**UNITED
      STATES**


**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 September 30, 2006**





**or**





o **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: 000-30781**








**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)**12
                Technology
                Way****Nashua,
                NH**
            
            **03060**(Address
                of principal executive
                offices)
            
            (Zip
                code)





**Issuer’s
      telephone number: (603) 324-0400**





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 o





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




**Common
                Stock**
            
            **1,013,038
                Shares**$0.001
                Par Value
            
            (Outstanding
                on November 14,
                2006)




Transitional
      Small Business Disclosure Format (check one) Yes o No x







**MANGOSOFT,
      INC. AND SUBSIDIARY**





**INDEX
      TO FORM 10-QSB**










PagePART
                I. FINANCIAL
                INFORMATIONITEM
                1 - Condensed Consolidated Financial Statements
                (unaudited):Balance
                Sheets as of September 30, 2006 and December 31, 2005
            
            3Statements
                of Operations for the Three Months Ended September 30, 2006 and
                2005
            
            4Statements
                of Operations for the Nine Months Ended September 30, 2006 and
                2005
            
            5Statements
                of Cash Flows for the Nine Months Ended September 30, 2006 and
                2005
            
            6Notes
                to the Condensed Consolidated Financial Statements
            
            7ITEM
                2 - Management’s Discussion and Analysis of Financial Condition and
                Results of Operations
            
            9ITEM
                3 - Controls and Procedures
            
            15PART
                II. OTHER
                INFORMATIONITEM
                1 - Legal Proceedings.
            
            16ITEM
                6 - Exhibits and reports on form 8-K.
            
            17Signature
            
            18Officer
                Certification
            
            19





2


**MANGOSOFT,
      INC. AND SUBSIDIARY**





**CONDENSED
      CONSOLIDATED BALANCE SHEETS**





**September
                30,**
            
            **December
                31,****2006**
            
            **2005****(Unaudited)****ASSETS**Current
                Assets:Cash
                and cash equivalents
            
            $
            219,027
            
            $
            480,662Accounts
                receivable
            
            
            21,261
            
            
            17,407Short-term
                investments
            
            
            -
            
            
            3,538Total
                current assets
            
            $
            240,288
            
            $
            501,607**LIABILITIES
                AND STOCKHOLDERS’ DEFICIT**Current
                Liabilities:Accounts
                payable
            
            $
            729,970
            
            $
            736,037Accrued
                compensation
            
            
            779
            
            
            7,788Other
                accrued expenses and current liabilities
            
            
            100,496
            
            
            101,054Total
                current liabilities
            
            
            831,245
            
            
            844,879Commitments
                and contingenciesStockholders’
                Deficit:Preferred
                stock - $.001 par value; authorized, 5,000,000shares;
                issued and outstanding, 20,000
            
            
            20
            
            
            20Common
                stock - $.0001 par value, authorized 3,703,704shares,
                issued and outstanding 1,013,038
            
            
            1,013
            
            
            1,013Additional
                paid-in capital
            
            
            88,725,694
            
            
            88,725,694Accumulated
                deficit
            
            
            (89,317,684
            )
            
            (89,069,999
            )Total
                stockholders’ deficit
            
            
            (590,957
            )
            
            (343,272
            )Total
                liabilities and stockholders’ deficit
            
            $
            240,288
            
            $
            501,607





See
      notes
      to the unaudited condensed consolidated financial statements.




3


**MANGOSOFT,
      INC. AND SUBSIDIARY**





**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**





**Three
                Months Ended September 30,****2006**
            
            **2005****(Unaudited)**Service
                revenues
            
            $
            67,845
            
            $
            80,918Costs
                and expenses:Cost
                of services
            
            
            65,201
            
            
            66,604General
                and administrative expense
            
            
            78,112
            
            
            82,567Loss
                from operations
            
            
            (75,468
            )
            
            (68,253
            )Interest
                income
            
            
            2,462
            
            
            3,162Net
                loss
            
            $
            (73,006
            )
            $
            (65,091
            )Net
                loss per share - basic and diluted
            
            $
            (0.07
            )
            
            (0.06
            )Weighted
                average shares outstanding - basic and diluted
            
            
            1,013,038
            
            
            1,013,038









See
      notes
      to the unaudited condensed consolidated financial statements.




