UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
DC   20549
 
 FORM
10-Q
 
 x
                      
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934.
 
 For
the Quarterly Period Ended September 30, 2009
 Commission
File Number: 000-30781
 
 MANGOSOFT,
INC.
 (Exact
name of registrant as specified in its charter)
 
 Nevada
                
                87-0543565(State
      or other jurisdiction
                
                (IRS
      Employer Identification No.)of
      incorporation or organization)29
      Riverside St. , Ste A Box 8Nashua
      , NH
                
                03062(Address
      of principal executive offices)
                
                (Zip
      code)
 
 Issuer’s
telephone number: (603) 324-0400
  
  Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days. Yes x No o
 
 Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 Large
      accelerated filer o
                Accelerated
      filer o
  Non-accelerated
      filer (Do not check if a smaller reporting company) o
                Smaller
      reporting company x
  Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes  o No  x
 
 As of
November 13, 2009, 5,443,157 shares of the Registrant’s common stock, par value
$0.001 per share, were outstanding.
  
  
  MANGOSOFT,
INC. AND SUBSIDIARIES
 
 INDEX
 
 PagePART
      I.       FINANCIAL INFORMATIONITEM
      1 – Condensed Consolidated Financial Statements
    (Unaudited):Balance
      Sheets as of September 30, 2009 and December 31, 2008
              3Statements
      of Operations for the Three Months Ended September  30, 2009 and
      2008
              4Statements
      of Operations for the Nine Months Ended September  30, 2009 and
      2008
              5Statements
      of Cash Flows for the Nine Months Ended September 30, 2009 and
      2008
              6Notes
      to Unaudited Condensed Consolidated Financial Statements
              7ITEM
      2 – Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
              10ITEM
      3 – Quantitative and Qualitative Disclosures About Market
    Risk
              13ITEM
      4 – Controls and Procedures
              13PART
      II.           OTHER
      INFORMATIONITEM
      1 – Legal Proceedings
              14ITEM
      1a. – Risk Factors
              15ITEM
      6 – Exhibits and Reports on Form 8-K
              18Signature
              20Officer
      Certification
              21
  2
  MANGOSOFT,
INC. AND SUBSIDIARIES
 
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)
 
 September30,
                                
                                
                                December31,2009
                                
                                
                                2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
                                
                                $
                                638,655
                                
                                
                                $
                                1,982,192Accounts
      receivable
                                
                                
                                13,038
                                
                                
                                
                                23,356Note
      receivable - related party
                                
                                
                                600,000
                                
                                
                                
                                -Investments
                                
                                
                                511,665
                                
                                
                                
                                -Interest
      receivable
                                
                                
                                7,000
                                
                                
                                
                                -Total
      assets
                                
                                $
                                1,770,358
                                
                                
                                $
                                2,005,548LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      Liabilities:Accounts
      payable
                                
                                $
                                -
                                
                                
                                $
                                153,177Accrued
      compensation
                                
                                
                                -
                                
                                
                                
                                3,076Other
      accrued expenses
                                
                                
                                28,035
                                
                                
                                
                                83,979Total
      current liabilities
                                
                                
                                28,035
                                
                                
                                
                                240,232Stockholders’
      Equity:Preferred
      stock - $.001 par value; authorized, 5,000,000 shares; issued and
      outstanding, 20,000
                                
                                
                                20
                                
                                
                                
                                20Common
      stock - $.001 par value, authorized 15,000,000 shares; issued and
      outstanding, 5,443,157 shares.
                                
                                
                                5,443
                                
                                
                                
                                5,443Additional
      paid-in capital
                                
                                
                                90,926,274
                                
                                
                                
                                90,926,274Accumulated
      deficit
                                
                                
                                (89,189,414
                                )
                                
                                
                                (89,166,421)Total
      stockholders' equity
                                
                                
                                1,742,323
                                
                                
                                
                                1,765,316Total
      liabilities and stockholders' equity
                                
                                $
                                1,770,358
                                
                                
                                $
                                2,005,548
 
 See notes
to the unaudited condensed consolidated financial statements.
 3
  MANGOSOFT,
INC. AND SUBSIDIARIES
 
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 
 Three Months Ended
                                      September
      30,2009
                                    
                                    
                                    2008Service
      revenues
                                    
                                    $
                                    29,101
                                    
                                    
                                    $
                                    67,349Costs
      and expenses:Cost
      of services
                                    
                                    
                                    34,150
                                    
                                    
                                    
                                    65,274General
      and administrative
                                    
                                    
                                    48,393
                                    
                                    
                                    
                                    115,454Loss
      from operations
                                    
                                    
                                    (53,442
                                    )
                                    
                                    
                                    (113,379
                                    )Investment
      income:Dividend
      income
                                    
                                    
                                    3,306
                                    
                                    
                                    
                                    —Gain
      on sale of investments
                                    
                                    
                                    22,273
                                    
                                    
                                    
                                    —Unrealized
      investment gain
                                    
                                    
                                    30,094
                                    
                                    
                                    
                                    —Interest
      income
                                    
                                    
                                    22,725
                                    
                                    
                                    
                                    4,133Net
      Investment income
                                    
                                    
                                    78,398
                                    
                                    
                                    
                                    4,133Net
      income (loss)
                                    
                                    $
                                    24,956
                                    
                                    
                                    $
                                    (109,266
                                    )Net
      income (loss) per share – basic and diluted
                                    
                                    $
                                    0.01
                                    
                                    
                                    $
                                    (0.02
                                    )Weighted
      average shares outstanding – basic and diluted
                                    
                                    
                                    5,443,157
                                    
                                    
                                    
                                    5,443,157
  See notes
to the unaudited condensed consolidated financial statements.
  4
 
 MANGOSOFT,
INC. AND SUBSIDIARIES
 
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 
 Nine Months Ended
                                September 30,2009
                              
