<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-KSB

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

      (MARK ONE)

         |X|      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED MAY 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.
                 (Name of Small Business Issuer in its Charter)

DELAWARE                                                             13-2897997
(State or Other Jurisdiction of
Incorporation or Organization)                            (IRS Employer ID No.)

2091 BUSINESS CENTER DRIVE, SUITE 100
IRVINE, CA 92612                                                          92612
(Address of Principal Executive Offices)                             (Zip Code)

Issuer's Telephone Number, Including Area Code:                  (949) 263-0910

Securities Registered Under Section 12(b) of the
Exchange Act:                                                              NONE
Securities Registered Under Section 12(g) of the
Exchange Act:

TITLE OF EACH CLASS
---------------------------------------------------------
Common Stock, par value $0.01 per share

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                No   |X|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |_|

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Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes |_| No |X|

Issuer's revenues for its most recent fiscal year: $ 211,040

The aggregate market value of the common stock, par value $0.01 per share, held
by non-affiliates of the Registrant totaling 5,458,827 shares was $5,459 as of
May 31, 2004 (based upon the closing bid of the Registrant's common stock on the
OTC Pink Sheets on May 31, 2004 of $0.001 per share). As of May 31, 2004, there
was no active market for the Issuer's common stock.

State the number of shares outstanding in each of the issuer's classes of common
equity, as of May 31, 2004.

                 CLASS                               OUTSTANDING
---------------------------------------  ---------------------------------------
Common Stock, par value $0.01 per share           50,255,309 shares

                       DOCUMENTS INCORPORATED BY REFERENCE

         No documents are incorporated by reference into this Annual Report on
Form 10-KSB.


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                               PURCHASESOFT, INC.
                          ANNUAL REPORT ON FORM 10-KSB
                                  MAY 31, 2004

                              CROSS REFERENCE SHEET

                                     PART I
                                     ------

Item 1       Description of Business

Item 2       Properties

Item 3       Legal Proceedings

Item 4       Submission of Matters to a Vote of Security Holders

                                     PART II
                                     -------

Item 5       Market for Common Equity and Related Stockholder Matters

Item 6       Management's Discussion and Analysis of
             Financial Condition and Results of Operations

Item 7       Financial Statements

Item 8       Changes In and Disagreements with Accountants on Accounting and
             Financial Disclosure

Item 8a      Controls and Procedures

                                    PART III
                                    --------

Item 9       Directors, Executive Officers, Promoters and Control Persons;
             Compliance with Section 16(a) of the Exchange Act

Item 10      Executive Compensation

Item 11      Security Ownership of Certain Beneficial Owners and
             Management and Related Stockholder Matters

Item 12      Certain Relationships and Related Transactions

Item 13      Exhibits and Reports on Form 10-K

Item 14      Principal Accountant Fees and Services


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                           FORWARD LOOKING STATEMENTS

         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.

         PART I

         The Company's annual report on Form 10-K, quarterly reports on Form
         10-Q, current reports on Form 8-K, and amendments to these reports
         filed or furnished pursuant to section 13(a) or 15(d) of the Exchange
         Act are made available free of charge through the Company's website,
         located at http://www.purchasesoft.com , as soon as reasonably
         practicable after reports have been filed with the Securities and
         Exchange Commission (SEC). The SEC also maintains an Internet site at
         http://www.sec.gov where these reports and other information about the
         Company can be obtained.


                         ITEM 1: DESCRIPTION OF BUSINESS
OVERVIEW

         Before prior management's announcement to wind down the Company's
         operations in December 2001, PurchaseSoft was positioned to become one
         of the leaders in eProcurement and eSourcing software. The Company had
         been supplying software for procurement since the late 1980's. Over 150
         manufacturing, insurance, publishing, distribution and financial
         services firms had installed their software. PurchaseSoft 5.0 (GT
         Purchase Pro), the Company's client-server solution had over 25 active
         clients and the newer Enterprise solution, PurchaseSmart 3.0 was just
         gaining traction with four installations.

         The Company suffered the same fate as many others when the tech funding
         bubble burst and without the ability to raise more capital in the
         public equity markets, the Board decided to wind down operations and
         close the Company. Attracted by projections of substantial growth in
         the procurement software market, PurchaseSoft investor and senior
         software executive Steven A. Flagg acquired controlling interest in the
         Company in August 2002 and restarted operations.

                                       4


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         The Company made two acquisitions via the issuance of stock, one in
         Germany, Netshare Solutions GmbH, in January, 2004 and another, in the
         United States, Computer Information Enterprises, Inc., in February,
         2004. Netshare fit closely with management's strategy to acquire
         Microsoft-centric software and services companies. Unfortunately, the
         underlying economic benefit of acquiring Netshare was an anticipated
         contract with a major Middle Eastern firm which did not materialize.
         Additionally, Netshare failed to raise three hundred thousand Euros
         necessary to sustain operations in Germany. With operating losses, the
         inability to raise capital overseas and delays in obtaining a
         significant contract, the Board of Directors of Company and the
         Managing Director of Netshare Solutions agreed to place Netshare into
         Temporary Insolvency on May 31, 2004. Subsequently, management
         determined that it was not economically viable to continue to
         financially support Netshare and allowed the Trustee to liquidate the
         assets of Netshare Solutions, GmbH. This investment was entirely
         written-off for the fiscal period now reported.

         The acquisition of Computer Information Enterprises, Inc. (CIE) has
         provided the Company with the initial platform for further acquisitions
         in the United States. CIE is an established developer of a document
         imaging management solution, ImageLink, which is tightly-integrated
         into a company's ERP accounting system via Microsoft's Solomon IV and
         Great Plains accounting software programs. In owning CIE less than four
         months, management has reduced overhead, re-focused its business
         strategy to enhancing existing and developing new document imaging
         software products, and increased software prices of its core products
         while continuing to service and renew existing customer's under
         maintenance agreements.

BUSINESS STRATEGY

         The Company's strategy once it has CIE operating at a breakeven basis,
         pre-corporate overhead allocations, is to acquire the software,
         intellectual property (IP), customer base and maintenance contracts of
         other software companies with a focus on Microsoft-centric product
         related companies. Computer Information Enterprises was the first of
         these acquisitions that will serve as a platform. Future acquisitions
         will be small to medium-sized, privately-held companies with revenues
         under five million dollars that are generally too small to attract
         private equity funds and strategic buyers.

         The Company believes there are a substantial number of businesses
         meeting these criteria due to continued weakness in IT spending, the
         poor IPO market, the need for alternative exit strategies for the many
         VC firms stuck with a portfolio of small software companies and
         software executives who have ridden the rollercoaster of IT expansion
         and collapse and are now seeking a liquidity event.

PRODUCTS

"PurchaseSoft 5.0"
------------------

         In May 1994, the Company released its first Microsoft Windows and
         client/server based purchasing and materials management software
         system, GT Purchase PRO. In the fall of 1997, the product name was
         changed from GT Purchase PRO to PurchaseSoft 5.0 consistent with the
         wider "enterprise" scope of the Company's software solution.
         PurchaseSoft 5.0 solutions provide a complete end-to-end electronic
         procurement system featuring electronic catalogs, requisitioning,
         e-mail enabled authorization, request for quotations, quotations,
         reports and analyses, purchasing, receiving, inventory management,
         fixed asset management, invoice management and advanced decision
         support.

         PurchaseSoft 5.0 is a full life-cycle suite of software modules for
         improving the performance of Purchasing and Materials Management.
         PurchaseSoft 5.0 is compatible with Structured Query Language ("SQL")
         databases, client/server architecture, and e-mail. PurchaseSoft 5.0 was
         an enterprise-wide application developed in PowerBuilder 5.0.

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The complete PurchaseSoft 5.0 software suite includes the following modules:
             Purchasing                               Inventory
             Requisitioning                           Invoice Matching
             Receiving                                Asset Management
             Quotations                               Blanket Orders

             Request for Quotations (RFQs)            Accounts Payable Interface
             Budgeting                                Migration and Integration
             Third Party Billing                      Web Requisitioning
             Web Quotations                           Document Imaging

         All of the modules can be integrated into one common logical system,
         and interfaces are available for supporting external Accounts Payable
         and MRO applications and systems. The software routes electronic
         purchase requisitions as application-level communication. Requisitions
         flow via corporate LANs, WANs, Internet, or Intranet to back-office
         solution processing. Requisitions are created using on-line, electronic
         product and services catalogs. Before reaching back-office processing,
         requisitions must be approved, and this is achieved using an
         authorization cycle as established through user-defined workflow routed
         on top of existing e-mail systems.

         Requisitions can be converted to RFQs to support the bidding and
         sourcing process, or requisitions can be turned directly into purchase
         orders. All information is processed at the line item level. Buyers can
         turn one requisition into many purchase orders or many requisitions
         into one P.O. A blanket purchase order feature handles routine and
         repetitive purchases. Purchase orders can be sent to vendors via paper,
         fax, and e-mail or exported for EDI exchange.

         Requisition authorization requests move over existing e-mail systems
         using MAPI. Contracts, product specifications, and other documents are
         managed as file attachments using OLE automation. Also, the system
         supports robust industry standard databases - Microsoft SQL Server and
         Oracle.

IMAGELINK
---------

         ImageLink is a document management system that is tightly-integrated
         with Microsoft's Solomon IV and Great Plains accounting ERP Systems.
         The product offers a secure environment for the storage and retrieval
         of documents. It is a useful tool for companies that are striving to be
         in compliance with Sarbanes-Oxley or HIPPA. There are various levels of
         user access which can be established by a central authority. A company
         can protect documents from unauthorized alteration and access of
         documents can be monitored by authorized personnel.

         While ImageLink is marketed as a tool within the accounting ERP system
         of a company, its capabilities extend beyond the accounting department.
         The product has the capability to capture, store and retrieve document
         images such as: contracts, memos, e-mail correspondence, expense
         reports, vendor accounts and even audio and video files. Installation
         is easy requiring no on-site support and normally requires less than
         one hour of IT staff's time.

         The Company also has a number of other products it distributes in
         addition to its core ImageLink product.

         Super Search is a stand-alone software products also integrated into
         Solomon IV and Great Plains ERP systems that allows one to access
         documents within the accounting system, or for non-accounting
         applications. This software component is based on Microsoft's SQL
         Server and Visual Basic. Key features include security via assigned
         rights so unauthorized, non-accounting personnel, can only access
         certain documents; scanning support for all paper documents with the
         capability to sort results by criteria; access to all types of
         documents including Word, excel, jpeg images, voice and video.

         Batch Indexing is another add-on product that associates large batches
         of scanned documents to individual transactions within an accounting
         system. Groups of documents are scanned from either a central scanner
         or remote site and grouped into pre-designated folders.

                                       6


<PAGE>

         ImageLink Wizard provides the capability to create profiles and specify
         what information will be attached to an image. Combined with
         SuperSearch, the user has an incredibly powerful and flexible search
         engine. AP-Distar is a high-end product solution that provides accounts
         payable image capture, data entry and distributed authorization for
         accounting systems. AP-Distar lends itself to generic integration with
         any SQL-based accounting system.

