<PAGE>

                    U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, DC 20549


                                  FORM 10-QSB

[x]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934.

                 For the Quarterly Period Ended March 31, 2001

                                      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: 0-30781


                                MANGOSOFT, INC.
       (Exact name of small business issuer as specified in its charter)



           Nevada                                        87-0543565
(State or other jurisdiction                  (IRS Employer Identification No.)
of incorporation or organization)


    1500 West Park Drive, Suite 190
          Westborough, MA                                    01581
(Address of principal executive offices)                   (Zip code)

                   Issuer's telephone number: (508) 871-7300

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
 Yes [X]  No [_]

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:

          Common Stock                                   26,957,142 Shares
        $0.001 Par Value                           (Outstanding on May 10, 2001)
<PAGE>

                        MANGOSOFT, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                             INDEX TO FORM 10-QSB

<TABLE>
<CAPTION>
                                                                                                         Page
PART I.      FINANCIAL INFORMATION

<S>                                                                                                       <C>
ITEM 1 - Financial Statements:
Condensed Consolidated Statements of Operations For The Three Months Ended March 31, 2001
 and 2000 and Cumulative For The Period From June 15, 1995 (Inception) To March 31, 2001.................. 3
Condensed Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000.......................... 4
Condensed Consolidated Statements of Cash Flows For The Three Months Ended March 31, 2001
 and 2000 and Cumulative For The Period From June 15, 1995 (Inception) To March 31, 2001.................. 5
Notes to the Condensed Consolidated Financial Statements.................................................. 6

ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations............ 9

PART II      OTHER INFORMATION

ITEM 6 - Exhibits and Reports on Form 8-K................................................................ 14

Signatures............................................................................................... 15
</TABLE>
                                       2

<PAGE>

                        MANGOSOFT, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                                           Cumulative From
                                                                 Three Months Ended March 31,               June 15, 1995
                                                                 ----------------------------               (Inception) to
                                                                    2001                2000                March 31, 2001
                                                                   ------              ------              ---------------
<S>                                                           <C>                   <C>                       <C>
Software license revenues....................................  $   127,270           $     1,335               $   470,421
Service revenues.............................................       11,360                    --                    11,360
                                                               -----------           -----------               -----------
Total revenues...............................................      138,630                 1,335                   481,781
 Costs and expenses:
 Cost of software license revenues...........................       16,000                    --                   116,847
 Cost of services (1)........................................      377,815                    --                   377,815
 Engineering and development (1).............................    1,130,019             1,141,781                29,754,957
 Selling and marketing (1)...................................      767,922               271,933                13,813,706
 General and administrative (1)..............................    1,363,943               668,137                16,742,429
 Stock-based compensation expense............................      501,273            22,166,009                 6,137,618
 Consulting fees paid to related parties.....................           --                    --                   747,971
                                                               -----------           -----------               -----------
  Loss from operations.......................................    4,018,342            24,246,525                67,209,562
Interest income..............................................      224,005                13,225                 1,905,497
Interest expense.............................................           --                 9,783                 5,308,114
                                                               -----------           -----------               -----------
Net loss.....................................................    3,794,337            24,243,083                70,612,179
Accretion of preferred stock.................................           --             9,627,147                16,231,171
                                                               -----------           -----------               -----------
Net loss applicable to common stockholders...................  $ 3,794,337           $33,870,230               $86,843,350
                                                               ===========           ===========               ===========

Net loss per share applicable to common shareholders  -
  basic and diluted..........................................  $     (0.14)          $     (1.68)
Weighted average shares outstanding - basic and diluted......   26,957,089            20,130,349

(1) Excludes stock-based compensation expense as follows:
    Cost of services.........................................  $    23,117           $        --               $    23,117
    Engineering and development..............................      154,411            11,119,266                 1,089,449
    Selling and marketing....................................      162,634             1,480,859                   859,393
    General and administrative...............................      161,111             9,565,884                 4,165,659
</TABLE>


         See notes to the condensed consolidated financial statements.