                              
                              2008Service
      revenues
                              
                              $
                              121,379
                              
                              
                              $
                              201,204Costs
      and expenses:Cost
      of services
                              
                              
                              135,299
                              
                              
                              
                              196,327General
      and administrative
                              
                              
                              198,186
                              
                              
                              
                              699,269Loss
      from operations
                              
                              
                              (212,106
                              )
                              
                              
                              (694,392
                              )Investment
      income:Dividend
      income
                              
                              
                              7,807
                              
                              
                              
                              —Gain
      on sale of investments
                              
                              
                              82,969
                              
                              
                              
                              —Unrealized
      investment gain
                              
                              
                              31,826
                              
                              
                              
                              —Interest
      income
                              
                              
                              66,511
                              
                              
                              
                              14,450Net
      Investment income
                              
                              
                              189,113
                              
                              
                              
                              14,450Net
      loss
                              
                              $
                              (22,993
                              )
                              
                              $
                              (679,942
                              )Net
      loss per share – basic and diluted
                              
                              $
                              (0.01
                              )
                              
                              $
                              (0.14
                              )Weighted
      average shares outstanding – basic and diluted
                              
                              
                              5,443,157
                              
                              
                              
                              5,013,424
  See notes
to the unaudited condensed consolidated financial statements.
 
 5
  MANGOSOFT,
INC. AND SUBSIDIARIES
 
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNADUDITED)
 
 Nine Months Ended
                                        September 30,2009
                                      
                                      
                                      2008CASH
      FLOWS USED IN OPERATING ACTIVITIES:Net
      loss
                                      
                                      $
                                      (22,993)
                                      
                                      
                                      $
                                      (679,942
                                      )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Unrealized
      gain in marketable securities
                                      
                                      
                                      (31,899)
                                      
                                      
                                      
                                      —Gain
      on sale of investments
                                      
                                      
                                      (82,969)
                                      
                                      
                                      
                                      —Increase
      (decrease) in cash from the change in:Accounts
      receivable
                                      
                                      
                                      10,318
                                      
                                      
                                      
                                      (509)Accounts
      payable
                                      
                                      
                                      (153,177
                                      )
                                      
                                      
                                      (92,154)Other
      accrued expenses
                                      
                                      
                                      (59,021
                                      )
                                      
                                      
                                      (15,833)Net
      cash used in operating activities
                                      
                                      
                                      (339,741
                                      )
                                      
                                      
                                      (788,438
                                      )CASH
      FLOWS USED IN INVESTING ACTIVITIES:Note  receivable
                                      
                                      
                                      (600,000
                                      )
                                      
                                      
                                      —Interest
      receivable
                                      
                                      
                                      (7,000
                                      )
                                      
                                      
                                      —Proceeds
      from sale of investments
                                      
                                      
                                      330,186Investments
      acquired
                                      
                                      
                                      (726,982
                                      )
                                      
                                      
                                      —Net
      cash used in investing activities
                                      
                                      
                                      (1,003,796
                                      )
                                      
                                      
                                      —CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      proceeds from private placement of common stock
                                      
                                      
                                      —
                                      
                                      
                                      
                                      1,023,548Net
      cash provided by financing activities
                                      
                                      
                                      —
                                      
                                      
                                      
                                      1,023,548NET
      INCREASE (DECREASE)  IN CASH AND CASH
EQUIVALENTS
                                      
                                      
                                      (1,343,537
                                      )
                                      
                                      
                                      235,110CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                                      
                                      
                                      1,982,192
                                      
                                      
                                      
                                      318,065CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                                      
                                      $
                                      638,655
                                      
                                      
                                      $
                                      553,175SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid for interest
                                      
                                      
                                      NONE
                                      
                                      
                                      
                                      NONECash
      paid for income taxes
                                      
                                      
                                      NONE
                                      
                                      
                                      
                                      NONE
 
 See notes
to the unaudited condensed consolidated financial statements.
  6
  MANGOSOFT,
INC. AND SUBSIDIARIES
 
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 1.
              NATURE
      OF BUSINESS AND BASIS OF
PRESENTATION
 
 MangoSoft,
Inc. and subsidiaries (the "Company") markets, sells and supports Internet
business software and services that improve the utility and effectiveness of
Internet-based business applications. The Company’s software solutions address
the networking needs of small businesses, workgroups and large enterprises. The
Company is engaged in a single operating segment of the computer software
industry.
  The
accompanying unaudited condensed consolidated financial statements have been
prepared on the same basis as the annual financial statements. In the opinion of
management, all significant adjustments, which are normal, recurring in nature
and necessary for a fair presentation of the financial position, cash flows and
results of the operations of the Company, have been consistently recorded. The
operating results for the interim periods presented are not necessarily
indicative of expected performance for the entire year.
  The
unaudited information should be read in conjunction with the audited financial
statements of the Company and the notes thereto for the year ended December 31,
2008 included in the Company’s Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
 
 As shown
in the unaudited condensed consolidated financial statements, during the nine
months ended September 30, 2009 and 2008, the Company incurred net losses of
$22,993 and $679,942 respectively. Cash used in operations during the nine
months ended September 30, 2009 and 2008 was $339,741 and $788,438,
respectively. These factors, among others, raise significant doubt about the
Company’s ability to continue as a going concern. The unaudited condensed
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of assets or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern. The Company’s continuation as a going concern is dependent upon
its ability to generate sufficient cash flow and meet its obligations on a
timely basis and ultimately attain profitability.
  7
 
 The
Company received gross proceeds of approximately $1,023,672 million through the
issuance of common stock pursuant to a rights offering and as a consequence
issued, commencing on or about February 27, 2008, approximately 2,047,344 shares
of its common stock to stockholders who properly exercised their rights in the
rights offering. Pursuant to the rights offering, which concluded as of the
close of business on February 19, 2008, stockholders of record at the close of
business on December 21, 2007, received, at no charge, a 0.7032 non-transferable
right for each share of common stock owned by such stockholder on the record
date. Each full right entitled the holder to purchase one share of the Company's
common stock at a purchase price of $0.50 per share.
  2.
              NET
      LOSS PER SHARE
 
 Basic net
loss per share is computed by dividing net loss by the weighted average number
of common shares outstanding for the period. Diluted net loss per share
reflects, in addition to the weighted average number of common shares, the
potential dilution if stock options and warrants outstanding were exercised
and/or converted into common stock, unless the effect of such equivalent shares
was antidilutive.
 