         In fiscal year 2005 the Company has plans to integrate its ImageLink
         product with Best's MAS90 accounting software to provide the same
         features currently available to users of Microsoft's Solomon IV and
         Great Plains ERP accounting software. To gain greater reseller loyalty
         and support from some of the largest resellers in the United States,
         the Company will also have to produce additional products to support
         the full breadth of Microsoft's ERP accounting product lines including
         Navision and Axapta. It is the Company's plan to begin development work
         on ImageLink for these final two segments of Microsoft's accounting
         products currently not supported sometime in late fiscal year 2006.

         The company via acquisition is looking for a natural expansion of its
         product capabilities into a generic imaging software product and a
         sophisticated Microsoft-centric workflow product.

         In fiscal year 2006 the Company plans to add the ImageLink feature to
         the PurchaseSoft supply chain management solution. This enhancement
         should contribute to its plans to re-market the product at a lower
         price point, while bringing this feature to existing PurchaseSoft
         customers currently using its product but presently not on maintenance.

         Competition

         ImageLink's product is seamlessly-integrated to a client's accounting
         ERP system therefore not requiring the user to "boot-up" separate
         programs while working within their accounting system. This itself
         makes the Company's product unique compared to most other document
         imaging software companies.

         Competition is intense. There are a large number of software companies
         providing generic document imaging management solutions. Like
         PurchaseSoft, there are several both smaller and larger companies
         operating specifically within the document imaging arena for accounting
         solutions. The Company must continue to enhance its core products and
         innovate with new product introductions to maintain a market presence.


ITEM 2:   PROPERTIES

Our corporate headquarters are located in a leased facility in Irvine,
California consisting of approximately 2,400 square feet of office space. The
facilities are leased for a term of one year and the lease is renewable at the
Company's option. As of February 16, 2003 the Company's mailing address is 2091
Business Center Drive, Suite 100, Irvine CA 92612. All of the books and records
of the Company are located in this office. The Company maintains no other
locations.

ITEM 3:   LEGAL PROCEEDINGS

PurchaseSoft was not a party to any legal proceedings during fiscal year 2004 or
as of the date of filing of this Form 10-K.


ITEM 4:   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the last quarter
of the fiscal year ended May 31, 2004.

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PART II:

ITEM 5:   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

         Our common stock is listed for quotation under the symbol "PURC.PK" on
         the National Association of Securities Dealers OTC Pink Sheets?. The
         following table sets forth the range of high and low bid quotations of
         the common stock during the two fiscal years ended May 31, 2004 and May
         31, 2003 as reported by OTC Pink Sheets?.

                                                                    BID
                                                           ---------------------
PERIOD                                                       HIGH        LOW
---------------------------------------------------------- ---------- ----------

Fiscal Year Ending May 31, 2004
          First Quarter                                    $   0.001  $    0.001
          Second Quarter                                   $   0.001  $    0.001
          Third Quarter                                    $   0.001  $    0.001
          Fourth Quarter                                   $   0.001  $    0.001

Fiscal Year Ended May 31, 2003
          First Quarter                                    $    0.01  $     0.01
          Second Quarter                                   $    0.01  $     0.01
          Third Quarter                                    $   0.001  $    0.001
          Fourth Quarter                                   $   0.001  $    0.001

The closing bid price of the common stock on May 31, 2004 on the OTC Pink
Sheets(R) was $0.001 per share.

STOCKHOLDERS

As of May 31, 2004, there were approximately 189 holders of record of
PurchaseSoft's common stock. To date, we have not paid any dividends on our
common stock.

RECENT SALES OF UNREGISTERED SECURITIES

In February, 2004 the Board approved an increase of authorized shares from fifty
million (50,000,000) to one hundred million shares (100,000,000) to facilitate
its Private Placement Memorandum for the raising of capital.

We issued shares of our common stock in unregistered transactions during fiscal
year 2004. All of the following shares of common stock issued were non
registered transactions in reliance on Section 4 (2) of the Securities Act of
1933, as amended (the "Securities Act"). The shares of common stock issued were
as follows:

In February 2004, 7,000,000 shares were issued to the Managing Directors of
Netshare Solutions, GmbH, for the acquisition of Netshare. Another 1,000,000
shares were issued to individuals involved in the acquisition or in lieu of fees
related to fund-raising activities.

In May, 2004, 1,000,000 shares were issued to Computer Information Enterprises,
Inc. for its acquisition by the Company, 3,000 ,000 shares were issued to Brian
Tauber for the conversion of a bridge loan to equity at .02 p/share, and
5,000,000 shares were issued for cash and services to Steve Flagg, President CEO
and Board of Director of Company.


TRANSFER AGENT AND REGISTRAR

Our transfer agent is Fidelity Transfer Company, 1800 South West Temple, Suite
301, Salt Lake City, UT 84115.


ITEM 6:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         The following discussion of our financial condition and results of
         operations should be read in conjunction with our financial statements
         and attached notes and the other financial information included
         elsewhere in this Annual Report on Form 10-KSB. This Management's
         Discussion and Analysis of Financial Condition and Results of
         Operations section contains descriptions of our expectations regarding
         future trends affecting our business. These forward-looking statements
         and other forward-looking statements made elsewhere in this document
         are made in reliance upon the safe harbor provisions of the Private
         Securities Litigation Reform Act of 1995. The discussion below and
         under the heading "Risk Factors" sets forth numerous factors we believe
         could cause actual results to differ materially from those contemplated
         by the forward-looking statements. We are not under any obligation to
         update the information contained in this section.

         Overview of Significant Activities

         Fiscal year 2004 was significant reflecting the Company's first steps
         in beginning the process to increase shareholder value via
         acquisitions. The first two acquisitions were made in early 2004
         following management's strategy to pursue Microsoft-centric
         acquisitions of small, privately-held software development companies.
         The first, in January, was Netshare Solution, GmbH, headquartered in
         Hanover, Germany and the second, in February, 2004 was Computer
         Information Enterprises, Inc. located in Irvine, California.

         The Company acquired 100% of Netshare through the issuance of eight
         million shares of stock with seven million of these shares going to the
         managing directors of Netshare. In addition, the Company made available
         over $200 Thousand U.S. dollars as working capital to support its
         operations. This acquisition was premised on Netshare quickly realizing
         a significant contract with a major Middle Eastern company. Concurrent
         with this acquisition Netshare and its management was to raise 300
         thousand Euros to support future working capital requirements to
         support its operations. With a very high unemployment rate in Germany
         within the technology sector and a large number of technology
         businesses in, or facing bankruptcy, the market to raise funds was very
         limited. Additionally, the contract, projected to begin in February,
         2004 was continually delayed, renegotiated and restructured further
         inhibiting local management's ability to raise necessary capital. In
         March and April the Company advanced over $50 thousand U.S. to further
         support its working capital needs. Attempts to sell Netshare's state of
         the art data center to raise monies for working capital also failed and
         on May 31, 2004, the managing director of Netshare Solutions, in
         concurrence with the Board of Directors of PurchaseSoft, placed
         Netshare into the German version of temporary insolvency. With no
         ability to raise capital and the major contract still not viable, the
         Company allowed the trustee of Netshare to liquidate assets thereby
         forcing the complete write-off of PurchaseSoft's investment in
         Netshare.

         The former Secretary, Treasurer, acting CFO, and board member, Tom
         Marsh, resigned from his duties in March to pursue other interests.
         Werner Loechle, COO and board member, residing in Stuttgart, Germany,
         with the closure of Netshare operations, resigned as an officer and
         board member in October, 2004.

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         In February, 2004 the Board authorized and received approval to
         increase its outstanding shares from the existing fifty million
         authorized to one hundred million shares authorized. The Company issued
         a Private Placement Memorandum authorizing the raising of $800 thousand
         U.S. dollars at (C).02 per share. From March 1, 2004 through May 31,
         2004 the company successfully raised $160 thousand dollars U.S. via
         this Private Placement. Another $60,000 was raised via a bridge loan in
         August, 2003 that was converted to equity in February, 2004 via
         warrants attached to the loan.

         On February 16, 2004, the Company closed on its second acquisition,
         Computer Information Enterprises, Inc. (CIE) located in Irvine, CA.
         This acquisition was made with the issuance of one million shares of
         Company stock. CIE had been in business for over twenty years prior to
         being acquired by Company, transforming itself from a company
         generating revenues primarily from consulting to its present state
         where it developed and marketed a secure, tightly-integrated document
         imaging software program for Microsoft's Solomon IV and Great Plains
         accounting ERP systems. With over three hundred licensed users of its
         ImageLink product, including companies such as Toshiba America, this
         acquisition has provided the platform for continued revenue growth and
         further acquisitions.

         Fiscal Year ended 2004 compared to 2003 (all figures founded to the
         nearest $1,000)

         In 2003, total revenues were $3,000 reflecting the re-start of
         PurchaseSoft operations through obtaining the renewal of maintenance
         contracts effective March 1, 2003 from two former customers,
         JPMorganChase and Chiquita.

         Fiscal year 2004 revenues reflect three and one-half months of
         ownership of CIE and the balance of deferred maintenance revenues from
         the original PurchaseSoft contracts. Revenues of $211,040 are derived
         from two sources, product sales, $103,000 and services $108,000.
         Services are comprised of consulting work performed by in-house staff
         for third parties unrelated to product sales and recognition of
         deferred revenues from maintenance contracts related to product sales.
         For the fiscal period maintenance revenues were $24,000 and consulting
         services were the remaining $84,000.

         Operating expenses total $258,000 and include salary expense of
         developers, administrative personnel and prepaid third party license
         expense. Of the total $258,000 in operating expenses, $52,000 is via
         corporate allocation from PurchaeSoft.

         Other income is comprised of rent expense from two third parties that
         sublease space from Company while other expenses include items such as
         rent, health insurance for employees and other overhead costs.

         The other major item contributing to the net loss of $394,317 is the
         loss on disposition and discontinuance of Netshare Solutions operations
         totaling $297,499. There should be no other expenses incurred in later
         periods related to the Netshare write-off.


         Liquidity and Capital Resources

         To date, we have funded our operations from the initial investment made
         by Steven A. Flagg, proceeds from the private placement memorandum and
         cash collections from customers. As of May 31, 2004 the Company had
         approximately $128,000 in cash, an increase of $110,000 from the prior
         fiscal period. Net cash used in operating activities during the fiscal
         year was $94,000. The net loss, primarily attributable to the loss on
         disposition of Netshare was the primary factor contributing to the
         increase in net cash used in operating activities.

         Net cash used in investing activities during 2004 totaled $168,893. The
         decrease was almost entirely due to the investment in Netshare.

         Net cash provided by financing activities during 2004 included the
         $160,000 cash received from the private placement memorandum and
         $213,000 from three shareholder loans.