                                       3
<PAGE>

                        MANGOSOFT, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                               March 31,                   December 31,
                                                                             ------------------------------------------
                                                                                 2001                         2000
                                                                                 ----                         ----
                                    ASSETS
<S>                                                                         <C>                           <C>
Current Assets:
   Cash and cash equivalents..............................................   $ 14,039,562                  $ 17,354,025
   Accounts receivable....................................................         55,154                        10,639
   Prepaid expenses and other current assets..............................        159,114                       155,445
                                                                             ------------                  ------------
      Total current assets................................................     14,253,830                    17,520,109
Property and Equipment - Net..............................................      1,084,242                     1,164,916
Other Assets..............................................................          2,400                         2,400
                                                                             ------------                  ------------
         Total............................................................   $ 15,340,472                  $ 18,687,425
                                                                             ============                  ============

                     LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts payable.......................................................   $  1,095,993                  $  1,285,614
   Accrued compensation...................................................        454,996                       286,552
   Other accrued expenses and current liabilities.........................        260,868                       293,955
                                                                             ------------                  ------------
        Total current liabilities.........................................      1,811,857                     1,866,121
                                                                             ------------                  ------------

Commitments and Contingencies

Stockholders' Equity:
   Common stock...........................................................         26,957                        26,957
   Additional paid-in-capital.............................................     90,215,667                    90,431,502
   Deferred compensation..................................................     (3,018,386)                   (3,735,869)
   Deficit accumulated during the development stage.......................    (73,695,623)                  (69,901,286)
                                                                             ------------                  ------------
      Total stockholders' equity..........................................     13,528,615                    16,821,304
                                                                             ------------                  ------------
         Total............................................................   $ 15,340,472                  $ 18,687,425
                                                                             ============                  ============
</TABLE>

         See notes to the condensed consolidated financial statements.

                                       4
<PAGE>

                        MANGOSOFT, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                                            Cumulative From
                                                                    Three Months Ended March 31,             June 15, 1995
                                                                                                            (Inception) to
                                                                      2001                  2000            March 31, 2001
<S>                                                               <C>                  <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................         $(3,794,337)         $(24,243,083)         $(70,612,179)
Adjustments to reconcile net loss to net cash used
 for operating activities:
  Depreciation and amortization..........................             131,915                59,104             2,540,192
  Stock-based compensation...............................             501,273            22,166,009             6,137,618
  Beneficial conversion feature of 12% convertible notes                   --                    --             4,860,000
  Accrued interest converted into paid-in-capital in
   connection with the conversion of the 12%
   convertible notes.....................................                  --                    --               377,409
  Increase (decrease) in cash from the change in:
   Accounts receivable...................................             (44,515)                 (270)              (55,154)
   Prepaid expenses and other current assets.............              (3,669)               21,453               (23,026)
   Accounts payable......................................            (189,621)              151,091             1,351,356
   Accrued compensation..................................             168,444               (15,898)              454,996
   Accrued expenses to related parties...................                  --              (712,683)               10,000
   Other accrued expenses and current liabilities.......              (33,087)             (357,461)              325,522
                                                                  -----------          ------------          ------------
    Net cash used for operating activities...............          (3,263,597)           (2,931,738)          (54,633,266)
                                                                  -----------           ------------          ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment....................             (51,241)             (173,082)           (3,624,434)
Increase in other long-term assets.......................                  --                    --                (2,400)
Payment of merger costs..................................                  --               (77,893)             (276,173)
                                                                  -----------          ------------          ------------
    Net cash used for investing activities...............             (51,241)             (250,975)           (3,903,007)
                                                                  -----------          ------------          ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of notes to related parties...                  --                    --             4,232,500
Proceeds from other debt financings......................                  --                    --             2,750,000
Repayments of notes issued to related parties............                  --              (232,500)             (232,500)
Repayments of other debt financings......................                  --               (37,200)             (886,088)
Net proceeds from the issuance of common and
preferred stock..........................................                 375            17,914,100            66,811,923
Purchase of common stock from related party..............                  --                    --              (100,000)
                                                                  -----------          ------------          ------------
    Net cash provided by financing activities............                 375            17,644,400            72,575,835
                                                                  -----------          ------------          ------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS..............................................          (3,314,463)           14,461,687            14,039,562
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD...................................................          17,354,025                29,959                    --
                                                                  -----------          ------------          ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                          $14,039,562          $ 14,491,646          $ 14,039,562
                                                                  ===========          ============          ============
</TABLE>

