software solutions for document-
intensive industries. ESPS software and consulting solutions are utilized by a
majority of the world's pharmaceutical manufacturers and serves a growing and
diversified customer base requiring a robust publishing initiative. ESPS'
software solutions are recognized as best-of-breed and have become the most
widely used software solution for regulatory and pre-market approval
initiatives.

ESPS is building its presence in a new, growing field-knowledge publishing.
Knowledge publishing utilizes advanced electronic technology to efficiently
manage the collection of raw data, develop it into information, and further
transform it into usable, documented knowledge. With the exponential rise in e-
commerce transactions, businesses are increasingly shifting to the highly
efficient process of electronic publishing and away from the traditional time
consuming and complex paper-based documentation.

As the de facto standard for electronic publishing, the ESPS software suite
enables its customers-enterprise-wide-to transform raw data into documented,
referential information required for product approval, regulatory submissions
and other document intensive applications.

ESPS provides its customers with in-depth industry-specific expertise to better
determine the customer's publishing needs and requirements. With a more
efficient publication and distribution process, ESPS customers can deliver their
product to market faster, reduce collaboration and production costs, and earn a
higher return on their investment.

Founded in 1994, ESPS helps businesses in many industries including those that
are highly regulated and document-intensive to manage and meet their publishing
needs more efficiently by using advanced technology. As a result,

                                       7
<PAGE>

CoreDossier(R), the Company's flagship product, was introduced in 1995 to enable
electronic management and publishing of regulatory compliance documents. Five
years later, CoreDossier has established a majority presence in the world's
pharmaceutical and biotechnology companies, and also is utilized by contract
research organizations, medical device companies, chemical companies, and other
industries.

CoreDossier functionality is enhanced with industry-specific modules and
application programming interfaces (API's). The CoreDossier product platform
provides the foundation for managing large, complex and compound documents for
multiple applications including the pre-market approval processes throughout an
organization. For example, CoreDossier enables users to input information stored
enterprise-wide in almost any file format including paper, word processing,
voice, video, spreadsheets, graphics programs and proprietary software and
output the information in any format. Industry-specific modules work with the
CoreDossier platform to perform functions designed to meet industry-specific
requirements. The CoreDossier API's enable third parties to develop custom
applications and extend access to additional external information sources.

Results of Operations
---------------------

The following table presents statement of operations data as a percentage of
total revenues:

<TABLE>
<CAPTION>

                                                                          Three months
                                                                         Ended June 30,
                                                                       -----------------
<S>                                                              <C>                <C>
                                                                     2000               1999
                                                                    -----              -----
Statement of Operations Data:
  Revenues:
     Software licenses                                               62.7%              64.7%
     Services and maintenance                                        37.3               35.3
                                                                    -----              -----
        Total revenues                                              100.0              100.0
  Cost of revenues:
     Software licenses                                                1.4                1.6
     Services and maintenance                                        26.0               23.7
                                                                    -----              -----
        Total cost of revenues                                       27.4               25.3
                                                                    -----              -----
  Gross profit                                                       72.6               74.7
  Operating expenses:
     Research and development                                        20.9               20.3
     Sales and marketing                                             34.6               39.3
     General and administrative                                      15.2               13.4
                                                                    -----              -----
        Total operating expenses                                     70.7               73.0
                                                                    -----              -----
  Income from operations                                              1.9                1.7
  Interest, net                                                       5.2                1.2
                                                                    -----              -----
  Income before income taxes                                          7.1                2.9
  Income tax provision                                                2.5                1.1
                                                                    -----              -----
  Net income                                                          4.6%               1.8%
                                                                    =====              =====
</TABLE>

Comparison of Three Months Ended June 30, 2000 and 1999
-------------------------------------------------------

For the three months ended June 30, 2000, revenues were $6.4 million,
representing an increase of 9% over the $5.9 million for the comparable period
in 1999.  Net income for the three months ended June 30, 2000 was $296,000, or
$0.02 per diluted share, compared to $106,000, or $0.01 per diluted share for
the same period in 1999.  Weighted average shares used in computing diluted
earnings per share in the first fiscal quarter were 18.2 million versus 15.5
million in the same period in the prior year.