         The Company intends to raise capital in fiscal year 2006, anticipated
         to be up to $2 million via a Private Investment in a Public Entity
         ("PIPE") to fund further acquisitions and to provide increased working
         capital.

                                       10


<PAGE>

         Critical Accounting Policies and Assumptions

         The accompanying consolidated financial statements were prepared in
         conformity with accounting principles generally accepted in the United
         States.

         Revenue Recognition:

         We have two distinct revenue streams: Software product revenues and
         service revenues.

         Software product revenues are related to our software applications
         invoiced on a fixed price and includes third party licenses necessary
         to use our product. Our invoices are COD and upon receipt of good funds
         unlocking keys are sent via email to the client along with instructions
         of how to download our product via our FTP site. Credit risk of product
         sales is therefore negligible.

         Services revenues comprises two components: consulting work for third
         parties which has net 15 day terms and is invoiced upon completion of
         the work; and deferred maintenance revenues. In a limited number of
         instances Company will invoice for consulting work on a product sale
         where some customization of software code is necessary. In most
         instances, the dollar amount is nominal and completed and delivered to
         the customer within two to five business days. Deferred maintenance
         revenues are generally amortized over a period of between twelve to
         sixteen months. As a policy, all of the Company's new sales expire on
         the last day of a particular month whether the sale occurred on the
         first day of the month or later within the month. Additionally, since
         Company's product can sometimes be acquired in conjunction with the
         underlying accounting software provided by Microsoft, there may be some
         delays in the length of time before our customer actually begins using
         our product. From a customer-service perspective, we will extended the
         amortization of maintenance beyond twelve month if this is known
         beforehand, but, with few exceptions, will we allow maintenance to run
         longer than ninety days from actual purchase date, regardless of when
         our product is sold. The average deferred maintenance contract length
         is approximately thirteen and a half months.

         Risk Factors

         Stockholders and prospective purchasers of our common stock should
         carefully consider the following risk factors in addition to the other
         information appearing in this Annual Report on Form 10-KSB.

         History of Losses and Accumulated Deficit; Uncertainty of Future
         Profitability.

         The Company has experienced ongoing losses from operations. The Company
         only resumed operations as a going concern in March 2003. The Company
         expects that such losses may continue for at least some period until
         product sales are generated in sufficient volume to offset expenses.

         New Management, Ability to Recruit Sales, Service, and Implementation
         Personnel.

         The Company's management has a very limited history in operating the
         Company. There can be no assurance that the Company's management will
         be successful in meeting their planned objectives. The ability to
         achieve anticipated revenues is substantially dependent on the ability
         of the Company to attract and retain skilled personnel, especially key
         management, sales, support, and development personnel. The Company
         believes that its future success will depend in large part on its
         ability to attract and retain highly skilled technical, managerial,
         marketing, and professional services personnel to ensure the high
         quality of products and services provided to its customers. The Company
         competes in the market for such personnel against numerous companies,
         including larger, more established companies with significantly greater
         financial resources than the Company. There can be no assurance that
         the Company will be successful in attracting and retaining skilled
         personnel. The Company's inability to attract and retain qualified
         employees would have a material adverse effect on the Company's
         business.

                                       11


<PAGE>

         Rapid Technological Change and New Products.

         The market for the Company's software products is characterized by
         rapid technological advances, evolving industry standards, change in
         end-user requirements, and frequent new product introductions and
         enhancements. Accordingly, the Company's future success will depend
         upon its ability to enhance its current products and develop and
         introduce new products that keep pace with technological developments,
         satisfy varying end-user requirements, and achieve market acceptance.
         Any failure by the Company to anticipate or respond adequately to
         technological developments or end-user requirements, or any significant
         delays in product development or introduction, could severely damage
         the Company's competitive position and have a material adverse effect
         on revenues. There can be no assurance that the Company will be
         successful in developing and marketing new products or product
         enhancements on a timely basis or that the Company will not experience
         significant delays in the future which could have a material adverse
         effect on the Company's results of operations. In addition, there can
         be no assurance that new products or product enhancements developed by
         the Company will achieve market acceptance.

         Dependence on a Single Product-Line.

         Substantially all of the Company's revenues over the next twelve months
         are expected to be derived from the sale of its ImageLink software
         product and related support services. Accordingly, any event that
         adversely affects revenue generated from the sale of software such as
         increased competition from competitors, negative publicity or
         evaluation, or obsolescence brought about if Microsoft deciding to no
         longer support either Solomon IV or Great Plains accounting software,
         or develops its own imaging software for its accounting products, could
         have a material adverse effect on the Company's results of operations.
         The Company's future financial performance will depend on the continued
         development and introduction of new and enhanced versions of its
         software and other products and on customer acceptance of such new
         enhanced products.

         Fluctuation in Quarterly Operating Results.

         The Company's revenues and operating results can vary substantially
         from quarter to quarter. Sales revenues in any quarter are
         substantially dependent on aggregate activity and the Company's ability
         to recognize revenue in that quarter in accordance with its revenue
         recognition policies and generally accepted accounting principles.
         Revenues may vary from quarter to quarter due to variances in prior
         quarter activity, which may positively or adversely affect the
         Company's future financial performance. The Company's sales cycle is
         typically from thirty to one hundred and twenty days. The Company's
         ability to increase revenue is dependent on its ability to grow sales
         activity which provides opportunities for consulting and subsequent
         maintenance revenues. Additionally the Company may not be able to
         recruit, hire, and train sufficient numbers of qualified consultants to
         perform such services. Due to the forgoing, it is likely that in one or
         more future quarters the Company's operating results will be below the
         expectations of public securities market analysts. In such event, the
         price of the Company's Common Stock would likely be materially
         adversely affected.

         Intellectual Property and Proprietary Rights.

         The Company relies on a combination of copyright, trademark and trade
         secret laws, employee and third party nondisclosure agreements, and
         other industry standard methods for protecting ownership of its
         proprietary software and business practices. There can be no assurance,
         however, that in spite of these precautions, an unauthorized third
         party will not copy or reverse-engineer certain portions of the
         Company's products or obtain and use information that the Company
         regards as proprietary. In addition, the laws of some foreign countries
         do not protect the Company's proprietary rights to the same extent as
         do the laws of the United States. There can be no assurance that the
         mechanisms used by the Company to protect its software will be adequate
         or that the Company's competition will not independently develop
         software products that are substantially equivalent or superior to the
         Company's software products. The Company expects that, as the number of
         software products in the industry increases and the functionality of
         these products further overlaps, software products will increasingly be
         subject to claims of infringement on third party proprietary rights.
         Any such claim, whether with or without merit, could result in costly
         litigation and require the Company to enter into royalty or licensing
         arrangements. Such royalty or license arrangements, if required, may
         not be available on terms acceptable to the Company or at all.

                                       12


<PAGE>

         Need for Additional Capital

         The Company will need to raise additional capital to finance its
         development and acquisition plans. The availability of financing for
         any plan will be critical to continue operations. Financing may not be
         available on terms that are favorable to us, or at all.

         Future Sales of Common Stock

         Our common stock is traded on the National Association of Securities
         Dealers OTC :Pink Sheets. Our common stock has historically been highly
         illiquid. Steven A. Flagg, who serves on our Board of Directors, and is
         the Company's President, in the aggregate, owns approximately 44% of
         the common stock as of May 31, 2004. If he were to sell even a small
         portion of the total shares in a short time, the market price of our
         common stock would likely decline dramatically. Furthermore, sales of a
         substantial number of shares of our common stock by any holder in a
         short time would likely cause the market price of our common stock to
         decrease significantly. In addition, the sale of any of these shares
         may impair our future ability to raise capital through the sale of
         additional stock.

         Inability to Influence the Outcome of Key Transactions

         One director of the Company, who also is the Company's President, in
         the aggregate owns approximately 44% of our common stock as of May 31,
         2004. This director has enough voting power to approve or disapprove
         virtually any matters that are determined by a majority vote of our
         stockholders, which severely limits other shareholder's ability to
         influence PurchaseSoft through voting their shares.

         Maintenance of a Public Trading Market for Shares of Our Common Stock

         Although shares of our common stock are presently quoted on the OTC
         Pink Sheets, we cannot assure you that they will continue to be quoted
         in the future. During the period of the Company's wind down the Company
         lost its market makers and has declined to establish new market makers
         until full and substantial operations are underway through product
         sales or an acquisition. Furthermore, in contrast to stock that is
         quoted on the NASDAQ National Market or traded on a national securities
         exchange, as a result of our stock being quoted on the OTC Pink Sheets,
         stockholders may:

         o        Find it more difficult to obtain accurate and timely
                  quotations regarding the bid and asked price
         o        Experience greater spreads between bid and asked prices;
         o        Be charged relatively higher transactional costs when buying
                  or selling our common stock; and
         o        Encounter more difficulty in effecting sales or purchases of
                  common stock.

         Cost of Compliance with Securities Laws

         While securities listed on the NASDAQ National Market System or
         national securities exchanges are in many cases exempt from the
         registration requirements of state securities laws, securities traded
         on the OTC Pink Sheets must comply with the registration requirements
         of state securities laws, which increases the time and costs associated
         with complying with state securities laws when raising capital. We
         cannot assure that this cost of compliance will not have a material
         adverse effect on the viability of the Company.

         Liquidity Reduction due to "Penny Stock" Regulatory Requirements

         The Securities and Exchange Commission has adopted regulations imposing
         limitations upon the manner in which certain low priced securities,
         referred to as a "penny stock," are publicly traded. Under these
         regulations, a penny stock is defined as any equity security that has a
         market price of less than $5.00 per share, subject to specified
         exceptions. Unless an exception is available, the regulations require
         the delivery, prior to any transaction involving a penny stock, of a
         disclosure schedule explaining the penny stock market and the risks
         associated with it. Also, under these regulations, some broker-dealers
         who recommend these types of securities to persons other than
         established customers and "accredited investors" must make a special
         written suitability determination for the purchaser and receive the
         purchaser's written agreement to a transaction prior to sale. Trading
         activities for penny stocks are more difficult for broker-dealers than
         in the case of securities not defined as penny stocks. Because our
         common stock may be a penny stock this may have the result of
         depressing the market for our securities, and a stockholder may find it
         difficult to sell shares of our common stock.

                                       13


<PAGE>

ITEM 7:   FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

See Table of Contents, page 16.


Mendoza Berger & Company, LLP's Report of Independent Registered Public
Accounting Firm

Balance Sheet as of May 31, 2004

Statement of Operations for the period May 31, 2004 and the three month period
ending May 31, 2003

Statements of Changes in Net Liabilities in Liquidation for the period May 31,
2004 and the three month period ending May 31, 2003

Statement of Stockholders' Equity for the year ending May 31, 2003 and the year
ending May 31, 2004

Statement of Cash Flows for the period ended May 31, 2004 and the three month
period ended May 31, 2004

Notes to Financial Statements


                                       14


<PAGE>



                          INDEPENDENT AUDITORS' REPORT







                               PURCHASESOFT, INC.