         See notes to the condensed consolidated financial statements.

                                       5
<PAGE>

                        MANGOSOFT, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS

   MangoSoft, Inc. and subsidiary (a development stage company) (the "Company")
develops advanced software technology to simplify, expand and integrate
networking and pooled use of computer resources. The Company organizes itself as
one segment reporting to the chief operating decision-maker.

   The Company is considered to be a development stage company since it has not
generated significant revenues from products or services that have been
developed-to-date. The Company is subject to a number of risks similar to those
of other companies in an early stage of development. Principal among these risks
are dependencies on key individuals, competition from other substitute products
and larger companies, the successful development and marketing of its products
and the need to obtain adequate additional financing necessary to fund future
operations. See "Risk Factors."

   As shown in the condensed consolidated financial statements, during the three
months ended March 31, 2001 and 2000 and cumulative for the period from June 15,
1995 (inception) to March 31, 2001, the Company incurred net losses of
$3,794,337, $24,243,083 and $70,612,179, respectively. Absent the reversal of a
stock-based compensation charge, the net loss for the three-month period ended
March 31, 2000 would have been $2,077,074. However, in 2000, the Company raised
significant capital; capital which management believes will be sufficient to
fund its existing operations for the next twelve months. The financial
statements do not include any adjustments relating to the recoverability of
assets or the 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
to meet its obligations on a timely basis and ultimately to attain
profitability.

2. PRESENTATION OF INTERIM FINANCIAL STATEMENTS

   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, 2000 included in the Company's Annual Report on Form 10-KSB filed
with the Securities and Exchange Commission.

   Revenue Recognition - Software license revenue is recognized when persuasive
evidence of an arrangement exists, the price is fixed and determinable, delivery
has occurred and collection is probable. Revenue from sales to distributors is
recognized upon sales to end customers. Service revenue is recognized as
services are provided.

   Comprehensive Income - Comprehensive loss was equal to net loss for each
period.

   Reclassifications - Certain reclassifications have been made to the interim
2000 and cumulative since inception amounts to conform to the 2001 presentation.

                                       6
<PAGE>

   Supplemental Cash Flow Information - The following table sets forth certain
supplemental cash flow information for the three months ended March 31, 2001 and
2000, and cumulative for the period from June 15, 1995 (inception) to March 31,
2001:

<TABLE>
<CAPTION>
                                                               Three Months Ended March 31,          Cumulative
                                                               ----------------------------
                                                                   2001            2000            Since Inception
                                                                   ----            ----            ---------------
<S>                                                            <C>               <C>               <C>
Cash paid for interest...................................         $  --          $  9,783              $ 98,151

Non Cash Financing Activities:
  Fair value of warrants issued in connection with the
   sale of the convertible preferred stock, Series A.....            --           711,229               711,229
  Conversion of accounts payable into common stock.......            --           100,000               420,000
</TABLE>

  3. STOCKHOLDERS' EQUITY

     In March 2000, the Company completed the sale of 2.5 million shares of a
  new issuance of Convertible Preferred Stock, Series A, (the "Preferred Stock")
  to accredited investors at $4.00 per share. The Preferred Stock was
  convertible into common stock (initially at a ratio of one to one) and had a
  liquidation preference of $10.0 million. The Preferred Stock would
  automatically convert to common stock upon the subsequent sale of an
  additional $10.0 million of the Company's securities.