4


**MANGOSOFT,
      INC. AND SUBSIDIARY**





**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**





**Nine
                Months Ended September 30,****2006**
            
            **2005****(Unaudited)**Service
                revenues
            
            $
            210,919
            
            $
            260,158Costs
                and expenses:Cost
                of services
            
            
            197,237
            
            
            201,214General
                and administrative (1)
            
            
            269,941
            
            
            271,149Stock-based
                compensation expense
            
            
            -
            
            
            428Loss
                from operations
            
            
            (256,259
            )
            
            (212,633
            )Interest
                income
            
            
            8,574
            
            
            14,130Net
                loss
            
            $
            (247,685
            )
            $
            (198,503
            )Net
                loss per share - basic and diluted
            
            $
            (0.24
            )
            $
            (0.19
            )Weighted
                average shares outstanding - basic and diluted
            
            
            1,013,038
            
            
            1,013,038




(1)
                Excludes stock-based compensation expense of:
            
            $
            -
            
            $
            428














See
      notes
      to the unaudited condensed consolidated financial statements.




5


**MANGOSOFT,
      INC. AND SUBSIDIARY**





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





**Nine
                Months Ended September 30,****2006**
            
            **2005****(Unaudited)**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (247,685
            )
            $
            (198,503
            )Adjustments
                to reconcile net loss to net cash used byoperating
                activities:Stock-based
                compensation
            
            
            -
            
            
            428Increase
                (decrease) in cash from the change in:Accounts
                receivable
            
            
            (3,854
            )
            
            (3,993
            )Accounts
                payable
            
            
            (6,067
            )
            
            805Accrued
                compensation
            
            
            (7,009
            )
            
            (6,179
            )Other
                accrued expenses
            
            
            (558
            )
            
            1,100Deferred
                revenue
            
            
            -
            
            
            (20,467
            )Net
                cash used by operating activities
            
            
            (265,173
            )
            
            (226,809
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Investment
                maturities
            
            
            2,403
            
            
            321,446Interest
                receivable
            
            
            1,135
            
            
            21,524Net
                cash provided by investing activities
            
            
            3,538
            
            
            342,970NET
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            (261,635
            )
            
            116,161CASH
                AND CASH EQUIVALENTS, BEGINNING OFPERIOD
            
            
            480,662
            
            
            458,032CASH
                AND CASH EQUIVALENTS, END OF PERIOD
            
            $
            219,027
            
            $
            574,193














See
      notes
      to the unaudited condensed consolidated financial statements.




6


**MANGOSOFT,
      INC. AND SUBSIDIARY**





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**1.**
            **NATURE
                OF BUSINESS AND BASIS OF
                PRESENTATION**





MangoSoft,
      Inc. and its subsidiaries Mangosoft Corp. and Mangosoft Intellectual Properties,
      Inc. (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.


Certain
      amounts from the prior year have been reclassified to conform to the current
      year presentation.





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,
      2005 included in the Company’s Annual Report on Form 10-KSB filed with the
      Securities and Exchange Commission.





As
      shown
      in the unaudited condensed consolidated financial statements, during the nine
      months ended September 30, 2006 and 2005, the Company incurred net losses of
      $247,685 and $198,503 respectively. Cash used in operations during the nine
      months ended September 30, 2006 and 2005 was $265,173 and $226,809,
      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.