 For the
nine months ended September 30, 2009 and 2008, the effect of stock options and
other potentially dilutive shares were excluded from the calculation of diluted
net loss per common share as their inclusion would have been
antidilutive.
 
 8
   3.
              REVENUE
      RECOGNITION
 
 The
Company records revenue upon delivery if pervasive evidence of an arrangement
exists, the price is fixed and determinable, and collection is probable. Revenue
for sales to distributors is recognized upon sales to end users. Service revenue
is recognized as services are performed.
 
 4.
              STOCK-BASED
      COMPENSATION
 
 The
Company currently has one stock-based compensation plan, which is described more
fully in Note 6 in the Company’s Annual Report on Form 10-K for the period ended
December 31, 2008, as filed on March 30, 2009. As amended, this plan provides
for the issuance of up to 296,297 shares of common stock to employees, officers,
directors and consultants in the form of nonqualified and incentive stock
options, restricted stock grants or other stock-based awards, including stock
appreciation rights. The stock options are exercisable as specified at the date
of grant and expire no later than ten years from the date of grant. As of
September 30, 2009, there were 179,652 remaining options available under this
plan.
  The
Company records stock based compensation under the  provisions of
Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment (“SFAS
123R”), Compensation cost for all stock-based payments granted is, based on the
grant-date fair value estimated in accordance with the provisions of SFAS 123R.
There were no stock based payments granted during the nine months ended
September 30, 2009 and 2008.
 
 5.
              RELATED
      PARTY TRANSACTIONS
 
 Note
receivable – related party represents an amount pursuant to an agreement entered
into on January 29, 2009.  Under this agreement MangoSoft, Inc. (the
“Company” or “MangoSoft”) agreed to loan $600,000 to Plaintiff Holding XI LLC, a
newly formed wholly owned subsidiary (the “Subsidiary”) of Plaintiff Funding
Holding, Inc., d/b/a LawCash (“LawCash”).  Such $600,000 loan (the
“Loan”) is evidenced by a secured promissory note issued by the Subsidiary to
MangoSoft having a term of one (1) year and bearing interest at the rate of 14%
per annum (the “MangoSoft Secured Note”).  LawCash, through its
various subsidiaries, is in the business of financing litigations, and the
proceeds of the Loan will be used to fund various plaintiffs’ receivables in the
normal course of LawCash’s business.  The Subsidiary’s obligations
with respect to the MangoSoft Secured Note are guaranteed by LawCash (the
“LawCash Guarantee”), and in addition, Mr. Selig Zises has agreed to guarantee
up to $120,000 of losses incurred by the Company in connection with the
MangoSoft Secured Note (the “Loss Guarantee”).   Each of the Company
and LawCash are directly or indirectly controlled by Mr. Selig Zises and Mr. Jay
Zises.
  During
the three months ended September 30, 2009 the Company paid consulting fees in
the amount of $15,000 to the widow of Dale Vincent, a stockholder and sole
employee and director of the Company until he passed away on April 22,
2009.
 
 6.
              INVESTMENTS
  Investments
include certain marketable securities with a fair value of $149,370 at September
30, 2009, which are held in a brokerage account. Fair value is determined for
this investment using quoted prices in an active market. This pricing
methodology applies to Level 1 investments in the fair value
hierarchy.
  On May
22, 2009, the Company purchased from Plaintiff Funding Holding, Inc., d/b/a
LawCash (“LawCash”), for the sum of $400,000 (the “Purchase Price”), all of
LawCash’s rights, title and interest in certain specified litigations that had
been funded by LawCash (the “Cases”).  LawCash, through its various
subsidiaries, is in the business of financing personal injury litigations, such
as the Cases, and in connection therewith, receives a contingent interest in the
proceeds of the potential recovery by a personal injury claimant or
litigant.  In accordance with the bill of sale entered into on May 22,
2009 by the Company and LawCash pursuant to which the Company acquired the Cases
(the “Bill of Sale”), LawCash will service the Cases pursuant to a master
services agreement dated May 22, 2009 (the “Master Services Agreement”) and the
Company is entitled to receive from the disposition of the Cases (i) the return
of the Purchase Price, and (ii) a return on the Purchase Price of 14% per
annum.  This investment, valued at $362,295 at September 30, 2009, is
recorded at fair value using significant observable inputs other than quoted
market prices and are considered to be level 2 investments in the fair
value hierarchy.
  7.
                SUBSEQUENT
      EVENTS
 
 The
Company adopted ASC 855, “Subsequent Events” (“ASC 855”).  ASC 855
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
available to be issued. The adoption of ASC Topic 855 did not have a material
impact on the Company’s consolidated results of operations or financial
condition.   The Company has evaluated subsequent events through
November 9, 2009, the date the financial statements were
issued.
 
 9
  ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 
 This
Quarterly Report on Form 10-Q contains forward-looking statements within the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Any statements in this Quarterly Report that are not statements of historical
facts are forward-looking statements, which involve risks and uncertainties.
Without limiting the foregoing, the words “believes,” “anticipates,” “plans,”
“expects,” and similar expressions are intended to identify forward-looking
statements. Our actual results may differ materially from those indicated in the
forward-looking statements as a result of the factors set forth elsewhere in
this Quarterly Report on Form 10-Q, including under “Risk Factors.” You should
read the following discussion and analysis together with our unaudited condensed
consolidated financial statements for the periods specified and the related
notes included herein. Further reference should be made to our Annual Report on
Form 10-K for the period ended December 31, 2008 filed with the Securities and
Exchange Commission.
 