     In accordance with Emerging Issues Task Force Abstract No. 98-5,
  "Accounting for Convertible Securities with Beneficial Conversion Features or
  Contingently Adjustable Conversion Ratios," the net proceeds from the Series A
  financing were allocated between the conversion feature and the preferred
  stock; because the fair value of the common stock was significantly in excess
  of the conversion price implicit in the Series A stock, the net proceeds were
  allocated to the conversion feature. Since the Preferred Stock was immediately
  convertible into common stock, an immediate dividend or accretion of
  $9,050,371 was recorded from common stockholders' equity to the carrying value
  of the Preferred Stock.

     In March 2000, the Company completed the sale of approximately 4.2 million
  shares of common stock to accredited investors at $5.00 per share. Upon
  completion of the sale of common stock, the Preferred Stock automatically
  converted, in accordance with its terms, into 2.5 million shares of common
  stock. The Company completed the sale of approximately 0.3 million additional
  shares of common stock at prices ranging from $4.00 to $5.00 per share in May
  2000.

     Costs incurred in connection with the sale of the common and Preferred
  Stock were $947,129, including $711,229 representing the fair value of
  warrants issued to the placement agent to purchase 58,975 shares of the common
  stock at $4.00 per share. The fair value of the warrants was calculated using
  the Black-Scholes option pricing model, with a risk-free interest rate of 6%,
  an expected life of two years, no dividends and a volatility of 150%. Because
  the Preferred Stock was immediately convertible into common stock, an
  immediate dividend or accretion of $576,776, representing the difference
  between the quoted market price of the common stock and the exercise price of
  the warrants was recorded from common stockholders equity relating to the
  warrants.

  4. STOCK-BASED COMPENSATION

     The Company accounts for stock options granted to employees in accordance
  with Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock
  Issued to Employees." Under APB No. 25, stock options, which include stock
  appreciation rights ("SARs"), are accounted for as variable awards and
  compensation expense is measured at each reporting date based on the
  difference between the exercise price and the market price of the common
  stock. For unvested options, compensation expense is recognized over the
  vesting period; for vested options, compensation expense is adjusted up or
  down at each reporting date based on changes in the market price of the common
  stock. At March 31, 2001 and 2000, there were

                                       7
<PAGE>

2,571,955 and 3,066,428 options, respectively, to purchase the Company's common
stock that included SARs.

   During the three months ended March 31, 2001, the Company recorded stock-
based compensation expense of $501,273. This expense is due primarily to the
amortization of $394,342 of stock-based compensation recognized as a result of
the Company's issuance of stock options to employees at exercise prices less
than the quoted market price on the grant date. Stock-based compensation of
$76,491 was recognized in relation to the SARs as the Company's quoted market
price of $1.28 per share on March 31, 2001 exceeded the exercise price of the
majority of the SARs. The remainder of the stock-based compensation expense for
the three months ended March 31, 2001 pertained to the Company's issuance of
25,000 options to non-employees. The fair value of the stock options awarded to
non-employees was calculated using the Black-Scholes option-pricing model.

5. NET LOSS PER COMMON SHARE

   Basic net loss per common share is computed by dividing net loss applicable
to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted net loss per common share reflects, in
addition to the weighted average number of common shares, the potential dilution
if common equivalent shares outstanding were exercised and/or converted into
common stock, unless the effect of such equivalent shares was antidilutive.

   For the three months ended March 31, 2001 and 2000, the effect of stock
options and other common equivalent shares were excluded from the calculation of
diluted net loss per common share as their inclusion would have been
antidilutive.

6. SUBSEQUENT EVENTS

   On April 3, 2001, the Company's Board of Directors resolved to reprice
options to purchase 2,584,167 shares of the Company's common stock. The options
were originally issued between October 1999 and December 2000 and had grant
prices ranging from $1.88 to $5.00 per share. The grant price for these options
was reduced to $1.03, the closing market value of the Company's common stock as
of the repricing date. The repriced options continue to vest according to the
original grant date. The Company will be required to account for these options
as variable awards subsequent to the repricing date.