On
      July
      27, 2006, in order to optimize the Company's flexibility in undertaking new
      business opportunities, the Company decided to manage its patent portfolio
      and
      intellectual property assets through a new wholly-owned subsidiary Mangosoft
      Intellectual Property, Inc. The new Company is authorized to issue up to 1,000
      shares of $.01 par value common stock. Mangosoft Intellectual Property, Inc.
      issued 100 of these shares of stock to Mangosoft Corp. None of the remaining
      900
      authorized shares have been issued at September 30, 2006.





On
      September 11, 2006, Mangosoft Corp. assigned the ownership and legal titles
      of
      twelve of its patents and applications with no recorded value to Mangosoft
      Intellectual Property, Inc., Pursuant to the agreement, Mangosoft Corp. assigned
      the entire right, title, and interest in and to the following applications
      to
      Mangosoft Intellectual Property, Inc.:





**Title**
            
            **Application
                No./Patent No.**
            
            **Filing
                Date/Issue Date**System
                For Tracking Data
            
            08/848,970
            
            05/02/97Method
                For Scheduling Thread Execution On A Limited Number Operating
                System
            
            09/069,352
            
            04/29/98Internet-Based
                Shared File Service With Native PC Client Access And Semantics And
                Distributed Access Control
            
            09/704,050
            
            11/01/00Internet-Based
                Shared File Service With Native PC Client Access And
                Semantics
            
            09/704,262
            
            11/01/00Dynamic
                Directory Service
            
            10/704,327
            
            11/07/03Internet-Based
                Shared File Service With Native PC Client Access And Semantics And
                Distributed Version Control
            
            11/285,423
            
            11/21/05System
                and Method For Providing Highly Available Data Storage Using Globally
                Addressable Memory
            
            5,909,540
            
            06/01/99Remote
                Access And Geographically Distributed Computers In A Globally Addressable
                Storage Environment
            
            5,987,506
            
            11/16/99Shared
                Client-Side Web Caching Using Globally Addressable Memory
            
            6,026,474
            
            02/15/00Dynamic
                Directory Service
            
            6,647,393
            
            11/11/03Distributed
                Virtual Web Cache Implemented Entirely in Software
            
            6,760,756
            
            07/06/04Internet-Based
                Shared File Service With Native PC Client Access And
                Semantics
            
            7,058,696
            
            06/06/06





7




**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, 2006 and 2005, 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.





**3.**
            
            **REVENUE
                RECOGNITION**





The
      Company records revenue upon delivery if pervasive evidence of an arrangement
      exists, the price is fixed and determinable, delivery has occurred 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-BASEDCOMPENSATION**





The
      Company currently has one stock-based compensation plan, which is described
      more
      fully in Note 8 in the Company’s Annual Report on Form 10-KSB for the period
      ended December 31, 2005, as filed on March 31, 2006. 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, 2006, there were 179,652 remaining options available under this
      plan.




Effective
      January 1, 2006, the Company adopted the fair value recognition provisions
      of
      Statement of Financial Accounting Standards (‘SFAS”) No. 123(R), Share-Based
      Payment (“SFAS 123R”), using the modified-prospective-transition method. Under
      this transition method, compensation cost recognized for the nine months ended
      September 30, 2006 include: (a) compensation cost for all stock-based payments
      granted, but not yet vested as of January 1, 2006, based on the grant-date
      fair
      value estimated in accordance with the original provisions of SFAS No. 123,
      Accounting for Stock Based Compensation, and (b) compensation cost for all
      stock-based payments granted subsequent to January 1, 2006, based in the
      grant-date fair value estimated in accordance with the provisions of SFAS 123R.
      Results for prior periods have not been restated. There were no unvested stock
      based payments at January 1, 2006 and there were no stock based payments granted
      during the nine months ended September 30, 2006.





The
      following table illustrates the effect on net loss and net loss per share if
      the
      Company applied the fair value recognition provision of SFAS No. 123 to
      stock-based employee compensation for the nine months ended September 30,
      2005.