 Overview
 
 We
market, sell and support Internet business software and services that improve
the utility and effectiveness of Internet-based business applications. Our
software solutions address the networking needs of small businesses, workgroups
and large enterprises. Our products and services enhance the performance of PC
networks and deliver improved service utilizing existing equipment. We no longer
develop new software products or services.
  Mangomind
SM is a multi-user, business-oriented, peer-to-peer file sharing system,
allowing individual users to collaborate over the Internet across organizational
boundaries in a safe and secure manner. The architecture is a blend of the
manageability of client/server with the autonomy, clustering, and caching
optimizations of peer-to-peer. The user experience is one of easy file sharing
with colleagues through what looks like an ordinary LAN shared drive. Mangomind
SM provides the secure file sharing benefits of a VPN without additional
hardware and configuration complexities. Mangomind SM is sold as both a service
and a standalone software product.
 
 fileTRUST
SM is an online data storage service. fileTRUST SM users can access their stored
files from any Internet-connected system. The fileTRUST SM service complements
our Mangomind SM service by providing customers with a lower cost online storage
system.
 
 Costs
and Expenses
 
 Cost of services - Cost of
services consist solely of the expenses we incur to administer and service the
Mangomind SM and fileTRUST SM services. These expenses consist primarily of
salaries and related personnel costs, the cost of our outsourced data center,
the license royalties we pay to our e-security software provider for the
encryption used in the Mangomind SM service and the fees we pay to Built Right
Networks to manage our billable services infrastructure.
  
 Other Operating
Expenses – Selling and marketing expenses consist primarily of costs
incurred to market our products and services such as the costs of attending and
presenting at trade shows. General and administrative expenses consist primarily
of salaries and related personnel costs and other general corporate costs such
as facility costs, commercial and general liability insurance, accounting and
legal expenses and other costs typical of a publicly held corporation. At
September 30, 2009, all operating activities were outsourced.
 
 Reduction in Force – We have
reduced our work force on four occasions since April 23, 2001 due to adverse
economic conditions and our need to conserve capital. At September 30, 2009, we
had no employees and outsourced all functions.
  10
  Results of Operations – Three Months Ended September 30, 2009
and 2008
 
 Revenues
for the three months ended September 30, 2009 decreased $38,248 or 56.8% to
$29,101 from $67,349 for the comparable period in 2008. The decrease was due to
a reduction in customers. No customer accounted for more than 10% of our
revenues for either period.
 
 We
recognized $26,410 from the sale of our Mangomind SM service and $2,691 from the
sale of our fileTRUST SM service during the three months ended September 30,
2009. During the comparable period in 2008, we recognized $64,438 from the sale
of the Mangomind SM service and $2,911 from the sale of our fileTRUST SM
service.
  Cost of
services for the three months ended September 30, 2009 decreased $31,124 or
47.7% to $34,150 compared to $65,274 for the comparable period in 2008. The
decrease in the cost of delivering our services was primarily a result of our
lower sales volume.
  For the
three months ended September 30, 2009, other operating expenses including
selling and marketing and general and administrative expenses decreased $67,061
or 58% to $48,393 compared with $115,454 for the comparable period in 2008. The
decrease in other operating expenses was due primarily to a decrease in legal
costs incurred in pursuit and defense of our patents combined with a reduction
of public relations, legal and other corporate consultants. For the three months
ended September 30, 2008, our one (1) full-time employee was working in a
general and administrative capacity. For the three months ended September 30,
2009, we had no employees and outsourced all functions.
 
 Our loss
from operations decreased $59,937 to $53,442 for the three months ended
September 30, 2009 compared with a loss from operations of  $113,379
for the comparable period in 2008, as a result of the above
factors.
  For the
three months ended September 30, 2009, there was $22,273 in realized gains on
the sale of investments, $3,306 in dividend income and $30,094 in unrealized
gains from investments held at Ladenburg Thalmann.
  Interest
income increased $18,592 to $22,725 for the three months ended September 30,
2009 compared to $4,133 for the comparable period in 2008 due to the
availability of working capital and addition of the note
receivable.
  Results of Operations – Nine Months Ended September 30, 2009
and 2008
 
 Revenues
for the nine months ended September 30, 2009 decreased $79,825 or 39.7% to
$121,379 from $201,204 for the comparable period in 2008.  The
decrease was due to a reduction in customers.  No customer accounted
for more than 10% of our revenues for either period.
 
 We
recognized $112,360 from the sale of our Mangomind SM service
and $9,019 from the sale of our fileTRUST SM service
during the nine months ended September 30, 2009. During the comparable period in
2008, we recognized $191,913 from the sale of the Mangomind SM service
and $9,291 from the sale of our fileTRUST SM
service.
 
 Cost
of services for the nine months ended September 30, 2009 decreased $61,028 or
31.1% to $135,299 compared to $196,327 for the comparable period in 2008. The
decrease in the cost of delivering our services was primarily a result of lower
sales volume.
 
 For the
nine months ended September 30, 2009, other operating expenses including selling
and marketing and general and administrative expenses
decreased  $501,083 or 71.7% to $198,186 compared with $699,269 for
the comparable period in 2008. The decrease in other operating expenses was due
primarily to legal costs incurred in pursuit of patents and in defense of our
patents combined with a reduction of public relations, legal and other corporate
consultants and facility rent in addition to reductions in our marketing,
selling and general and administrative personnel associated with our work force
reductions. During the nine months ended September 30, 2008, our one (1)
full-time employee was working in a general and administrative capacity. During
the nine months ended September 30, 2009, we began outsourcing all
functions.
  Our loss
from operations decreased $482,286 to $212,106 for the nine months ended
September 30, 2009 compared with a loss from operations of $694,392 for the
comparable period in 2008 as a result of the above factors.
 