   Effective April 23, 2001, the Company implemented an approximate 40%
reduction in its work force. In connection with this work force reduction, the
Company eliminated the positions held by two members of senior management.

                                       8
<PAGE>

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

   This Quarterly Report on Form 10-QSB 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-QSB, including
under "Risk Factors." You should read the following discussion and analysis
together with our 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-KSB for the period ended December 31, 2000
filed with the Securities and Exchange Commission.

Overview

   We develop Internet business software and services that improve the utility
and effectiveness of Internet-based business applications. We develop, market
and support software solutions to 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.

   Cachelink(TM) is a peer-to-peer clustered web cache. Cachelink utilizes our
peer-to-peer clustering technology to efficiently link together the individual
browser caches of multiple systems on a LAN into an aggregated "super cache,"
resulting in much faster Internet access without the expense of a dedicated
hardware caching appliance or server. Cachelink is a pure peer-to-peer
architecture, including a completely decentralized directory. The product is
self-configuring and self-healing from any number of system failures.

   Mangomind(TM) is a new multi-user, business-oriented, peer-to-peer file
sharing service, 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.

   The majority of our revenues from current operations are derived from sales
of our Cachelink product, for which sales to 3Com Corporation ("3Com") have
amounted to $135,000, or 28%, of our cumulative revenues since inception. We
recognize revenue generated from the sale of Cachelink when persuasive evidence
of an arrangement exists, the price is fixed and determinable, delivery has
occurred and collection is probable. We began marketing and selling our
Mangomind service to professional service organizations and other business
organizations in January 2001 and have generated $11,360 in revenues to date. We
recognize revenue generated from the sale of the Mangomind service as the
service is provided to our end customers.

   Cost of software license revenues primarily consist of disk replication costs
and other costs we incur in connection with sales of Cachelink.

   Cost of services consist solely of the expenses we incur to administer the
Mangomind service. These expenses consist primarily of salaries and related
personnel costs, the cost of our outsourced data center, the managed storage
services provided to us by an independent storage provider and the license
royalties we pay to our e-security software provider for the 128-bit encryption
the Mangomind service employs.

                                       9
<PAGE>

   Engineering and development expenses consist primarily of salaries and
related personnel costs and other costs related to the design, development,
testing, deployment and enhancement of our products and services. We have
expensed our engineering and development costs as incurred. The engineering,
research and development we perform is essential to providing the most robust,
reliable and secure products and services to our end customers to meet their
requirements and those of a changing market.

   Selling and marketing expenses consist primarily of salaries and related
personnel costs and additional 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.

   We are considered to be a development stage company since we have not
generated significant revenues from the products and services that have been
developed to date. We are subject to a number of risks similar to those of other
companies in an early stage of development. Principal among these risks are
dependencies on key individuals, competition from other substitute products and
larger companies, the successful development and marketing of our products and
services and the need to obtain adequate additional financing necessary to fund
future operations.

Results of Operations - Three Months Ended March 31, 2001 and 2000

   Revenues for the three months ended March 31, 2001 increased $137,295 to
$138,630 compared with $1,335 for the comparable period in 2000. We recognized
$127,270 from the sale of our Cachelink product and $11,360 from the sale of our
Mangomind service. Sales of Cachelink to 3Com and Kacom, Inc., a Korean systems
integrator, of $90,000 and $25,500, respectively, represented approximately 65%
and 18% of our revenues for the three-month period ended March 31, 2001. A
single customer, Nokia Corporation (formerly Ramp Networks, Inc.), represented
20% of our revenues for the three-month period ended March 31, 2000. No other
customer accounted for more than 10% of our sales for either period.

   Cost of software license revenues for the three months ended March 31, 2001
consisted primarily of disk replication costs incurred in connection with our
sales of Cachelink to 3Com. There were no such costs incurred in the three-month
period ended March 31, 2000.