Net
                loss as reported
            
            $
            (198,503
            )Add
                back stock-based compensation included in thedetermination
                of net loss as reported
            
            
            428Less
                stock-based compensation had all options beenrecorded
                at fair value
            
            
            (1,243
            )Adjusted
                net loss
            
            $
            (199,318
            )Weighted
                average shares outstanding, basic andDiluted
            
            
            1,013,038Net
                loss per share, basic and diluted, as reported
            
            $
            (0.19
            )Adjusted
                net loss per share, basic and diluted
            
            $
            (0.20
            )





8


**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, 2005 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.





**Critical
      Accounting Policies**





Our
      accounting policies are described in our Annual Report on Form 10-KSB for the
      period ended December 31, 2005 filed with the Securities and Exchange
      Commission. The following describes the application of accounting principles
      that have a significant impact on our consolidated financial
      statements:





*Going
      Concern Assumption* - The
      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 we be unable to continue as a going
      concern. If the consolidated financial statements were prepared on liquidation
      basis, the carrying value of our assets and liabilities would be adjusted to
      net
      realizable amounts. In addition, the classification of the assets and
      liabilities would be adjusted to reflect the liquidation basis of
      accounting.





*Revenue
      Recognition* - We
      recognize revenue generated from product sales when persuasive evidence of
      an
      arrangement exists, the price is fixed and determinable, delivery has occurred
      and collection is probable. We recognize revenue generated from the sale of
      the
      Mangomind SM and
      fileTRUST SM services
      as the service is provided. We recognize revenue generated from the sale of
      the
      Mangomind SM product
      over the period of the first year’s maintenance agreement when persuasive
      evidence of the arrangement exists, the price is fixed and determinable,
      delivery and any required installation has been completed and collection is
      probable.




9





*Stock-based
      Compensation* - As
      part of our compensation programs offered to our employees, we grant stock
      options. In addition, we have engaged third-party consultants and advisors
      and
      have compensated them in the form of stock options. Through December 31, 2005
      compensation for stock options issued to employees was generally measured as
      the
      difference between the exercise price of the options granted and the fair value
      of our common stock on the date of grant. Effective January 1, 2006, the Company
      adopted the fair value recognition provisions of Statement of Financial
      Accounting Standards (“SFAS”) No. 123(R), *Share-Based
      Payment* (“SFAS
      123R”), using the modified-prospective-transition method. Under this transition
      method, compensation cost recognized for the nine months ended September 30,
      2006 include: (a) compensation cost for all stock-based payments granted, but
      not yet vested as of January 1, 2006, based on the grant-date fair value
      estimated in accordance with the original provisions of SFAS No. 123, *Accounting
      for Stock Based Compensation* ,
      and (b)
      compensation cost for all stock-based payments granted subsequent to January
      1,
      2006, based on the grant-date fair value estimated in accordance with the
      provisions of SFAS 123R.





Compensation
      for stock options issued to third-party consultants and advisors is measured
      at
      the fair value on the date of grant, determined using the Black-Scholes
      valuation model.





*Deferred
      Taxation* -
      Because of the significant operating losses incurred and projected future
      operating losses, we have provided a full valuation allowance against the
      deferred tax assets created by our net operating loss
      carryforwards.





**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 the cost of our outsourced data
      center, the fees we pay to Built Right Networks to manage our billable services
      infrastructure, internet and telephone charges.





*Other
      Operating Expenses* --
      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, 2006,
      there
      were no full time employees performing selling and marketing activities.
      Effective April 1, 2005, we have outsourced our general and administrative
      personnel activities to Built Right Networks. Our one remaining employee is
      performing some general and administrative activities.





*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, 2006, we had one employee working in a general and administrative
      capacity.





**Results
      of Operations - Three Months Ended September 30, 2006 and
      2005**





Revenues
      for the three months ended September 30, 2006 decreased $13,073 or 16% to
      $67,845 from $80,918 for the comparable period in 2005. The decrease in our
      revenues was primarily due to a $13,073 decrease in software license revenue.
      No
      customer accounted for more than 10% of our revenues for the three-month period
      ended September 30, 2006.