Revenues

License revenues.   License revenues increased 5% to $4.0 million for the three
months ended June 30, 2000, from $3.8 million for the three months ended June
30, 1999.  This increase is primarily due to a large deployment of our new
kPublisher software to File Net in the current period.

                                       8
<PAGE>

Services and maintenance revenues.   Services and maintenance revenues increased
15% to $2.4 million for the three months ended June 30, 2000 from $ 2.1 million,
for the three months ended June 30, 1999.  This increase resulted primarily from
an increase in demand for implementation and maintenance services on a larger
customer base.

For the three months ended June 30, 2000, one customer accounted for 25% of
revenues and for the three months ended June 30, 1999, one customer accounted
for 18% of revenues.

Cost of Revenues

Cost of software licenses revenues.   Cost of software licenses revenues
consists primarily of royalties we pay to third parties for the use of their
technology incorporated into our CoreDossier products.  Cost of software
licenses as a percentage of revenues were 1.4% of license revenues for the three
months ended June 30, 2000 and 1.6% for the three months ended June 30, 1999.
The reduced cost of software license revenues percentage is due to the contract
with File Net, which did not have any cost of software license revenues as no
third party software was embedded in our kPublisher product.  There was no
amortization for purchased software in the periods presented.  We expect the
cost of software license revenues to increase in future periods as we deploy
this technology to our customers.

Cost of services and maintenance revenues.   Cost of services and maintenance
revenues consists primarily of personnel costs related to professional services
and customer support.  Cost of services and maintenance revenues increased 19%
to $1.7 million for the three months ended June 30, 2000 from $1.4 million for
the three months ended June 30, 1999.  This increase resulted primarily from the
hiring and training of 6 additional professional services and customer support
personnel to support our increased customer base.  The number of professional
services and maintenance professional services and customer support personnel
increased to 53 at June 30, 2000 from 47 at June 30, 1999.  Cost of services and
maintenance revenues as a percentage of services and maintenance revenues
increased to 70% for the three months ended June 30, 2000 from 67% for the three
months ended June 30, 1999.  The cost of services and maintenance revenues as a
percentage of services and maintenance revenues may vary among periods because
of the mix of services  we provide which have different cost structures.
Service and maintenance gross profits were 30% for the three months ended June
30, 2000 compared to 33% for the three months ended June 30, 1999.

Operating Expenses

Research and development.   Research and development expenses consist primarily
of salaries and benefits for software developers, quality assurance personnel,
and program managers and technical writers.  Research and development expenses
increased 12% to $1.3 million for the three months ended June 30, 2000 from $1.2
million for the three months ended June 30, 1999.  This increase resulted
primarily from an increase in recruiting fees, depreciation and office rent.
Research and development expenses represented 21% of our total revenues for the
three months ended June 30, 2000 and 20% for the three months ended June 30,
1999.

Sales and marketing.   Sales and marketing expenses consist primarily of
salaries, commissions earned by sales  personnel, travel, promotional expenses
and communication costs related to direct sales efforts.  Sales and marketing
expenses decreased 4% to $2.2 million in the three months ended June 30, 2000
from $2.3 million for the three months ended June 30, 1999.  This decrease
resulted primarily from our reduced headcount and related costs.  The number of
our executive, sales and marketing personnel decreased to 44 at June 30, 2000
from 53 as of June 30, 1999.  Sales and marketing expenses represented 35% of
our total revenues for the three months ended June 30, 2000 and 39% for the
three months ended June 30, 1999.  We believe that we will need to significantly
increase our sales and marketing expenses to expand our market position, and
further increase our penetration and acceptance of our products in other
targeted industries.  Accordingly, we anticipate that sales and marketing
expenses will increase in future periods.