                     FINANCIAL STATEMENTSFOR THE YEAR ENDED
                              MAY 31, 2004 AND THE
                            THREE MONTH PERIOD ENDED
                                  MAY 31, 2003



                                       15


<PAGE>

                                TABLE OF CONTENTS




Report of Independent Registered Public Accounting Firm.......................17

Balance Sheets ...............................................................18

Statements of Operations......................................................19

Statement of Stockholders' Equity (Deficit)...................................20

Statements of Cash Flows .....................................................21

Notes to Financial Statements ............................................... 22




                                       16


<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors
of PurchaseSoft, Inc.

We have audited the balance sheet of PurchaseSoft, Inc. as of May 31, 2004 and
the related statements of operations, changes in stockholders' equity (deficit)
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The financial
statements of PurchaseSoft, Inc. as of May 31, 2003 were audited by other
auditors, whose report is dated August 14, 2003 and described conditions
indicating the Company has the ability to continue as a going concern.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects the financial position of PurchaseSoft, Inc. as of May 31,
2004, and the results of its operations and cash flows for the year then ended
in conformity with accounting principles generally accepted in the United States
of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company's viability is dependent
upon its ability to obtain future financing and the success of its future
operations. These factors raise substantial doubt as to the Company's ability to
continue as a going concern. Management's plan in regard to these matters is
described in Note 3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

Mendoza Berger & Company, LLP


March 22, 2005
Irvine, CA


                                       17


<PAGE>
<TABLE>

                                              PURCHASESOFT, INC.
                                                BALANCE SHEETS
                                             MAY 31, 2004 AND 2003
-----------------------------------------------------------------------------------------------------
                                                   ASSETS


                                                                         2004                2003
                                                                     -------------      -------------
<S>                                                                  <C>                <C>
Current assets:
    Cash                                                             $    127,625       $     17,938
    Accounts receivable                                                    55,870                 --
    Prepaid software licenses                                               4,530                 --
    Prepaid expenses and other assets                                       6,562                 --
                                                                     -------------      -------------

         Total current assets                                             194,587             17,938

Property and equipment, net (Note 6)                                       13,982              1,052
Goodwill                                                                  150,803            150,803
Deposits                                                                    4,144                 --
                                                                     -------------      -------------

        Total assets                                                 $    363,516       $    169,793
                                                                     =============      =============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
    Accounts payable and accrued expenses                                  84,493             12,128
    Deferred revenue                                                       77,739             15,064
    Shareholder's notes payable (Note 9)                             $    213,000       $         --
                                                                     -------------      -------------

        Total current liabilities                                         375,232             27,192

Commitments and contingencies (Note 10)                                         --                 --


Stockholders' equity (Note 7):
    Common stock:
      $0.01 par value; 100,000,000 shares authorized;
        50,255,309 and 33,287,267 shares issued and outstanding
        at May 31, 2004 and 2003, respectively                            502,553            332,873
    Additional paid-in capital                                         43,226,142         43,155,822
    Accumulated deficit                                               (43,651,379)      (43,257,062)
    Treasury stock                                                        (89,032)           (89,032)
                                                                     -------------      -------------

        Total stockholders' equity (deficit)                              (11,716)           142,601
                                                                     -------------      -------------

        Total liabilities and stockholders' equity                   $    363,516       $    169,793
                                                                     =============      =============


                  The accompanying notes are an integral part of these financial statements
</TABLE>
                                                      18


<PAGE>

                               PURCHASESOFT, INC.
                            STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------


                                                                   FOR THE THREE
                                                 FOR THE YEAR      MONTH PERIOD
                                                 ENDED MAY 31,     ENDED MAY 31,
                                                    2004               2003
                                                -------------      -------------
Revenues:
    Products                                    $    102,648       $      1,250
    Services                                         108,392              1,936
                                                -------------      -------------

        Total revenues                               211,040              3,186
                                                -------------      -------------

Expenses:
    Cost of service revenue                          142,705              1,200
    General and administrative                       115,543             12,972
                                                -------------      -------------

        Total expenses                               258,248             14,172
                                                -------------      -------------

Operating loss                                       (47,208)           (10,986)
                                                -------------      -------------

Other income (expense):
    Other income                                       3,282              1,753
    Other expense                                    (45,386)                --
    Interest expense                                  (6,706)                --
    Loss on disposition and discontinuance of
      Netshare, Inc.                                (297,499)                --
                                                -------------      -------------

Total other income expense                          (346,309)             1,753
                                                -------------      -------------

Net loss before income taxes                        (393,517)            (9,233)
Provision for income taxes (Note 8)                     (800)                --
                                                -------------      -------------

Net loss                                        $   (394,317)      $     (9,233)
                                                =============      =============

Loss per share - basic and diluted              $      (0.01)      $      (0.00)
                                                =============      =============

Weighted average number of shares                 35,558,500         33,287,267
                                                =============      =============

    The accompanying notes are an integral part of these financial statements

                                       19


<PAGE>
<TABLE>

                                                    PURCHASESOFT, INC.
                                        STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------------------------------------------------------------------------------------------------

                                                     COMMON STOCK
                                           ----------------------------------
                                                         PAR VALUE     ADDITIONAL                                     TOTAL
                                            NUMBER OF     ($0.01)       PAID-IN       ACCUMULATED    TREASURY      STOCKHOLDERS'
                                             SHARES        AMOUNT       CAPITAL         DEFICIT        STOCK      EQUITY (DEFICIT)
                                          ------------- ------------- -------------  -------------  -------------  -------------
<S>                                         <C>         <C>           <C>            <C>            <C>            <C>
Balance at February 28, 2003 after
   liquidation                              33,287,267  $    332,873  $ 42,939,273   $(43,247,829)  $    (89,032)  $    (64,715)

Adoption of push down accounting                    --            --       150,803             --             --        150,803

Special item-wind down adjustments                  --            --        65,317             --             --         65,317

Common stock contributed by officers for
services                                            --            --           429             --             --            429

Net loss                                            --            --            --         (9,233)            --         (9,233)
                                          ------------- ------------- -------------  -------------  -------------  -------------

Balance at May 31, 2003                     33,287,267       332,873    43,155,822    (43,257,062)       (89,032)       142,601

Issued shares for Netshare acquisition       8,000,000        80,000       (17,000)            --             --         63,000

Issued shares for purchase of CIE            1,000,000        10,000         7,000             --             --         17,000

Issued shares for cash                       7,968,042        79,680        80,320             --             --        160,000

Net loss                                            --            --            --       (394,317)            --       (394,317)
                                          ------------- ------------- -------------  -------------  -------------  -------------

Balance at May 31, 2004                     50,255,309  $    502,553  $ 43,226,142   $(43,651,379)  $    (89,032)  $    (11,716)
                                          ============= ============= =============  =============  =============  =============

                             The accompanying notes are an integral part of these financial statements
</TABLE>
                                                                20


<PAGE>
<TABLE>

                                         PURCHASESOFT, INC.
                                      STATEMENTS OF CASH FLOWS
                              FOR THE YEARS ENDED MAY 31, 2004 AND 2003
-------------------------------------------------------------------------------------------------

                                                                                  FOR THE THREE
                                                                    FOR THE YEAR   MONTH PERIOD
                                                                       ENDED           ENDED
                                                                    MAY 31, 2004    MAY 31, 2003
                                                                    ------------    ------------
<S>                                                                  <C>             <C>
Cash flows from operating activities:
    Net loss                                                         $(394,317)      $  (9,233)
Adjustments to reconcile net loss to net cash used in operating
   activities:
     Loss on disposition and discontinuance of Netshare                234,499              --
     Depreciation                                                        1,464             211
    Changes in operating assets and liabilities:
        Accounts receivable                                            (55,870)             --
        Prepaid software licenses                                       (4,530)             --
        Prepaid expenses                                                (6,562)             --
        Deposit                                                         (4,144)             --
        Stock contributed by officers for services                          --             429
        Accounts payable and accrued expenses                           72,366           3,734
        Deferred revenue                                                62,674          15,064
                                                                     ----------      ----------

            Total adjustments                                          299,897          19,438
                                                                     ----------      ----------

            Net cash used in operating activities                      (94,420)         10,204
                                                                     ----------      ----------

Cash flows from investing activities:
    Purchase of property and equipment                                 (14,393)         (1,263)
    Investment in Netshare                                            (154,500)             --
                                                                     ----------      ----------

            Net cash used in investing activities                     (168,893)         (1,263)
                                                                     ----------      ----------

Cash flows from financing activities:
    Stock issued for cash                                              160,000              --
    Loans from shareholders                                            213,000              --
                                                                     ----------      ----------

            Net cash provided by financing activities                  373,000              --
                                                                     ----------      ----------

Net increase in cash                                                   109,687           8,942

Cash, beginning of year                                                 17,938           8,996
                                                                     ----------      ----------

Cash, end of year                                                    $ 127,625       $  17,938
                                                                     ==========      ==========


Supplemental Disclosure of Cash Flow Information:
         Cash paid during the year for:
                    Interest                                         $   6,706       $      --
                                                                     ==========      ==========

Supplemental Disclosure of Non-Cash Items:
         Common stock for services                                   $      --       $     429
                                                                     ==========      ==========

Common stock issued for the purchase of Netshare                     $  63,000       $      --
                                                                     ==========      ==========

Common stock issued for the purchase of CIE                          $  17,000       $      --
                                                                     ==========      ==========


              The accompanying notes are an integral part of these financial statements
</TABLE>
                                                 21


<PAGE>
                               PURCHASESOFT, INC.
                        NOTES TO THE FINANCIAL STATEMENTS


1.       BUSINESS AND ORGANIZATION
         -------------------------

         PurchaseSoft, Inc. (the Company) is pursuing an aggregation strategy of
         acquiring Microsoft-centric, privately held software companies in the
         United States with revenues under four million dollars annually.
         PurchaseSoft's core product is a sophisticated Purchasing/Supply Chain
         management software program. The Company's most notable acquisition to
         date was Computer Information Enterprises, Inc. (CIE), a company that
         develops and markets Imagelink; an imaging and document management
         software product for accounting and ERP Systems. The Company closed its
         first round of a Private Placement and has recently engaged an
         investment bank to perform, amongst several tasks, the raising of two
         million dollars through a Private Investment in a Public Company
         ("PIPE").

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         ------------------------------------------

         PROPERTY AND EQUIPMENT
         ----------------------

         Property and equipment is stated at cost and depreciated using the
         straight-line method over the estimated useful life of the assets,
         which is three to seven years.

         REVENUE RECOGNITION
         -------------------

         The Company recognizes sales revenue when both title and risk of loss
         transfers to the customer, provided no significant obligations remain
         pursuant to Securities and Exchange Commission's Staff Accounting
         Bulletin No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS. Deferred
         maintenance revenues are amortized over the term of the Maintenance
         agreement, usually a period of twelve to sixteen months.