 For the
nine months ended September 30, 2009, there was $82,969 in realized gains
on the sale of investments, $7,807 in dividend income and $31,826 in unrealized
gains from investments held at Ladenburg Thalmann.
 
 Interest
income increased $52,061 to $66,511 for the nine months ended September 30,
2009 compared to $14,450 for the comparable period in 2008 due to the
availability of working capital and addition of the note
receivable.
  Financial
Condition, Liquidity and Capital Resources
 
 We were
formed in June 1995 and, since our formation, have raised approximately
$76,449,000 in financing from private placements of debt and equity securities.
In addition to the financing we received through the sale of our securities, we
have, at times, depended upon loans from stockholders and directors and credit
from suppliers to meet interim financing needs. Borrowings from stockholders and
directors have generally been refinanced with new debt instruments or converted
into additional equity. At September 30, 2009, approximately $28,000 in
additional financing was provided through accounts payable, accrued expenses and
other trade credit.
  11
  The
Company received gross proceeds of approximately $1,023,672 through the issuance
of common stock pursuant to a rights offering and as a consequence issued,
completed on or about February 19, 2008, approximately 2,047,344 shares of its
common stock to stockholders who properly exercised their rights in the rights
offering. Pursuant to the rights offering, which concluded as of the close of
business on February 19, 2008, stockholders of record at the close of business
on December 21, 2007, received, at no charge, a 0.7032 non-transferable right
for each share of common stock owned by such stockholder on the record date.
Each full right entitled the holder to purchase one share of the Company’s
common stock at a purchase price of $0.50 per share.
 
 On January 29, 2009, Form 8-K was filed indicating that Mangosoft agreed to loan
$600,000 to Plaintiff Holding XI LLC, a newly formed wholly owned subsidiary
(the “Subsidiary”) of Plaintiff Funding Holding, Inc., d/b/a LawCash. Such loan
is evidenced by a secured promissory note issued by the Subsidiary to Mangosoft
having a term of one year and bearing interest at the rate of 14% per
annum.
 
 At
September 30, 2009, we had a cash balance of $638,655 and working capital of
approximately $1,742,323. We do not have any commercial commitments or off
balance sheet financing. Our commitments are described in Note 8 in the
Company’s Annual Report on Form 10-K for the period ended December 31, 2008, as
filed on March 30, 2009.
 
 We did
not make any capital expenditures during the three months ended September 30,
2009.
 
 We have
significantly modified our operations and reduced our work force on four
separate occasions since April 2001. We currently outsource the management of
our billable services infrastructure, software code base, customer support and
reseller channel management to Built Right Networks. Built Right Networks
receives a fee based on the percentage of monthly income earned plus an
administration fee.
 
 Unless we
can generate significant on-going revenue, we will need additional sources of
equity or debt financing. Although we have been successful in raising past
financing, there can be no assurances that additional financing will be
available to us on commercially reasonable terms, or at all.
 
 OFF-BALANCE
SHEET ARRANGEMENTS
 
 We do not
have any commercial commitments or off-balance sheet financing. Our commitments
are described in Note 8 to our consolidated financial statements filed on Form
10-K for the period ended December 31, 2008, as reported to the Securities and
Exchange Commission.
  12
   ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 The
accompanying unaudited consolidated financial statements include estimated fair
value information as of September 30, 2009 as required by SFAS No. 107,
“Disclosure About Fair Value of Financial Instruments”. Disclosure of the
estimated fair values of financial instruments often requires the use of
estimates. The Company uses the following methods and assumptions to estimate
the fair value of financial instruments.
 
 CASH
 
 The
carrying amounts approximate fair market value at September 30,
2009.
 
 NOTE
RECEIVABLE
 
 The
carrying amounts approximate fair market value at September 30,
2009.
 
 INVESTMENTS
 
 The
carrying amounts approximate fair market value at September 30,
2009.
 In
accordance with SFAS 159, the company is recording unrealized gains/(losses) on
the Statement of Operations.
  ITEM
4. CONTROLS AND PROCEDURES
 
 At
September 30, 2009, we had no employees and outsourced all functions. A complete
set of internal controls including segregation of duties is not possible in an
organization of this size. However, we have implemented control procedures
surrounding the maintenance of our accounting and financial systems and the
safeguarding of our assets. Further, all transactions entered into outside the
normal course of our day-to-day operations must be approved by Mr. Selig Zises,
Interim Chief Executive Officer.
  Our Chief
Executive Officer, President and sole director, after evaluating the
effectiveness of our "disclosure controls and procedures" (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of
the period covered by this Quarterly Report on Form 10-Q (the "Evaluation
Date"), has concluded that as of the Evaluation Date, our disclosure controls
and procedures were not effective to provide reasonable assurance that
information we are required to disclose in reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission rules and forms, and
that such information is accumulated and communicated to our management,
including our Chief Executive Officer, as appropriate, to allow timely decisions
regarding required disclosure.
  We have
identified deficiencies in the design or operation of the Company’s internal
controls that we consider to be material weaknesses in the effectiveness of the
Company’s internal controls pursuant to standards established by the Public
Company Accounting Oversight Board. A “material weakness” is a deficiency, or
combination of significant deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected. Specifically, we found that the
Company has an overall lack of segregation of duties as well as a lack of
necessary corporate accounting resources related to the financial reporting
process and accounting functions as the Company does not have any full time
accounting personnel. The Company’s President serves as both Chief Executive
Officer and Chief Financial Officer of the Company. Accordingly, certain
functional and monitoring controls do not exist.
  There was
no change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter
ended September 30, 2009 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial
reporting.
  13
  PART II – OTHER INFORMATION
 
 ITEM
1. LEGAL PROCEEDINGS
 
 On
November 22, 2002, the Company filed a complaint in the United States District
Court of New Hampshire, against Oracle Corporation for infringement of U.S.
Patent No. 6,148,377 and U.S. Patent No. 5,918,229. The complaint seeks
unspecified monetary damages and injunctive relief and awards for interest,
costs and attorneys’ fees.
 