   Cost of services for the three months ended March 31, 2001 consisted
primarily of managed storage service costs and the salaries and related
personnel costs of our dedicated technical support and Mangomind operations
teams. There were no such costs incurred in the three-month period ended March
31, 2000.

   Operating expenses for the three months ended March 31, 2001 and 2000,
excluding the effects of stock-based compensation, increased $1,180,033 from
$2,081,850 in 2000 to $3,261,884 in 2001. This increase is due primarily to the
overall increase in our personnel and the associated expenses attributable to
these salaries and related personnel costs as well as the increase in expenses
associated with the deployment and administration of the Mangomind service.

   Stock-based compensation expense of $501,273 was recorded for the three-month
period ended March 31, 2001 compared to $22,166,009 for the comparable period in
2000. The significant decrease in this expense is primarily attributable to the
decline in the market price of our common stock and its effect on employee stock
options accounted for as variable awards (see footnote 4 to the condensed
consolidated financial statements).

   The loss from operations decreased $20,228,183 to $4,018,342 for the three-
month period ended March 31, 2001 compared with a loss from operations of
$24,246,525 for the comparable period in 2000 as a result of the above factors.


                                      10
<PAGE>

   Interest income increased $210,780 to $224,005 for the three months ended
March 31, 2001 compared to $13,225 for the three months ended March 31, 2000.
The increase is attributable to interest earned on the investment of the
proceeds received from the sale of common stock and the Convertible Preferred
Stock, Series A in March, April and May 2000.

Financial Condition, Liquidity and Capital Resources

   We were formed in June 1995 and, since our formation, have raised
approximately $74.2 million in gross proceeds as of March 31, 2001 through the
private placement of debt and equity securities. Approximately $32.2 million of
these proceeds were raised in 2000.

   In addition, we have, at times, depended upon bank debt, 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 March 31,
2001, approximately $1.8 million in additional financing was provided through
accounts payable, accrued expenses and other trade credit.

   At March 31, 2001, we had a cash balance of approximately $14.0 million and
working capital of approximately $12.4 million. Excluding our facility lease and
other minor equipment leases, we do not have any long-term obligations.

   We are in the development stage, and to date, our product sales have provided
a minor source of liquidity. From inception through March 31, 2001, we have
generated approximately $500,000 in sales and incurred cumulative net losses of
approximately $70.6 million.

   We believe that unless we can generate a significant level of on-going
revenue and attain adequate profitability in the near-term, we will need to seek
additional sources of equity or debt financing. Although we have been successful
in obtaining financing in the past, there can be no assurance that any
additional financing will be available to us on commercially reasonable terms or
at all. Our inability to obtain additional financing when needed will have a
material adverse effect on our business and prospects, requiring us to
significantly curtail or possibly cease our operations. In addition, any
additional equity financing may involve substantial dilution to the interests of
our then existing shareholders.

   We believe that we have adequate funding to continue operations at least for
the next twelve (12) months based on our current and forecasted expenses and
cash flows.

Current Developments

   Effective April 23, 2001, we implemented an approximate 40% reduction in our
work force due to adverse economic conditions and our need to conserve capital.
We believe that this reduction was necessary to reduce our overhead and enable
us to grow our business and position ourselves for greater long-term success. We
expect to incur approximately $400,000 in severance and other personnel related
costs in connection with this action.

   In connection with this reduction, the positions held by two members of
senior management, Ms. Linda Myers-Tierney, Senior Vice President of Marketing
and Chief Marketing Officer, and Mr. Thomas Teixeira, Vice President of
Engineering, were eliminated.

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<PAGE>

Risk Factors

We Have A Limited Operating History And A History Of Substantial Operating
Losses.