         INCOME TAXES
         ------------

         Deferred income taxes are reported using the liability method. Deferred
         tax assets are recognized for deductible temporary differences and
         deferred tax liabilities are recognized for taxable temporary
         differences. Temporary differences are the differences between the
         reported amounts of assets and liabilities and their tax bases.
         Deferred tax assets are reduced by a valuation allowance when, in the
         opinion of management, it is more likely than not that some portion or
         all of the deferred tax assets will not be realized. Deferred tax
         assets and liabilities are adjusted for the effects of changes in tax
         laws and rates on the date of enactment. The Company is subject to the
         $800 minimum California Franchise tax, which is reflected in the
         statement of operations for the year ended May 31, 2004.


                                       22


<PAGE>


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
         ------------------------------------------------------

         NET LOSS PER SHARE
         ------------------

         In February 1997, the Financial Accounting Standards Board (FASB)
         issued SFAS No. 128 "Earnings Per Share" which requires the Company to
         present basic and diluted earnings per share, for all periods
         presented. The computation of loss per common share (basic and diluted)
         is based on the weighted average number of shares actually outstanding
         during the period. The Company has no common stock equivalents, which
         would dilute earnings per share.

         FAIR VALUE OF FINANCIAL INSTRUMENTS
         -----------------------------------

         Financial instruments consist principally of cash and payables. The
         estimated fair value of these instruments approximate their carrying
         value.

         FOREIGN CURRENCY TRANSLATION
         ----------------------------

         The Company translates the foreign currency financial statements of its
         foreign operations by translating balance sheet accounts at the
         exchange rate on the balance sheet date and the income statement
         accounts using the prevailing exchange rates at the transaction date.
         Translation gains and losses are recorded in stockholders' equity and
         realized gains and losses are reflected in operations. There were no
         material translation or exchange gains and losses for the year ended
         May 31, 2004 and for the period ended May 31, 2003.

         IMPAIRMENT OF LONG-LIVED ASSETS
         -------------------------------

         FASB issued in August 2001, SFAS 144, "Accounting for the Impairment or
         Disposal of Long-lived Assets". In accordance with this statement, the
         Company periodically reviews its long-lived assets to be held and used
         by the Company to determine whether any events or changes in
         circumstances indicate that the carrying amount of the asset may not be
         recoverable. The Company bases its evaluation on such impairment
         indicators as the nature of the assets, the future economic benefit of
         the assets, any historical or future profitability measurements, as
         well as other external market conditions of factors that may be
         present. If such impairment indicators are present or other factors
         exist that indicate that the carrying amount of the asset may not be
         recoverable, the Company determines whether an impairment has occurred
         through the use of an undiscounted cash flow analysis of assets at the
         lowest level for which identifiable cash flows exist. If an impairment
         has occurred, the Company recognizes a loss for the difference between
         the carrying amounts and the estimated value of the asset.

                                       23


<PAGE>


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
         ------------------------------------------------------

         IMPAIRMENT OF LONG-LIVED ASSETS (Continued)
         -------------------------------------------

         The fair value of the asset is measured using quoted market prices or,
         in the absence of quoted market prices, fair value is based on an
         estimated discounted cash flow analysis. The company has experienced no
         impairment losses to date.

         USE OF ESTIMATES
         ----------------

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect 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.

         INTANGIBLE ASSETS
         -----------------

         On November 1, 2002, the Company adopted SFAS No. 142, "Goodwill and
         Other Intangible Assets." The new standard requires that goodwill and
         indefinite-lived intangible assets no longer be amortized. In addition,
         goodwill and indefinite-lived intangible assets are tested for
         impairment at least annually. These tests will be performed more
         frequently if there are triggering events. Impairment losses after
         initial adoption will be recorded as a part of income from continuing
         operations.

         Definite-lived intangible assets, such as patents, are amortized over
         their estimated useful lives. The Company continually evaluates the
         reasonableness of the useful lives of these assets. In accordance with
         SFAS No. 142, "Goodwill and Other Intangible Assets," if a revision in
         the useful lives of these assets is deemed necessary, the remaining
         carrying amount of the intangible asset is amortized prospectively over
         the revised remaining useful life of the definite-lived intangible
         asset.

         Management periodically reviews the carrying value of acquired
         intangible assets that are being amortized to determine whether an
         impairment may exist. The Company considers relevant cash flow and
         profitability information, including estimated future operating
         results, trends and other available information, in assessing whether
         the carrying value of intangible assets being amortized can be
         recovered. If the Company determines that the carrying value of
         intangible assets will not be recovered from the undiscounted future
         cash flows of the acquired business, the Company considers the carrying
         value of such intangible assts as impaired and reduces them by a charge
         to operations in the amount of the impairment.

                                       24


<PAGE>

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
         ------------------------------------------------------

         INTANGIBLE ASSETS (Continued)
         -----------------------------

         An impairment charge is measured as any deficiency in the amount of
         estimated undiscounted future cash flows of the acquired business
         available to recover the carrying value related to the intangible
         assets that are being amortized. The Company did not recognize any
         impairment changes for the year ended May 31, 2004.

         RECLASSIFICATIONS
         -----------------

         Certain amounts in the prior period presented have been reclassified to
         conform to the current period financial statement presentation. These
         reclassifications have no effect on previously reported net loss.

         NEW STANDARDS TO RECENT ACCOUNTING PRONOUNCEMENTS
         -------------------------------------------------

         In August 2001, the Financial Accounting Standards Board (FASB) issued
         SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
         Assets, which supersedes SFAS No. 121, Accounting for the Impairment of
         Long-Lived Assets and for Long-Lived Assets to Be Disposed of and the
         accounting and reporting provisions of APB Opinion No. 30. SFAS No. 144
         addresses financial accounting and reporting for the impairment or
         disposal of long-lived assets and is effective for fiscal years
         beginning after December 15, 2001, and interim periods within those
         fiscal years.

         In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
         Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
         Technical Corrections," effective May 15, 2002. SFAS No. 145 eliminates
         the requirement that gains and losses from the extinguishment of debt
         be aggregated and classified as an extraordinary item, net of tax, and
         makes certain other technical corrections. SFAS No. 145 did not have a
         material effect on the company's Consolidated Financial Statements.

         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
         Associated with Exit or Disposal Activities". This statement requires
         that a liability for a cost associated with an exit or disposal
         activity be recognized when the liability is incurred. The provisions
         of this statement are effective for exit or disposal activities that
         are initiated after December 31, 2002. The Company adopted SFAS No. 146
         on January 1, 2003 and its effect is reflected in the Company's
         financial position or operations.

                                       25


<PAGE>


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
         ------------------------------------------------------

         NEW STANDARDS TO RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
         -------------------------------------------------------------

         In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN
         45"), Guarantor's Accounting and Disclosure Requirements for
         Guarantees, Including Indirect Guarantees of Others. FIN 45 requires
         that upon issuance of a guarantee, the guarantor must recognize a
         liability for the fair value of the obligation it assumes under that
         guarantee. The interpretations provisions for initial recognition and
         measurement should be applied on a prospective basis to guarantees
         issued or modified after December 31, 2002. The disclosure requirements
         are effective for financial statements of both interim and annual
         periods that end after December 15, 2002. The Company has no
         guarantees, and therefore believes the adoption of FIN 45 will not have
         a material impact on its financial statements.

         In November 2002, the EITF reached a consensus on EITF 00-21, "Revenue
         Arrangements with Multiple Deliverables," related to the separation and
         allocation of consideration for arrangements that include multiple
         deliverables. The EITF requires that when the deliverables included in
         this type of arrangement meet certain criteria they should be accounted
         for separately as separate units of accounting. This may result in a
         difference in the timing of revenue recognition but will not result in
         a change in the total amount of revenues recognized in a bundled sales
         arrangement. The allocation of revenues to the separate deliverables is
         based on the relative fair value of each item. If the fair value is not
         available for the delivered items then the residual method must be
         used. This method requires that the amount allocated to the undelivered
         items in the arrangement is their full fair value. This would result in
         the discount, if any, being allocated to the delivered items. This
         consensus is effective prospectively for arrangements entered into in
         fiscal periods beginning after June 15, 2003. The Company does not
         expect the adoption of EITF 00-21 to have a material impact on its
         financial statements.

         In December 2002, the FASB issued SFAS No. 148, Accounting or Stock
         Based Compensation--Transition and Disclosure--an Amendment of SFAS No.
         123, Accounting for Stock-Based Compensation. This Statement provides
         alternative methods of transition for a voluntary change to the fair
         value based method of accounting for stock-based employee compensation.
         In addition, this Statement amends the disclosure requirements of SFAS
         No. 123 to require prominent disclosures in both annual and interim
         financial statements about the methods of accounting for stock-based
         employee compensation and the effect of the method used on reported
         results. The statement has varying effective dates commencing with
         interim periods beginning after December 15, 2002. The adoption of SFAS
         No. 148 did not have a material effect on its financial statements.

         In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
         Interest Entities - an Interpretation of Accounting Research Bulletin
         No. 51." FIN No. 46 requires the primary beneficiary to consolidate a
         variable interest entity (VIE) if it has a variable interest that will
         absorb a majority of the entity's expected losses if they occur,
         receive a majority of the entity's expected residual returns if they
         occur, or both. FIN No. 46 applies immediately to VIEs created after
         January 31, 2003 and to VIEs in which the entity obtains an interest
         after that date. In October 2003, the FASB deferred the latest date by
         which all public entities must apply FIN No. 46 to all VIEs and
         potential VIEs, both financial and non-financial in nature, to the
         first reporting period ending after December 15, 2003. The adoption of
         FIN No. 46 in February 2003 did not have a material impact on the
         Company's financial position, cash flows or results of operations.

         On January 1, 2003, the Company adopted SFAS No. 143, "Accounting for
         Asset Retirement Obligations," which was issued in June 2001. SFAS No.
         143 provides accounting and reporting guidance for legal obligations
         associated with the retirement of long-lived assets that result from
         the acquisition, construction or normal operation of a long-lived
         asset. SFAS No. 143 requires the recording of an asset and a liability
         equal to the present value of the estimated costs associated with the
         retirement of long-lived assets for which a legal or contractual
         obligation exists. The asset is required to be depreciated over the
         life of the related equipment or facility, and the liability is
         required to be accreted each year based on a present value interest
         rate. The adoption of the standard did not have a material effect on
         the Company's financial statements.

         The Company's accounts receivable result from sales to either resellers
         or to direct end-users. The Company extends credit to its customers
         based upon its evaluation of each customer's financial condition and
         credit history. The Company generally does not require collateral from
         its customers.