General and administrative.   General and administrative expenses consist
primarily of salaries, benefits and related costs for executive, finance,
administrative, and information services personnel. These expenses also include
fees for legal, accounting, and consulting services.   General and
administrative expenses increased 24% to $982,000 for the three months ended
June 30, 2000 from $792,000 for the three months ended June 30, 1999.  This
increase resulted primarily from severance and bonus of our former president and
increased travel costs.  The number of our executive, finance and administrative
personnel remained constant at 22 as of June 30, 2000 and June 30, 1999.

                                       9
<PAGE>

Interest, net.   Interest, net is derived from interest income earned on our
cash and cash equivalents, offset by interest expense on our capital lease.  Net
interest income increased 373% to $336,000 for the three months ended June 30,
2000 from $71,000 for the three months ended June 30, 1999.   This increase was
primarily attributable to income earned on the invested proceeds from the
Company's initial public offering on June 16, 1999.

Income tax provision.   Income tax provision increased by $98,000 to $163,000
for the three months ended June 30, 2000 from $65,000 for the three months ended
June 30, 1999.   This increase resulted from higher income before income taxes
for the three months ended June 30, 2000.

Liquidity and Capital Resources
-------------------------------

As of June 30, 2000, we had cash and cash equivalents of $23.3 million, an
increase of $722,000 from cash and cash equivalents held at March 30, 2000.  Our
working capital at June 30, 2000 was $26.5 million, compared to $25.9 million at
March 30, 2000.

Our operating activities resulted in net cash inflows of $729,000 for the three
months ended June 30, 2000 and $1.3 million for the three months ended June 30,
1999.  The operating cash inflows for the three months ended June 30, 2000 were
from the income for the period, a refund of prepaid income taxes, and
depreciation.  Decreases in deferred revenues, accounts payable and accrued
expenses, as well as increases in accounts receivable and other assets partially
offset the cash provided by operating activities.  The sources of cash in the
three months ended June 30, 1999 were primarily income for the period, increases
in deferred revenues, accounts payable and accrued expenses, and decreases in
accounts receivable offset by decreases in other assets.

Investing activities used cash of $215,000 for the three months ended June 30,
2000, and $467,000 for the three months ended June 30, 1999 for the purchase of
property and equipment.

Financing activities provided cash of $208,000 for the three months ended June
30, 2000 due to proceeds from the exercise of stock options, partially offset by
the payment of long term debt.  Financing activities provided $22.2 million for
the three months ended June 30, 1999 due primarily to the proceeds from the sale
of common stock from the Company's initial public offering.

We anticipate that we will continue to experience significant growth in our
operating expenses. Operating expenses will consume a material amount of our
cash resources, including a portion of the net proceeds of the public offering.
We believe that the net proceeds of the public offering, together with our
existing cash and cash equivalents, will be sufficient to meet our anticipated
cash needs for working capital and capital expenditures for at least the next
twelve months.

Risk Associated with the Year 2000
----------------------------------

To date we have not experienced any material problems attributable to the
inability to recognize dates beginning with the year 2000 in our software
products, services, or internal systems. Based on our current assessment, we
believe the current versions of our software products are Year 2000 compliant,
that is, they are capable of adequately distinguishing 21st century dates from
20th century dates. Although we have passed the rollover from December 31, 1999
to January 1, 2000, we still face risks to the extent that products are
generally integrated into enterprise systems involving sophisticated hardware
and complex software products that we cannot adequately evaluate for Year 2000
compliance. To date, we have not incurred any material costs directly associated
with our Year 2000 compliance efforts, except for compensation expense
associated with our salaried employees who have devoted some of their time to
our Year 2000 assessment and remediation efforts.

Although we have not been a party to any litigation or arbitration proceeding
involving our products or services related to Year 2000 compliance issues, we
may in the future be required to defend our products or services in such
proceedings, or to negotiate resolutions of claims based on Year 2000 issues.
The costs of defending and resolving Year 2000 related disputes, regardless of
the merits of such disputes, and any liability we have for Year 2000 related
damages, including consequential damages, could materially adversely affect our
business, financial condition and operating results. Year 2000 issues did cause
a delay in, or cancellation of, decisions to purchase our products or services,
our business, financial condition and operating results have not at this point
been materially adversely affected.