     Our current operations substantially commenced in May 1997. Accordingly,
our prospects should be evaluated based on the expenses and operating results
typically experienced by any early stage business. We have a history of
substantial operating losses and an accumulated deficit of approximately $73.7
million as of March 31, 2001. For the three months ended March 31, 2001 and the
year ended December 31, 2000, our losses from operations, excluding the net
effects of stock-based compensation, were $3.5 million and $13.9 million,
respectively. We have historically experienced cash flow difficulties primarily
because our expenses have exceeded our revenues. We expect to incur additional
operating losses and expect cumulative losses to increase substantially as our
marketing, sales, and research and development efforts expand.

Our Performance Depends On Market Acceptance Of Our Products.

     We expect to derive a substantial portion of our future revenues from the
sales of Cachelink and the Mangomind service, both of which are in the initial
marketing phase. If markets for our products and services fail to develop,
develop more slowly than expected or are subject to substantial competition, our
business, financial condition and results of operations will be materially and
adversely affected.

We Have A Multi-faceted Market Strategy.

     We expect our future marketing efforts will substantially focus on
developing business relationships with technology companies that seek to augment
their business by offering our products and services to their customers. Our
inability to enter into and retain strategic relationships, or the inability of
such technology companies to effectively market our products and services, could
materially and adversely affect our business, operating results and financial
condition.

We Will Need Additional Financing.

     We will require substantial additional capital to finance our future growth
and product development. We can provide no assurance that we will obtain
additional financing sufficient to meet our future needs on commercially
reasonable terms or otherwise. If we are unable to obtain the necessary
financing, our business, operating results and financial condition will be
materially and adversely affected.

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 assurance 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, the market price of our common stock will be materially and
adversely affected.

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 assurance 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 such 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.

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<PAGE>

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 proprietary intellectual property, 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.

Our Success Depends on Key Personnel.

     Our success is dependent upon the efforts of our senior management
personnel. The loss of members of our senior management group could have a
material adverse effect on our business. In addition, competition for qualified
personnel in the computer software industry is intense, and we can provide no
assurance that we will be able to retain existing personnel or attract and
retain additional qualified personnel necessary for the development of our
business. Our inability to attract and retain such personnel would have a
material adverse effect on our business, financial condition and results of
operations.

Defects In Our Software May Adversely Affect Our Business.

     Complex software products and services such as the software developed by
MangoSoft may contain defects when introduced and also when updates, upgrades
and new versions are released. Our introduction of software with defects or
quality problems could 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 and services or
claims by customers or others against us. Such problems or claims could have a
material adverse effect on our business, financial condition and results of
operations.

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<PAGE>

                          PART II - OTHER INFORMATION

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

   Exhibit
    Number                           Description of Exhibit

      2.1     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)
       10     Lease of Westborough Office Park, Building Five, dated November
              10, 1995. (3)
       16     Letter on Change in Certifying Accountant. (4)
       21     Subsidiary of the Registrant. (2)
     99.1     1999 Incentive Compensation Plan, as amended and restated on May
              1, 2000. (2)
     99.2     Form of Subscription Agreement for purchase of common stock,
              dated as of March 20, 2000. (2)
     99.3     Form of Warrant Agreement. (2)
     99.4     Value Added Reseller Agreement, dated July 14, 2000, between
              MangoSoft, Inc. and 3Com Corporation. (5)

     (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 Current Report on Form 8-K/A for an event
          dated January 11, 2000 and hereby incorporated by reference thereto.
     (5)  Filed as an exhibit to our Registration Statement on Form 10-SB/A,
          filed August 30, 2000, and hereby incorporated by reference thereto.

(b)  Report on Form 8-K:

     On February 23, 2001, we filed on Form 8-K a notification that Craig
Goldman resigned as Director of MangoSoft, Inc. effective January 29, 2001.

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<PAGE>

                                   SIGNATURES

     Pursuant to 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.

May 11, 2001                          MANGOSOFT, INC.

                                      /S/  Robert E. Parsons
                                          ------------------
                                          Robert E. Parsons
                                          Chief Financial Officer
                                          (Principal Financial and Accounting
                                           Officer)








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