                                       26


<PAGE>


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
         ------------------------------------------------------

         NEW STANDARDS TO RECENT ACCOUNTING PRONOUNCEMENTS (Continued)
         -------------------------------------------------------------

         In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
         133 on Derivative Instruments and Hedging Activities." SFAS No. 149
         amends and clarifies accounting for derivative instruments, including
         certain derivative instruments embedded in other contracts, and for
         hedging activities under SFAS No. 133. SFAS No. 149 clarifies under
         what circumstances a contract with an initial net investment meets the
         characteristic of a derivative as discussed in SFAS No. 133. In
         addition, it clarifies when a derivative contains a financing component
         that warrants special reporting in the statement of cash flows. SFAS
         No. 149 is effective for contracts entered into or modified after June
         30, 2003, except as specifically noted in SFAS No. 149. SFAS No. 149
         should be applied prospectively. The adoption of SFAS No. 149 did not
         have a material impact on our financial position, cash flows or results
         of operations.

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
         Financial Instruments with Characteristics of both Liabilities and
         Equity." This Statement establishes standards for how an issuer
         classifies and measures certain financial instruments with
         characteristics of both liabilities and equity. SFAS No. 150 is
         effective for financial instruments entered into or modified after May
         31, 2003, and otherwise is effective at the beginning of the first
         interim period beginning after June 15, 2003, except for mandatorily
         redeemable financial instruments of nonpublic entities and the
         provisions of paragraphs 9 and 10 of SFAS No. 150 (and related guidance
         in the appendices), as they apply to mandatorily redeemable
         non-controlling interests, which were deferred by the FASB on October
         29, 2003. The adoption of SFAS No. 150 did not have a material impact
         on the Company's financial position, cash flows or results of
         operations.

         On December 17, 2003, the SEC issued Staff Accounting Bulletin ("SAB")
         No. 104, "Revenue Recognition," which supersedes SAB No. 101, "Revenue
         Recognition in Financial Statements." SAB No. 104's primary purpose is
         to rescind accounting guidance contained in SAB No. 101 related to
         multiple element revenue arrangements, superseded as a result of the
         issuance of EITF 00-21, "Accounting for Revenue Arrangements with
         Multiple Deliverables." Additionally, SAB No. 104 rescinds the "Revenue
         Recognition in Financial Statements Frequently Asked Questions and
         Answers" issued with SAB No. 101 that had been codified in Staff
         Accounting Bulletin Topic 13, "Revenue Recognition." The adoption of
         SAB No. 104 did not have any impact on our financial position, cash
         flows or results of operations.

         In December 2004, the FASB issued SFAS No. 123 (Revised 2004),
         "Share-based Payment" that will require the company to expense costs
         related to share-based payment transactions with employees. With
         limited exceptions, SFAS No. 123(R) requires that the fair value of
         share-based payments to employees be expensed over the period service
         is received. SFAS No. 123(R) becomes mandatorily effective for the
         company on July 1, 2005. The company intends to adopt this standard.
         SFAS No. 123(R) allows the use of both closed form models (e.g.,
         Black-Scholes Model) and open form models (e.g., lattice models) to
         measure the fair value of the share-based payment as long as that model
         is capable of incorporating all of the substantive characteristics
         unique to share-based awards. In accordance with the transition
         provisions of SFAS No. 123(R), the expense attributable to an award
         will be measured in accordance with the Company's measurement model at
         that award's date of grant.

                                       27


<PAGE>

         In December 2004, the FASB issued SFAS No. 153, "Exchanges of
         Nonmonetary Assets, an amendment of APB Opinion No. 29" effective for
         nonmonetary asset exchanges occurring in the fiscal year beginning
         January 1, 2006. SFAS No. 153 requires that exchanges of productive
         assets be accounted for at fair value unless fair value cannot be
         reasonably determined or the transaction lacks commercial substance.
         SFAS No. 153 is not expected to have a material effect on the Company's
         financial statements.

3.       GOING CONCERN
         -------------

         The accompanying financial statements, which have been prepared in
         conformity with accounting principles generally accepted in the United
         States of America, contemplates the continuation of the Company as a
         going concern. Continuation of the Company as a going concern is
         contingent upon establishing and achieving profitable operations. Such
         operations will require management to secure additional financing for
         the Company in the form of debt or equity. Management believes that the
         actions currently being taken to obtain funding will allow the Company
         to continue its operations. However, there is no assurance that the
         necessary funds will be realized by securing debt or through stock
         offerings. The financial statements do not include any adjustment that
         might result from the outcome of this uncertainty.

4.       SPECIAL ITEMS-WIND DOWN ADJUSTMENTS
         -----------------------------------

         On November 8, 2002, the Board of Directors approved a plan for the
         restart of services and support to previous Company customers and the
         cessation of the wind down of operations. Under this plan, the Company
         will engage certain subcontractors to provide management, sales and
         support through commissions and revenue sharing agreements. With the
         first new revenue generated in the fourth quarter, the Company changed
         its accounting method from liquidating basis to going concern basis
         effective on March 1, 2003. All wind down costs and adjustments
         incurred in the liquidation period are then eliminated by a transfer
         from paid-in capital.

                                       28


<PAGE>
<TABLE>

         A summary of the paid-in capital and the effects of the adoption of the
         going concern basis from liquidation basis is as follows:

<S>                                                                             <C>
                Paid-in capital at November 30, 2001, prior to liquidation      $   44,991,491

                Initial adjustment to liquidation value at November 30, 2001        (3,705,699)

                Wind down costs and adjustments:
                      Wind down costs incurred                                      (1,553,164)
                      Adjustments of estimated values                                3,206,645
                                                                                ---------------

                Paid-in capital at February 28, 2003                                42,939,273

                Wind down adjustments at February 28, 2003                              65,317
                                                                                ---------------

                Paid-in capital after liquidation                               $   43,004,590
                                                                                ===============
</TABLE>

5.       CHANGE IN MAJORITY OWNER
         ------------------------

         On July 23, 2002, L-R Global sold all of its shares in the Company
         (approximately 82% of the outstanding shares) to two individuals for
         $10,000. The selling price was later reduced down to $3,000. The
         Company is not aware of the source of the purchasers' funds.

         As a result of these transactions, the Company adopted push-down
         accounting and recognized goodwill of $150,803:

                 Total purchase cost                               $      3,000

                 Net, working deficit acquired                         (147,803)
                                                                   -------------

                 Goodwill (excess of cost over fair value)         $    150,803
                                                                   =============

         Goodwill, which represents the excess of the purchase price over the
         fair value of tangible and identified assets acquired, is not being
         amortized but will be reviewed annually for impairment or more
         frequently if impairment indicators arise, in accordance with SFAS No.
         142. Goodwill is expected to be deductible for tax purposes over 15
         years under Internal Revenue Code 197.

6.       PROPERTY AND EQUIPMENT
         ----------------------
<TABLE>

         Property and equipment consist of the following:

                                               FOR THE YEAR ENDED        FOR THE THREE MONTH PERIOD
                                               MAY 31, 2004              ENDED MAY 31, 2003
                                               ----------------------    ----------------------
<S>                                            <C>                       <C>
         Computer equipment                    $              15,656     $               1,263

         Less: accumulated depreciation                       (1,674)                     (211)
                                               ----------------------    ----------------------

                                               $              13,982     $               1,052
                                               ======================    ======================
</TABLE>

         Depreciation expense for the year ended May 31, 2004 and the three
         month period ended May 31, 2003 was $1,464 and $211, respectively.

                                       29


<PAGE>

7.       CAPITAL STOCK
         -------------

COMMON STOCK

         The authorized capital stock of the Company consists of 100,000,000
         shares of common stock at a par value of $0.01. At May 31, 2004 and
         2003 there were 50,255,309 and 33,287,267 shares issued and
         outstanding, respectively.

         In February, 2004, the Company issued 8,000,000 shares of $0.01 par
         value common stock for the acquisition of Netshare Gmbh. This
         acquisition was accounted for as a purchase of assets. (see Note 10
         Litigation).

         In May 2004, the Company issued 1,000,000 shares of $0.01 par value
         common stock for the acquisition of Computer Information Enterprises,
         Inc. (CIE). This acquisition was accounted for as a purchase of assets.

         In May the Company issued 8,000,000 shares of $0.01 par value common
         stock for cash in the amount of $160,000 ($0.02 per share).

8.       INCOME TAXES
         ------------

         The components of the deferred tax asset is as follows at May 31:
<TABLE>

                                                            2004                 2003
                                                       -----------------    ----------------
<S>                                                    <C>                  <C>
         Deferred tax assets:
           Net operating loss carryforward             $     15,334,000     $    15,135,000

         Valuation allowance                                 15,334,000          15,135,000
                                                       -----------------    ----------------

         Net deferred tax assets                       $              -     $             -
                                                       =================    ================
</TABLE>

         The Company had available approximately $38,500,000 and $38,000,000 of
         unused Federal and state net operating loss carryforwards at May 31,
         2004 and 2003, respectively, that may be applied against future taxable
         income. These net operating loss carryforwards expire through 2022 and
         2012 for federal and state purposes, respectively. The State of
         California has suspended the use of net operating losses for years
         ended May 31, 2004 and 2003. There is no assurance that the Company
         will realize the benefit of the net operating loss carryforwards.

         SFAS No. 109 requires a valuation allowance to be recorded when it is
         more likely than not that some or all of the deferred tax assets will
         not be realized. At May 31, 2004 and 2003, valuation allowances for the
         full amount of the net deferred tax asset were established due to the
         uncertainties as to the amount of the taxable income that would be
         generated in future years.

         On May 31, 2004, Netshare, Inc. was placed into bankruptcy in the
         federal courts of Germany, the country having jurisdiction over
         Netshare. Management determined that Netshare was not economically
         viable and on September 1, 2004 allowed the trustee to liquidate all
         assets of the company. In connection with the bankruptcy filing, the
         Company recognized a $297,499 loss on the disposition and
         discontinuance of Netshare, which is reflected in the Statement of
         Operations.

                                       30


<PAGE>

8.       INCOME TAXES (Continued)
         ------------

         Reconciliation of the differences between the statutory tax rate and
         the effective income tax rate is as follows at May 31:

                                                          2003         2002
                                                        --------     --------
Statutory federal tax  (benefit) rate                   (34.00)%     (34.00)%
Statutory state tax  (benefit) rate                      (5.83)%      (5.83)%
                                                        --------     --------
Effective tax benefit rate                              (39.83)%     (39.83)%

Valuation allowance                                       39.83%       39.83%
                                                        --------     --------

Effective income tax rate                                  0.00%        0.00%
                                                        ========     ========

9.       SHAREHOLDER NOTE PAYABLE
         ------------------------

         On May 1, 2004, the Company issued two notes payable totaling $205,000
         to an officer of the Company. The notes had an interest rate of 6% per
         annum and were due on May 31, 2004. The due dates on these notes were
         extended to October 31, 2005. In consideration of the due date
         extension, the Company issued 12,000,000 shares of its $0.01 par value
         common stock, with a market value of $1,200, to the officer.

         At May 31, 2004, the Company had an $8,000 demand note payable to an
         officer, bearing an interest rate of 6% per annum. This note was repaid
         by December 31, 2004.


10.      COMMITMENTS AND CONTIGENCIES
         ----------------------------

         LEASE AGREEMENT
         ---------------

         The Company has a one year lease on office space expiring on February
         28, 2006 for a minimum $51,391.80, annually.