 On May
15, 2003, Oracle Corporation filed a complaint in the United States District
Court, Northern District of California, against the Company and Built Right
Networks for infringement of a patent held by Oracle Corporation. The complaint
seeks unspecified monetary damages and injunctive relief and awards for
interest, costs and attorneys’ fees.
 
 On July
2, 2003, the Company filed a complaint in the United States District Court,
Northern District of California, against Oracle Corporation, Sun Microsystems,
Inc., Dell Computer Corporation and Electronic Arts, Inc. for infringement of
U.S. Patent No. 6,148,377 and U.S. Patent No. 5,918,229. The complaint seeks
unspecified monetary damages and injunctive relief and awards for interest,
costs and attorneys’ fees.
  On March
14, 2006, the U.S. District Court in New Hampshire ruled in favor of Oracle’s
motion for summary judgment that it did not infringe U.S. Patent No. 6,148,377
held by Mangosoft, Inc. Mangosoft had sued Oracle in 2002, claiming infringement
of its patent on shared memory technology as described above.
 
 On
September 22, 2006, the Company through its subsidiary Mangosoft Intellectual
Property, Inc., filed a civil action in the United States District Court for the
Eastern District of Texas alleging patent infringement against eBay, Inc. of San
Jose and its subsidiaries Skype Technologies SA and Skype Software Sarl of
Luxembourg. The Complaint alleges that each of the defendants have infringed,
and continue to infringe, U.S. Patent No. 6,647,393 entitled "Dynamic Directory
Service" in violation of one or more provisions of 35 U.S.C. section 271. The
complaint seeks damages for willful infringement as well as injunctive
relief.
 
 On
October 26, 2006 Mangosoft Inc. was successful in its motion for summary
judgment of non-infringement of United States Patent No. 6,371,790 in an action
brought by Oracle International Corp. Oracle's motion for summary adjudication
of patent validity, along with Mangosoft's motion to amend its final contentions
of patent invalidity, and Oracle's motion to preclude Mangosoft from asserting a
defense of inequitable conduct were denied by the United States District Chief
Judge.
 
 On March
29, 2007 the Company filed a Notice of Appeal in the United States District
Court for the District of New Hampshire in the case of Mangosoft, Inc., et al. v.
Oracle Corporation , C.A. No. 02-545-M. By filing the Notice of Appeal,
Mangosoft has commenced an appeal in the United States Court of Appeals for the
Federal Circuit challenging, among other things, the District Court’s claim
construction Order of September 21, 2004, the District Court’s order granting
defendant Oracle Corporation’s motion for summary judgment of non-infringement
entered on March 14, 2006, and the District Court’s entry of final judgment
entered on March 29, 2007.
 
 On May
14, 2008, Form 8-K was filed indicating that the United States Court of Appeals
for the Federal Circuit issued an opinion in the case Mangosoft, Inc. et al. v.
Oracle Corporation. The opinion affirmed the District Court’s claim construction
order of September 21, 2004 and the District’s Court’s decision granting
defendant’s motion for summary judgment on non-infringement entered by the
District Court on March 28, 2007.
 
 On
December 4, 2008, Form 8-K was filed indicating that Mangosoft, Inc. entered
into an agreement to settle its patent litigation with Skype Technologies SA,
Skype Software SARL and eBay Inc. titled Mangosoft Intellectual Property, Inc.
V. Skype Technologies, S.A. et al., Civil Action No. 2:06CV-390 TJW, which was
pending in the United States District Court for the Eastern District of Texas.
Under the terms of the Agreement, eBay and its affiliates and subsidiaries will
receive a non-exclusive license to all of the patents or patent applications now
owned by the Company, or in which the Company has a controlling interest, for a
one time fee in the amount of $2,300,000. The Agreement also provides for
general releases and dismisses the existing litigation between the
parties.
 
 Other
than the matters listed above, there are no material pending legal proceedings,
other than the routine litigation occurring in the normal course of operations,
to which we are party or of which any of our properties are
subject.
  14
  ITEM
1a. –
Risk
Factors
 
 We
Have A Limited Operating History And A History Of Substantial Operating
Losses.
 
 We have a
history of substantial operating losses and an accumulated deficit of $
89,189,414 as of September 30, 2009. For the nine months ended September 30,
2009, our loss was $22,993.
 
 We have
historically experienced cash flow difficulties primarily because our expenses
have exceeded our revenues. We expect to incur additional operating losses.
These factors, among others, raise significant doubt about our ability to
continue as a going concern. If we are unable to generate sufficient revenue
from our operations to pay expenses or we are unable to obtain additional
financing on commercially reasonable terms, our business, financial condition
and results of operations will be materially and adversely
affected.
 
 However,
for the year ended December 31, 2008 we had income from operations of $547,660.
This was primarily due to litigation settlement income, which is described in
Note 3 to our consolidated financial statements filed on Form 10- K for the
period ended December 31, 2008.
  We
Will Need Additional Financing.
 
 We may
require additional capital to finance our future operations. We can provide no
assurance that we will obtain additional financing sufficient to meet our future
needs on commercially reasonable terms or otherwise.
 
 Our
Success Depends On Our Outsourced Services Agreement.
 
 Effective
September 30, 2002, we outsourced the management of our internal information
systems, billable services infrastructure, software code base, customer support
and reseller channel management to Built Right Networks under our September 30,
2002 Information Management Services Agreement (the “Outsourced Services
Agreement”). The principals of Built Right Networks are all former MangoSoft
employees. We can provide no assurance that Built Right Networks will remain
solvent or can retain their key personnel. Built Right Network’s inability to
retain key personnel or to remain solvent would have a material and adverse
effect on our business, financial condition and results of
operations.
 