We
      recognized $64,852 from the sale of our Mangomind SM service
      and $2,993 from the sale of our fileTRUST SM service
      during the three months ended September 30, 2006. During the comparable period
      in 2005, we recognized $72,855 from the sale of our Mangomind SM service,
      and $8,063 from the sale of our fileTRUST SM service.





Cost
      of
      services for the three months ended September 30, 2006 decreased $1,403 or
      approximately 2% to $65,201 compared to $66,604 for the comparable period in
      2005. The decrease in the cost of delivering our services was primarily a result
      of our continued reductions and our switch to a lower cost data center Built
      Right Networks.




10





For
      the
      three-month period ended September 30, 2006, general and administrative expenses
      decreased $4,455 or approximately 5% to $78,112 compared with $82,567 for the
      comparable period in 2005. The decrease in general and administrative expenses
      was primarily due to decreases in professional, and legal fees, travel and
      travel related expenses. For the three-month period ended September 30, 2006,
      we
      had one (1) full-time employee working in a general and administrative
      capacity.





Our
      loss
      from operations increased $7,215 to $75,468 for the three-month period ended
      September 30, 2006 compared with a loss from operations of $68,253 for the
      comparable period in 2005 as a result of the above factors.





Interest
      income decreased $700 to $2,462 for the three months ended September 30, 2006
      compared to $3,162 for the three months ended September 30, 2005 primarily
      as a
      result of a reduction in our cash balances available for investment.





**Results
      of Operations - Nine Months Ended September 30, 2006 and
      2005**





Revenues
      for the nine months ended September 30, 2006 decreased $49,239 or 19% to
      $210,919 from $260,158 for the comparable period in 2005. The decrease in our
      revenues was primarily due to a $32,056 decrease in software license revenue.
      No
      customers accounted for more than 10% of our revenues for the nine-month period
      ended September 30, 2006.





We
      recognized $198,916 from the sale of our Mangomind service and $12,003 from
      the
      sale of our fileTRUST service during the nine months ended September 30, 2006.
      During the same period in 2005, we recognized $238,975 from the sale of our
      Mangomind service and $21,183 from the sale of our fileTRUST
      service.





Cost
      of
      services for the nine months ended September 30, 2006 decreased $3,977 or 2%
      to
      $197,237 from $201,214 for the comparable period in 2005. The decrease in the
      cost of delivering our services was primarily a result of continued overhead
      reductions and our switch to a lower cost data center Built Right
      Networks.





For
      the
      nine-month period ended September 30, 2006, general and administrative expenses
      decreased $1,208 or 1% to $269,941 compared with $271,149 for the comparable
      period in 2005. The decrease in general and administrative expenses was
      primarily due to decreases in professional, and legal fees, travel and travel
      related expenses. During the nine month period ended September 30, 2006, we
      had
      one (1) full-time employee working in a general and administrative
      capacity.





Our
      loss
      from operations increased $43,626 to $256,259 for the nine-month period ended
      September 30, 2006 compared with a loss from operations of $212,633 for the
      comparable period in 2005 as a result of the above factors.





Interest
      income decreased $5,556 to $8,574 for the nine months ended September 30, 2006
      compared to $14,130 for the nine months ended September 30, 2006, primarily
      as a
      result of a reduction in our cash balances available for investment.





**Financial
      Condition, Liquidity and Capital Resources**





We
      were
      formed in June 1995 and since our formation have raised approximately
      $74,250,000 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 on loans from stockholders and directors and credit
      from suppliers to meet our interim financing needs. Borrowings from stockholders
      and directors have generally been refinanced with new debt instruments or
      converted into additional equity. At September 30, 2006, approximately $831,000
      in additional financing was provided through accounts payables, accrued expenses
      and other trade credit, a significant portion of which is past due.