         LITIGATION
         ----------

         PurchaseSoft acquired 100% of Netshare GmbH common stock in January,
         2004 in exchange for shares of PurchaseSoft common stock and a payment
         of 13,000 Euros to one of the shareholders. The purpose of the
         acquisition was to support management's growth plans through a
         Microsoft- centric acquisition strategy. At the time of the acquisition
         a major Middle East contract was scheduled to be executed in February.
         The acquisition was predicated on this transaction. The transaction did
         not materialize. In addition, Netshare failed to raise 300,000 Euros
         necessary to support Netshare's operations on a stand-alone basis.

                                       31


<PAGE>

10.      COMMITMENTS AND CONTIGENCIES (Continued)
         ----------------------------------------

         LITIGATION (Continued)
         ----------------------

         The Managing Director of Netshare, in concurrence with the Board of
         Directors of PurchaseSoft agreed to place Netshare in temporary
         insolvency on May 31, 2004. On September 1, 2004 the trustee began
         action to liquidated assets.

         PurchaseSoft management has retained legal counsel and is exploring
         possible legal action.

         CONTINGENT LIABILITY
         --------------------

         As part of the Purchase Agreement between PurchaseSoft and Netshare
         GmBh, the Company agreed to a third-party guarantee up to a maximum of
         50%, not to exceed 50,000 Euros for a loan made by a German bank to two
         of the officers of Netshare for a prior business transaction.

11.      SUBSEQUENT EVENTS
         -----------------

         During the period from June 1, 2004 through March 22, 2005 the Company
         issued 11,501,625 shares of common stock for cash at an average price
         of $0.03 per share, $365,016 and 22,990,000 shares of common stock for
         services valued at the closing market price of the stock on the date
         issued of $0.001 per share, $14,479.


ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         On May 18, 2004 the Board began a search to identify a new firm to
         perform the annual audit of PurchaseSoft, Inc.'s May, 2004 financial
         statements and the reviews of its quarterly financial statements. The
         bid by its existing firm Spector & Wong, LLP was withdrawn by mutual
         consent. On July 8, 2004 Spector & Wong was dismissed.

         The reports of Spector & Wong, LLP on the Company's financial
         statements for the past two fiscal years did not contain an adverse
         opinion or a disclaimer of opinion and were not qualified or modified
         as to uncertainty, audit scope, or accounting principles with the
         exception of the following:

         On December 21, 2001, the Board of Directors of the Company approved a
         plan to wind down the operations of the Company, which included
         salvaging the value of its assets during the wind down (the "Plan").
         The key objectives of the Plan are (1) to conserve the assets of the
         Company in order to extend operations pending a sale; (2) to maximize
         the value of the Company's assets in any sale to third party; and (3)
         to maintain the value in public shell if possible. As a result of the
         adoption of the Plan and the imminent nature of the liquidation, the
         Company adopted the liquidation basis of accounting effective December
         1, 2001. The liquidation basis of accounting requires the Company to
         accrue an estimate for all liabilities related to expenses to be
         incurred during the wind down period. Additionally, assets are stated
         at their estimated net realizable value and liabilities are stated at
         their anticipated settlement amounts. The estimated net realizable
         value of assets represents management's best estimated of the
         recoverable value of the assets, net of selling expenses, and without
         consideration for the effect that the settlement of any litigation may
         have on the value of the assets.

         On November 8, 2002, the Board of Directors approved a plan for the
         restart of service and support to previous Company's customers and for
         the cessation of the wind down of operations. Under this plan, the
         Company will engage certain subcontractors to provide management, sales
         and support through commissions and revenue sharing agreements. With
         the first new revenue generated in the fourth quarter of fiscal year
         ended May 31, 2003, the Company changed its accounting method from
         liquidating basis to going concern basisl effective on March 1, 2003.

         In connection with the audits of the Company's financial statements for
         each of the two fiscal years ended May 31, 2002 and May 31, 2003, and
         in the subsequent interim period, there were no disagreements with
         Spector & Wong, LLP on any matters of accounting principles or
         practices, financial statement disclosure, or auditing scope and
         procedures which, if not resolved to the satisfaction of Spector &
         Wong, LLP would have caused Spector & Wong, LLP to make reference to
         the matter in their report. Further, Spector & Wong, LLP did not advise
         the Company of any "reportable events" pursuant to Item 304(a)(1)(v) of
         Regulation S-K in connection with the audits of the Company's financial
         statements for each of the two fiscal years ended May 31, 2002 and May
         31, 2003 respectively, or in the subsequent interim period.

                                       32


<PAGE>

         On July 8, 2004, the Board approved and named Mendoza Berger Company,
         LLP as its independent accounting firm, replacing Spector & Wong, LLP.
         Mendoza Berger Company, LLP began its engagement with the audit of
         PurchaseSoft, Incs's May 31, 2004 fiscal year end financial statement.

         During the two most recent fiscal years ended May 31, 2002 and 2003,
         and through July 8, 2004, the Company did not consult with Mendoza
         Berger Company, LLP regarding either: (i) the application of accounting
         principles to a specified transaction, either completed or proposed; or
         the type of audit opinion that might be rendered on the Company's
         financial statements; or (ii) any matter that was either the subject of
         a disagreement (as that terms id defined in Item 304(a)(1)(iv) of
         Regulation S-K and the related instructions that Item) or a reportable
         event ( as the term is defined in Item 304(a)(1)(v) of Regulation S-K).

         There were no disagreements with Spector & Wong, LLP.

PART III:


ITEM 9A: 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.


ITEM 9: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth our directors and executive officers as of May
31, 2004, their ages and the positions held by them:

<TABLE>

                                                                           YEAR BECAME
                                                                            OFFICER OR
NAME                          AGE          POSITION WITH COMPANY             DIRECTOR
-------------------------- ---------- -------------------------------- -------------------
<S>                           <C>                                             <C>
Steven A. Flagg               45      President and Director                  2002
                                      Treasurer/Secretary and

Kevin A. Yanoscik             47      Director                                2004
</TABLE>

         Steven A. Flagg (45) President and Chairman. Mr. Flagg has served as
         the President, Chairman and as a Director since August 5th, 2002. Mr.
         Flagg is Managing Partner and co-founder of Marsh+Flagg, a merger and
         acquisition advisory firm in La Jolla, California. Prior to
         Marsh+Flagg, Flagg was an active individual investor and turnaround
         consultant to early stage technology companies, including Findcom,
         PurchaseSoft, and PointPoint.Com. Flagg moved to La Jolla from Paris
         after several successful management assignments building international
         sales and consulting operations for companies such as KnowledgeWare and
         Sterling Software. At Sterling, Flagg served as VP of Business
         Development for International where he led European M&A activity. Flagg
         built the international business of financial software provider SS&C.
         SS&C completed a $50 million IPO led by Hambrecht and Quist and Alex
         Brown. Prior to Paris, Flagg was a successful software sales executive
         in NYC working for University Computing Company (acquired by CA),
         Oracle and KnowledgeWare. Flagg graduated from SUNY Brockport NY with a
         major in business and sociology.

                                       33


<PAGE>

         Kevin A. Yanoscik (47) Secretary/Treasurer. Mr. Yanoscik has served as
         Secretary and Treasurer and as a Director since February 16, 2004.
         Yanoscik was previously a principal in the investment banking firm of
         Marsh+Flagg, a merger and acquisition advisory firm headquartered in La
         Jolla, CA with Yanoscik operating out of Newport Beach, CA. Prior to
         Marsh+Flagg, Yanoscik held various corporate lending positions with a
         number of national and international financial institutions including
         FB Commercial Finance, LaSalle Business Credit, NationsBank and
         HongKong and Shanghai Banking Corporation. Yanoscik received a BA in
         political science from Temple University and an MBA/MIM degree from the
         University of Denver.

         Board of Directors. The Board is currently comprised of Steve Flagg and
         Kevin Yanoscik. With an additional acquisition the company plans to add
         one additional board member. The company has identified two outside
         people who have verbally committed to joining the Board no later than
         January, 2006, one of whom is an active CPA who will head the audit and
         compensation committees.

FAMILY RELATIONSHIPS

         There are no family relationships among any of the directors or
         executive officers.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Under Section 16(a) of the Securities Exchange Act of 1934, as amended,
         our directors and certain of our officers and persons holding more than
         ten percent of our common stock are required to report their ownership
         of our common stock and any changes in ownership to the Securities and
         Exchange Commission and to us. Specific due dates have been established
         and we are required to report in this Annual Report on Form 10-KSB any
         failure to file by these dates during the fiscal year ended May 31,
         2004. Based on our review of copies of these reports and the forms
         available to us by the previous management, all forms were filed in a
         timely manner.

ITEM 10:   EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The table below sets forth information regarding executive compensation
for the fiscal years ended May 31, 2004 of our Chief Executive Officers. There
was no compensation for our executive officers whose compensation for fiscal
2003.

<TABLE>
                                                                             LONG TERM
                                                   ANNUAL COMPENSATION     COMPENSATION
                                                -------------------------- --------------
                                                                                             ALL OTHER
                                                                               AWARDS      COMPENSATION
NAME AND PRINCIPAL POSITION           YEAR       SALARY ($)    BONUS ($)     OPTIONS (#)        ($)
--------------------------------- ------------- ------------- ------------ -------------- --------------
<S>                                       <C>        <C>             <C>             <C>             <C>
Steven A. Flagg                           2004(1)    $40,000         --              --              --
   President

Kevin A. Yanoscik                         2004(2)    $12,000         --              --              --
   Secretary and Treasurer
</TABLE>

1.       Steven Flagg succeeded Mr. LaGuardia on August 5th 2002 and received no
         compensation during fiscal year 2003.

2.       Kevin Yanoscik succeeded Tom Marsh as Secretary and Treasurer on
         February 16, 2004 and received no compensation during fiscal year 2003.

                                       34


<PAGE>

OPTION/SAR GRANTS IN LAST FISCAL YEAR

No option was granted to the officers during the fiscal year ended May 31, 2003.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

Officers did not hold any options during the fiscal year ended May 31, 2004, and
there were no unexercised options held at the end of such fiscal year by the
officers.

EXECUTIVE EMPLOYMENT AGREEMENTS

Management Consulting Agreements
--------------------------------

         In February, 2004, the Company entered into management consulting
         agreements with the Company's President and the Company's Secretary and
         Treasurer. The agreements provided that both officers are entitled to
         receive compensation for their services rendered, as follows:
         $10,000.00 per month for Steven A. Flagg and $3,000.00 per month for
         Kevin A Yanoscik.

Consulting Agreement
--------------------

         The Company also executed a Consulting Agreement with a former employee
         who agrees to serve as the Company's Vice President of Support for a
         monthly retainer fee of $600.00 commencing April, 2004.

DIRECTOR COMPENSATION

At the current time, our directors receive no compensation for their service as
directors.