 Our
Performance Depends On Market Acceptance Of Our Products.
 
 We expect
to derive a substantial portion of our future revenues from the sales of
Mangomind SM and fileTRUST SM. Due to our small size and need to conserve
capital, our selling and marketing activities for these products and services is
limited. If markets for our products fail to develop, develop more slowly than
expected, are subject to substantial competition or react negatively to Bank of
America’s (formerly FleetBoston) termination of its February 2002 enterprise
license agreement with us, our business, financial condition and results of
operations will be materially and adversely affected.
 
 We
Depend On Strategic Marketing Relationships.
 
 We expect
our future marketing efforts will focus in part on developing business
relationships with technology companies that seek to augment their businesses by
offering our products to their customers. Our inability to enter into and retain
strategic relationships, or the inability of such technology companies to
effectively market our products, could materially and adversely affect our
business, operating results and financial condition.
  15
  There
May Be Limited Liquidity In Our Common Stock And Its Price May Be Subject to
Fluctuation.
 
 Our
common stock is currently traded on the OTC Bulletin Board and there is only a
limited market for our common stock. We can provide no assurances that we will
be able to have our common stock listed on an exchange or quoted on NASDAQ or
that it will continue to be quoted on the OTC Bulletin Board. If there is no
trading market for our common stock, the market price of our common stock will
be materially and adversely affected.
 
 SEC
Rules Concerning Sales Of Low-Priced Securities May Hinder Re-Sales Of Our
Common Stock
 
 Because
our common stock has a market price that is less than five dollars per share,
our common stock is not listed on an exchange or quoted on NASDAQ and is traded
on the OTC Bulletin Board. Brokers and dealers who handle trades in our common
stock are subject to certain SEC disclosure rules when effecting trades in our
common stock, including disclosure of the following: the bid and offer prices of
our common stock, the compensation of the brokerage firm and the salesperson
handling a trade and legal remedies available to the buyer. These requirements
may hinder re-sales of our common stock and may adversely affect the market
price of our common stock.
 
 Rapidly
Changing Technology And Substantial Competition May Adversely Affect Our
Business.
 
 Our
business is subject to rapid changes in technology. We can provide no assurances
that research and development by competitors will not render our technology
obsolete or uncompetitive. We compete with a number of computer hardware and
software design companies that have technologies and products similar to those
offered by us and have greater resources, including more extensive research and
development, marketing and capital than us. We can provide no assurances that we
will be successful in marketing our existing products and developing and
marketing new products in such a manner as to be effective against our
competition. If our technology is rendered obsolete or we are unable to compete
effectively, our business, operating results and financial condition will be
materially and adversely affected.
  Litigation
Concerning Intellectual Property Could Adversely Affect Our
Business.
  We rely
on a combination of trade secrets, copyright and trademark law, contractual
provisions, confidentiality agreements and certain technology and security
measures to protect our trademarks, patents, proprietary technology and
know-how. However, we can provide no assurance that our rights in our
intellectual property will not be infringed upon by competitors or that
competitors will not similarly make claims against us for infringement. If we
are required to be involved in litigation involving intellectual property
rights, our business, operating results and financial condition will be
materially and adversely affected.
 
 Defects
In Our Software Products May Adversely Affect Our Business.
  Complex
software such as the software developed by MangoSoft may contain defects when
introduced and also when updates and new versions are released. Our introduction
of software with defects or quality problems may result in adverse publicity,
product returns, reduced orders, uncollectible or delayed accounts receivable,
product redevelopment costs, loss of or delay in market acceptance of our
products or claims by customers or others against us. Such problems or claims
may have a material and adverse effect on our business, financial condition and
results of operations.
  16
  We
Have Limitations On The Effectiveness Of Our Internal
Controls.
 
 We have
no employees and all our functions are outsourced. A complete set of internal
controls is not possible in an organization of this size. Management does not
expect that its disclosure controls or its internal controls will prevent all
errors and intentional misrepresentations. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues, if any, within the
organization have been detected.
   17
  ITEM
6.   EXHIBITS AND REPORTS ON FORM 8-K
 
 (a)
              Exhibits:
 
 Number
              Description of Exhibit2.1
              Agreement
      and Plan of Merger by and among First American Clock Co., MangoSoft
      Corporation and MangoMerger Corp., dated as of August 27, 1999.
      (1)3.1
              Articles
      of Incorporation, as amended. (2)3.2
              By-laws.
      (2)4.1
              Rights
      Plan. (6)10
              Lease
      of Westborough   Office Park, Building Five, dated November 10, 1995.
      (3)14
              Code
      of Ethics. (7)21
              Subsidiary
      of the Registrant. (2)31.1
              Certification
      of Principal Executive Officer required by Rule 13a 14(a) or Rule 15-d14
      (a) of the Securities Exchange Act of 1934, as adopted pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002.32.1
              Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.99.1
              1999
      Incentive Compensation Plan, as amended and restated on May 1, 2000.
      (1)99.2
              Form
      of Subscription Agreement for purchase of common stock, dated as of March
      20, 2000. (1)99.3
              Form
      of Warrant Agreement. (1)99.4
              Asset
      Purchase Agreement, dated February 11, 2002, between MangoSoft, Inc. and
      Fleet National Bank. (4)99.5
              Warrant
      Agreement, dated February 11, 2002, between MangoSoft, Inc. and Fleet
      National Bank. (4)99.6
              Information
      Management Services Agreement, dated September
                30,
      2002, between MangoSoft, Inc. and Built Right Networks LLC.
      (5)99.7
              Rights
      Agreement, dated March 14, 2003, between MangoSoft, Inc. and Interwest
      Transfer Co., Inc. (6)
 