                                       10
<PAGE>

Factors Affecting Operating Results
-----------------------------------

Our future operating results are uncertain and likely to fluctuate. Our
operating results have varied widely in the past, and we expect that they will
continue to fluctuate in the future. In addition, our operating results may not
follow any past trends. It is particularly difficult to predict the timing or
amount of our license revenues because

  .  Our sales cycles are lengthy and variable, typically ranging between six to
     nine months from our initial contact with a potential customer to the
     signing of a license agreement, although occasionally sales require
     substantially more time;

  .  The amount of unfulfilled orders for our products at the beginning of a
     quarter is small because our products are typically shipped shortly after
     orders are received; and

  .  We recognize a substantial portion of our license revenues in the last
     month of a quarter, and often in the last weeks or days of a quarter.

Nevertheless, we base our decisions regarding our operating expenses on
anticipated revenue trends. Because many of our expenses are relatively fixed, a
delay in recognizing revenue from a limited number of license transactions could
cause our operating results to vary significantly from quarter to quarter and
could result in operating losses. To the extent these expenses are not followed
by increased revenues, our operating results will suffer.

Our results fluctuate from quarter to quarter. In the past, the software
industry has experienced significant downturns, particularly when general
economic conditions decline and spending on management information systems
decreases. Our business, financial condition and operating results may fluctuate
substantially from quarter to quarter as a consequence of general economic
conditions in the software industry. In addition, the fiscal or quarterly budget
cycles of our customers can cause our revenues to fluctuate from quarter to
quarter. As a result of all of these factors, we believe that period-to-period
comparisons of our operating results are not meaningful, and you should not rely
on such comparisons to predict our future performance. Fluctuations in our
operating results, particularly compared to the expectations of market analysts
or investors, could cause volatility in the price of our common stock.

We have a limited operating history. We commenced operations on April 29, 1994
and commercially released the initial version of CoreDossier in November 1995.
Accordingly, we have a limited operating history, and we face all of the risks
and uncertainties encountered by early-stage companies. Our limited operating
history makes it difficult to forecast our future operating results. The new and
evolving nature of the electronic compliance market increases these risks and
uncertainties. We expect to continue to devote substantial resources to our
product development, sales and marketing, and customer support. As a result, we
will need to generate significant quarterly revenues to achieve and maintain
profitability. Our business strategies may not be successful, and we may not be
profitable in any future period.

We may be unable to expand our sales and support infrastructure. To date, we
have sold our products primarily through our direct sales force and have
supported our customers with our consulting and customer support staff. Our
future revenue growth will depend in large part on recruiting and training
additional direct sales, consulting and customer support personnel. We have not
experienced difficulty in recruiting qualified sales and support personnel. We
may not be able to successfully expand our direct sales force or other
distribution channels and any such expansion may not result in increased
revenues. If we are unable to hire highly trained consulting and customer
support personnel, we may be unable to meet customer demands. Our business,
financial condition and operating results will be materially adversely affected
if we fail to expand our direct sales force or our technical and customer
support staff.

We have historically sold most of our products and services to businesses in the
pharmaceutical and biotechnology industry. We have recently begun selling our
products and services to other industries requiring robust publishing
initiatives. Our business strategy includes targeting applications that are
document-intense publishing operations including bids and proposed management of
large documents, and others. We may not experience the same level of sales in
other industries as in the pharmaceutical and biotechnology industry.

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<PAGE>

If we are unable to adequately address these factors we may not successfully
market and sell our products and services in these targeted industries.
Consequently, we may not generate revenues. In addition, as we develop new
industry-specific products, we may begin competing with companies we have not
competed against in the past. These companies may have greater experience and
expertise in these industries. If we are unable to compete successfully against
these new competitors our business and results of operations would be harmed.