11





At
      September 30, 2006, we had a cash balance of approximately $219,000 and a
      working capital deficiency of approximately $591,000. We do not have any
      commercial commitments or off balance sheet financing. Our commitments under
      our
      operating leases are described in Note 10 to our consolidated financial
      statements filed on Form 10-KSB for the period ended December 31, 2005, as
      reported to the Securities and Exchange Commission.





We
      did
      not make any capital expenditures during the nine months ended September 30,
      2006.




We
      have
      significantly modified our operations and reduced our work force on four
      separate occasions since April 2001. We currently have one (1) employee working
      in a general and administrative capacity. We outsource the management of our
      billable services infrastructure, software code base, customer support and
      reseller channel management to Built Right Networks for approximately $21,000
      per month, under a September 30, 2002 agreement, which can be cancelled with
      a
      ninety (90) day notice.





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.





As
      shown
      in the unaudited condensed consolidated financial statements, during the nine
      months ended September 30, 2006 and 2005, we incurred net losses of $247,685
      and
      $198,503, respectively. Cash used in operations during the nine months ended
      September 30, 2006 and 2005 was $265,173 and $226,809, respectively. The
      factors, among others, raise significant doubt about our ability to continue
      as
      a going concern. Our continuation as a going concern is dependent upon our
      ability to generate sufficient cash flow and meet our obligations on a timely
      basis and ultimately attain profitability.








**OFF-BALANCE
      SHEET ARRANGEMENTS**





We
      do not
      have any commercial commitments or off-balance sheet financing. Our commitments
      under our operating leases are described in Note 10 to our consolidated
      financial statements filed on Form 10-KSB for the period ended December 31,
      2005, as reported to the Securities and Exchange Commission.





**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
      $89,317,684 as of September 30, 2006. For the nine months ended September 30,
      2006 and the year ended December 31, 2005, our losses from operations were
      $256,259 and $364,389, respectively. 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.





*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. Also, Bank of America
      (formerly FleetBoston) terminated its license agreement with us in September
      2004. While we are seeking new business opportunities to replace the resulting
      loss or revenue, we cannot be certain we will find a replacement for such
      revenue. If we are unable to obtain the necessary financing, our business,
      operating results and financial condition will be materially and adversely
      affected.




12





*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. Our contract represents a large majority of Built Right Networks’
revenue. 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.




*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
      in
      the future 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 ten 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.




13




*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.





*We
      Have Limitations On The Effectiveness Of Our Internal
      Controls.*





We
      have
      one (1) full-time employee engaged in general and administrative capacities.
      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.




14




**ITEM
      3.**  **CONTROLS
      AND PROCEDURES**





We
      have
      significantly reduced our work force on several occasions during 2001 and 2002.
      At September 30, 2006 we had one (1) employee, Mr. Dale Vincent, our President,
      Chief Executive Officer and sole director. 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. Vincent.





Our
      principal executive and financial officer has evaluated the effectiveness of
      our
      disclosure controls and procedures (as defined in Rules 13a-15(e) and
      15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”)), as of the end of the period covered by this Quarterly Report on
      Form 10-QSB. Based on such evaluation, our principal executive and
      financial officer has concluded that as of such date, our disclosure controls
      and procedures were designed to ensure that information required to be disclosed
      by us in reports that we file or submit under the Exchange Act is recorded,
      processed, summarized and reported within the time periods specified in
      applicable SEC rules and forms and were effective.





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, 2006 that has materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting.




15


**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 did 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.





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.




16


**ITEM
      6.** **EXHIBITS
      AND REPORTS ON FORM 8-K**





**(a)**
            **Exhibits:**





**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)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


**(b)**
            **Reports
                on Form 8-K:**


There
      were no notifications filed on Form 8-K during the three months ended September
      30, 2006.





17





**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.




MANGOSOFT,
                INC.November
                14, 2006
            By:
            /s/ *Dale
              Vincent*Dale
              VincentChief
                Executive Officer
              (Principal
                Financial and AccountingOfficer)




18