ITEM 11:   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth information as of May 31, 2004, as
         reported to us, as to the beneficial ownership of our common stock by
         each director, each named officer, by all directors and executive
         officers as a group and each person known to us to be the beneficial
         owner of more than 5% of our issued and outstanding common stock as of
         August 10, 2003 or other date noted below. Unless otherwise specified,
         the address of each beneficial owner is c/o PurchaseSoft, Inc., 2091
         Business Center Drive, Suite 100, Irvine CA 92612. As of May 31, 2004,
         50,255,309 shares of common stock were outstanding.
<TABLE>
                                                                                  PERCENTAGE OF
                                                         AMOUNT AND NATURE OF      OUTSTANDING
                                                         BENEFICIAL OWNERSHIP       SHARES OF
NAME AND ADDRESS                                                  OF               COMMON STOCK
OF BENEFICIAL OWNER                                        COMMON STOCK (1)         OWNED (2)
------------------------------------------------------- ----------------------- -------------------
<S>             <C>                                              <C>                       <C>
Steven A. Flagg (3)                                              22,149,857                49.8

Kevin A. Yanoscik                                                   100,000                00.2

All current directors and executive officers as a
   group (2 people)                                              22,249,857                50.0%
</TABLE>

         (1)      The shares owned, and the shares included in the total number
                  of shares outstanding, have been adjusted, and the percentage
                  owned has been computed, in accordance with Rule 13d-3(d)(1)
                  under the Securities Exchange Act of 1934, as amended, and
                  includes, options and warrants to the extent called for by
                  such rule, with respect to shares of common stock, that can be
                  exercised within 60 days. Except as set forth in the footnotes
                  below, such shares are beneficially owned with sole investment
                  and sole voting power.

         (2)      The percent of class calculation is based on 50,255,309 shares
                  of PurchaseSoft's common stock being issued and outstanding as
                  of May 31, 2004 and effect being given, where appropriate,
                  pursuant to Rule 13d-3(d)(1)(i) under the Exchange Act, to any
                  option or warrant then exercisable or exercisable within 60
                  days thereafter.

         (3)      Includes 300,000 shares held by his children.

                                       35


<PAGE>

ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

ITEM 13:  EXHIBITS AND REPORTS ON FORM 8-K

EXHIBITS

         The following exhibits, which are designated with a footnote reference,
         are incorporated by reference to a prior registration statement
         declared effective under the Securities Act or a periodic report file
         pursuant to Section 13 of the Exchange Act. Exhibits designated with an
         asterisk are filed with this report.

NUMBER                                EXHIBIT
---------- ---------------------------------------------------------------------
2.1        Agreement and Plan of Merger, dated November 10, 1998, by and between
           PurchaseSoft, Inc., a Delaware corporation, and Greentree Software,
           Inc., a New York corporation. (1)

3.1        Certificate of Incorporation of the Company.  (1)

3.2        Amendment to Certificate of Incorporation of the Company.  (10)

3.3        By-laws of the Company.  (1)

4.1        Specimen Certificate for Shares of Common Stock.  (6)

10.1       The Company's Stock Option Plan of 1987.  (2)

10.2       The Company's Stock Option Plan of 1994.  (3)

10.3       The Company's 1997 Stock Option Plan.  (4)

10.4       Registration Rights Agreement dated as of December 25, 1995 among the
           Company and certain of its Shareholder (5)

10.5       Registration Rights Agreement dated as of April 23, 199 among the
           Company and certain of its Shareholders. (5)

10.6       Registration Rights Agreement dated October 25, 1996 between the
           Company and certain of its Shareholders. (4)

10.7       Form of Warrant issued to Wm. Smith Securities & Gilmore & Co. (A
           substantial number of these warrants have been assigned to L-R Global
           Partners, L.P.) (5)

10.8       Form of Warrant issued to TIS Acquisitions and Management Group,
           Inc., The Travelers Indemnity Company, and Mark Cahill, dated October
           25, 1996. (4)

                                       36


<PAGE>

10.9       Form of Warrant issued to Wm. Smith Securities, Inc., dated October
           25, 1996. (A substantial number of these warrants have been assigned
           to L-R Global Partners, L.P.) (4)

10.10      Form of Warrant issued to Wm. Smith Securities, Inc., dated October
           25, 1996. (A substantial number of these warrants have been assigned
           to L-R Global Partners, L.P.) (4)

10.11      Promissory note dated March 23, 2000, of PurchaseSoft, Inc. to L-R
           Global Partners, L.P. (This note is no longer outstanding. It was
           converted into common stock at May 31, 2001 under a conversion
           agreement dated April 12, 2001 between the Company and L-R Global.)
           (7)

10.12      Lease agreement between the Company and Flanders Westborough
           Delaware, Inc. (8)

10.13      Lease agreement between the Company and Office Associates L.L.C. (8)

10.14      Management consulting agreement dated as of August 15, 2000 by and
           between the Company and Donald S. LaGuardia. (9)

10.15      Demand promissory note dated January 30, 2001, of PurchaseSoft, Inc.
           to L-R Global Partners, L.P. (This note is no longer outstanding. It
           was converted into common stock at May 31, 2001 under a conversion
           agreement dated April 12, 2001 between the Company and L-R Global.)
           (9)

10.16      Employment agreement dated January 25, 2001 between the Company and
           Jeffrey Pinkerton. (11)

10.17      Agreement dated February 21, 2001 between the Company and VIA
           Marketing and Design, Inc. (11)

10.18      Agreement dated March 15, 2001 between the Company and Tata Infotech
           Limited. (11)

10.19      Conversion Agreement dated April 12, 2001 between the Company and L-R
           Global Partners, L.P. (12)

10.20      Demand promissory note dated July 18, 2001, of PurchaseSoft, Inc. to
           L-R Global Partners, L.P. (This note is no longer outstanding. It was
           cancelled on August 28, 2001as partial payment towards L-R Global's
           irrevocable exercise of its subscription rights in the rights
           offering. (13)

10.21      Stock Purchase Agreement Dated July 31, 2002 by and between L-R
           Global Partners, L.P. and Steven A Flagg and Thomas B. Marsh
           concerning the sale of all of L-R Global's stock in PurchaseSoft to
           Flagg and Marsh. (14)

10.22      Management consulting agreement dated May 30, 2003 by and between
           Company and Steven A. Flagg. (15)

10.23      Management consulting agreement dated May 30, 2003 by and between
           Company and Kevin A. Yanoscik. (15)

10.24      Management consulting agreement dated April 1, 2004 by and between
           Company and Stuart Williamson. (15)

10.25      Asset Purchase Agreement dated January 26, 2004 by and between
           Company and Computer Information Enterprises (16)

10.26      Asset Purchase Agreement dated January 30, 2004 by and between
           Company and Netshare Solutions GmbH (16)

10.27      Executive Employment Agreement dated January 26, 2004 by and between
           Company and Craig Chandler (16)

                                       37


<PAGE>

14.1       Code of Ethics (17)

16.0       Letter from Spector & Wong, LLP to the Securities and Exchange
           Commission regarding change in certifying accountant, which
           Appears as Exhibit 16.1 (17)

16.1       8-K/A dated September 16, 2005 to Registrant's 8-K filed
           July 28, 2005. (18)

31.1       Certifications of the President & CEO

31.2       Certifications of the Secretary/Treasurer & CFO 32.1 Written
           statement of the CEO pursuant to 18 SSC Section 1350

32.2       Written statement of the CFO pursuant to 18 SSC Section 1350

FOOTNOTES:
----------

(1)        Incorporated herein by reference to the Company's Report on Form 8-K,
           filed on November 25, 1998.

(2)        Incorporated herein by reference to the Company's Annual Report on
           Form 10-K for the fiscal year ended May 31, 1991.

(3)        Incorporated herein by reference to the Company's Annual Report on
           Form 10-KSB for the fiscal year ended May 31, 1994.

(4)        Incorporated herein by reference to the Company's Annual Report on
           Form 10-KSB for the fiscal year ended May 31, 1997.

(5)        Incorporated herein by reference to the Company's Registration
           Statement on Form S-1, File No. 333-45475.

(6)        Incorporated herein by reference from the Company's Annual Report on
           Form 10-KSB for the fiscal year ended May 31, 1999.

(7)        Incorporated herein by reference from the Company's Quarterly Report
           on Form 10-QSB for the quarter ended February 29, 2000.

(8)        Incorporated herein by reference from the Company's Annual Report on
           Form 10-KSB/A for the fiscal year ended May 31, 2000.

(9)        Incorporated herein by reference from the Company's Quarterly Report
           on Form 10-QSB/A for the quarter ended August 31, 2000.

(10)       Incorporated herein by reference from the Company's Quarterly Report
           on Form 10-QSB for the quarter ended November 30, 2000.

(11)       Incorporated herein by reference from the Company's Quarterly Report
           on Form 10-QSB for the quarter ended February 28, 2001.

(12)       Incorporated herein by reference from the Company's Form S-3
           Registration Statement, File No.333-60890 filed on May 14, 2001.

(13)       Incorporated herein by reference to the Company's Report on Form 8-K,
           filed on July 25, 2001.

(14)       Incorporated herein by reference to the Company's Report on Form 8-K,
           filed on August 5, 2002.

(15)       Incorporated herein by reference to the Company's Report on Form 8-K,
           filed on January 23, 2004

                                       38


<PAGE>

(16)       Incorporated herein by reference to the Company's Report on Form
           10-QSB for the quarter ended February 29, 2004.

(17)       Attached as Exhibit

(18)       Incorporated herein by reference to the Company's Report on
           Form 8-K/A filed on September 16, 2005.


REPORTS ON FORM 8-K

1.         None


ITEM 14:  PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

The fees paid to the Company's principal accountant, Mendoza Berger for
professional services rendered for the annual audit of the Company's financial
statements were $24,055 for the year ending May 31, 2004.

AUDIT RELATED FEES

There were no fees paid to the Company's principal accountant, Mendoza Berger
Company pursuant to Item 9(e)(1) of Schedule 14A other than those fees reported
under Audit Fees above.

TAX FEES

The fees paid to the Company's principal accountant, Mendoza Berger Company for
professional services rendered for the filing of state, local and federal tax
returns were $5,000 for the year ending May 31, 2004.

ALL OTHER FEES

There were no other fees paid to the Company's principal accountant, Mendoza
Berger Company for professional services for or during the years ending May 31,
2004.

OTHER
All fees paid were approved by the Company's Board of Directors and none of the
hours expended on the Company's audit and tax requirements were performed by
persons other than those employed full-time by Mendoza Berger Company.

                                       39


<PAGE>


SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Issuer caused
this report to be signed on its behalf by the undersigned, thereunto to be duly
authorized.

                                                 PurchaseSoft, Inc.
                                                 (Issuer)

Date: September 12, 2005                         /s/ Steven A. Flagg
                                                 -------------------------------

                                                 Steven A. Flagg
                                                 President and CEO

Date: September 12, 2005                         /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 May
31, 2004.

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

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

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





                                       40