We depend on certain key employees. Our future performance will also largely
depend on the efforts and abilities of our key technical, customer support,
sales and managerial personnel and on our ability to retain them. Our success
will depend on our ability to attract and retain such personnel in the future.
In addition, the loss of any of our executive officers could materially
adversely affect our business, financial condition and operating results.

Our market is subject to rapid technological change. The software market in
which we compete is characterized by rapid technological change. Existing
products become obsolete and unmarketable when products using new technologies
are introduced and new industry standards emerge. For example, we may need to
modify our products when third parties change software that we integrate into
our products. As a result, the lifecycles of our products are difficult to
estimate. To be successful, we must continue to enhance our current product line
and develop new products that successfully respond to such developments.

Our business, financial condition and operating results would be materially
adversely affected if we delay release of our products and product enhancements
or if these products and product enhancements fail to achieve market acceptance
when released.

We face risks from expansion of our international operations. We intend to
expand our international operations and may enter new international markets.
This expansion will require significant management attention and financial
resources. We may not be able to maintain or increase international market
demand for CoreDossier. We do not currently engage in currency hedging
activities, but we may do so in the future. Increases in the value of the U.S.
dollar relative to foreign currencies could materially adversely affect our
operating results.

We depend on service revenues. Support and service revenues represented 37% of
our total revenues for the first quarter of fiscal 2001 and 39% of our total
revenues for fiscal 2000. We anticipate that service revenues will continue to
represent a significant percentage of total revenues. Because service revenues
have lower gross margins than license revenues, a continued increase in the
percentage of total revenues represented by service revenues resulting from
increased services and maintenance revenues or a decrease in license revenues
could have a detrimental impact on overall gross margins and our operating
results.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
         ---------------------------------------------------------

We are exposed to financial market risks, including changes in interest rates.
We typically do not attempt to reduce or eliminate our market exposures on our
investment securities because the majority of our investments are short-term.
We do not have any derivative instruments.

The fair value of our investment portfolio or related income would not be
significantly impacted by either a 100 basis point increase or decrease in
interest rates due mainly to the short-term nature of the major portion of our
investment portfolio.  All of the potential changes noted above are based on
sensitivity analysis performed on our balances as of June 30, 2000.

PART II - OTHER INFORMATION
---------------------------

Item 1.  Legal Proceedings
         -----------------

From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business.  The Company is
not involved in any legal proceedings, which would, in management's opinion,
have a material adverse effect on the Company's business or results of
operations.

                                       12
<PAGE>

Item 2.  Changes in Securities and Use of Proceeds
         -----------------------------------------

There have been no changes in securities during the quarter ended June 30, 2000.

Item 3.  Defaults Upon Senior Securities
         -------------------------------

There have been no defaults by the Company on any Senior Securities during the
quarter ended June 30, 2000.

Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

No matters were submitted to a vote of the Company's stockholders during the
first quarter of the fiscal year covered by this report through the solicitation
of proxies or otherwise.

Item 5.  Other Information
         -----------------

On April 24, 2000, Terrence P. Brennan resigned as President and Chief Executive
Officer, but retained his position as Chairman of the Board. On June 29, 2000,
Mr. Brennen resigned as Chairman of the Board. Mr. R. Richard Dool assumed the
position of President, Chief Executive Officer on April 24, 2000 and Director on
July 21, 2000.

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

(A)  Exhibits

     (27)  Financial Data Schedule

(B)  Reports on Form 8-K

No reports on Form 8-K were filed during the quarter covered by this Form10-Q.

                                       13
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 11th day of August
2000.

                                  ESPS, INC.


                        By:    /s/R. Richard Dool
                               ------------------
                               R. Richard Dool
                               President and Chief Executive Officer
                               (Principal Executive Officer)

                        By:    /s/George B. Pearcy
                               ---------------------------------------------
                               George B. Pearcy
                               Chief Financial Officer
                               (Principal Financial and Accounting Officer)

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