 (1)
              Filed
      as an exhibit to our Current Report on Form 8-K for an event dated
      September 7, 1999 and hereby incorporated by reference
      thereto.(2)
              Filed
      as an exhibit to our Registration Statement on Form 10-SB, filed June 9,
      2000, and hereby incorporated by reference thereto.(3)
              Filed
      as an exhibit to our Quarterly Report filed November 9, 1999 for the
      quarter ended September 30, 1999 and hereby incorporated by reference
      thereto.(4)
              Filed
      as an exhibit to our Quarterly Report filed August 14, 2002 for the
      quarter ended June 30, 2002 and hereby incorporated by reference
      thereto.(5)
              Filed
      as an exhibit to our Current Report on Form 8-K for an event dated
      September 30, 2002 and hereby incorporated by reference
      thereto.(6)
              Filed
      as an exhibit to our Current Report on Form 8-K for an event dated March
      21, 2003, as amended on July 25, 2003, and hereby incorporated by
      reference thereto.(7)
              Filed
      as an exhibit to our Annual Report filed on March 26, 2004 for the year
      ended December 31, 2003 and hereby incorporated by reference
      thereto.
  18
  (b)  Reports
on Form 8-K:
  (1)
              On
      January 22, 2008, Form 8-K was filed indicating that its Board of
      Directors has extended the expiration date of its previously announced
      rights offering from January 29, 2008 to February 18,
  2008.(2)
              On
      January 29, 2008, Form 8-K was filed indicating that its Board of
      Directors has extended the expiration date of its previously announced
      rights offering from February 18, 2008 to February 19,
    2008.(3)
              On
      February 27, 2008, Form 8-K was filed indicating the closing and the
      results of its rights offering which ended as of the close of business on
      February 19, 2008. The Company received gross proceeds of approximately
      $1,023,672 and will issue approximately 2,047,344 shares of its common
      stock to its stockholders who properly exercised their rights in the
      rights offering. The Company expects to commence issuing the shares of
      common stock on or about February 27, 2008.(4)
              On
      May 14 2008, Form 8-K was filed indicating that the United States Court of
      Appeals for the Federal Circuit issued an opinion in the case Mangosoft,
      Inc. et al. v. Oracle Corporation. The opinion affirmed the District
      Court’s claim construction order of September 21, 2004 and the District
      Court’s decision granting defendant’s motion for summary judgment on
      non-infringement entered by the District Court on March 28,
      2007.(5)
              On
      December 4, 2008, Form 8-K was filed indicating that Mangosoft, Inc.
      entered into an agreement to settle its patent litigation with Skype
      Technologies SA, Skype Software SARL and eBay Inc. titled Mangosoft
      Intellectual Property, Inc. V. Skype Technologies, S.A. et al., Civil
      Action No. 2:06CV-390 TJW, which was pending in the United States District
      Court for the Eastern District of Texas. Under the terms of the Agreement,
      eBay and its affiliates and subsidiaries will receive a non-exclusive
      license to all of the patents or patent applications now owned by the
      Company, or in which the Company has a controlling interest, for a one
      time fee in the amount of $2,300,000. The Agreement also provides for
      general releases and dismisses the existing litigation between the
      parties.(6)
              On
      January 29, 2009, Form 8-K was filed indicating that Mangosoft agreed to
      loan $600,000 to Plaintiff Holding XI LLC, a newly formed wholly owned
      subsidiary (the “Subsidiary”) of Plaintiff Funding Holding, Inc., d/b/a
      LawCash. Such loan is evidenced by a secured promissory note issued by the
      Subsidiary to Mangosoft having a term of one year and bearing interest at
      the rate of 14% per annum. Each of the Company and LawCash are directly or
      indirectly controlled by Mr. Selig Zises and Mr. Jay
  Zises.
  (7)
              On
      April 22, 2009, Dale Vincent, the Chief Executive Officer and President
      and sole Director and sole employee of MangoSoft, Inc. (the “Company”),
      passed away.  As a result of the vacancy created by the death of
      Mr. Vincent, on April 28, 2009, Selig Zises was elected as a Director of
      the Company by written consent of a majority of the stockholders of the
      Company in lieu of a stockholders’ meeting.  Thereafter, Mr.
      Zises appointed himself as Interim Chief Executive Officer and
      Interim Secretary of the Company.  Mr. Zises will not receive
      any compensation as an officer or director of the Company.  Mr.
      Zises is 67 years of age and has been a private investor for the past five
      (5) years.  There is no family relationship between Selig Zises
      and any other former executive officer or director of the Company, and
      there is no arrangement or understanding under which Selig Zises was
      appointed Director, Interim Chief Executive Officer
      or Interim Secretary.
  (8)
              On
      May 22, 2009, MangoSoft, Inc. (the “Company” or “MangoSoft”) agreed to
      purchase from Plaintiff Funding Holding, Inc., d/b/a LawCash
      (“LawCash”), for the sum of $400,000 (the “Purchase Price”), all of
      LawCash’s rights, title and interest in certain specified litigations that
      had been funded by LawCash (the “Cases”).  LawCash, through its
      various subsidiaries, is in the business of financing personal injury
      litigations, such as the Cases, and in connection therewith, receives a
      contingent interest in the proceeds of the potential recovery by a
      personal injury claimant or litigant.  In accordance with the
      bill of sale entered into on May 22, 2009 by the Company and LawCash
      pursuant to which the Company acquired the Cases (the “Bill of Sale”),
      LawCash will service the Cases pursuant to a master services agreement
      dated May 22, 2009 (the “Master Services Agreement”) and the Company is
      entitled to receive from the disposition of the Cases (i) the return of
      the Purchase Price, and (ii) a return on the Purchase Price of 14% per
      annum..
  19
  SIGNATURE
 
 In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
 
 November
      13, 2009
                          
                          MANGOSOFT,
      INC./S/
      Selig
      ZisesSelig
      Zises
                            Interim
      Chief Executive
Officer