UNITED STATES


SECURITIES AND EXCHANGE
COMMISSION


Washington,DC20549





FORM 10-Q





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





For the Quarterly Period Ended March 31,
2009








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)29 Riverside St., Ste ABox8Nashua,NH
            03062(Address of principal executive
      offices)
            (Zip
  code)





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







Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months, and (2)
has been subject to such filing requirements for the past 90 days. YesxNoo





Indicate by check mark whether the
Registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):





Large accelerated filero
            Accelerated filero




Non-accelerated filer (Do not
      check if a smaller reporting company)o
            Smaller reporting companyx




Indicate by check mark whether the
Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YesoNox





As of May 11, 2009, 5,443,157shares of the Registrant’s common
stock, par value $0.001 per share, were outstanding.














MANGOSOFT, INC. AND
SUBSIDIARIES





INDEX





PagePART I.FINANCIAL
      INFORMATIONITEM 1 – Condensed Consolidated
      Financial Statements (Unaudited):Balance Sheets as of March 31,
      2009 and December 31, 2008
            3Statements of Operations for the
      Three Months Ended March 31, 2009 and 2008
            4Statements of Cash Flows for the
      Three Months Ended March 31, 2009 and 2008
            5Notes to Unaudited Condensed
      Consolidated Financial Statements
            6ITEM 2 – Management’s Discussion
      and Analysis of Financial Condition and Results of
      Operations
            9ITEM 3 – Quantitative and
      Qualitative Disclosures About Market Risk
            13ITEM 4 – Controls and
      Procedures
            13ITEM 5 – Subsequent
      Event
            13PART
      II.OTHER
      INFORMATIONITEM 1 – Legal
      Proceedings
            14ITEM 1a. – Risk
      Factors
            15ITEM 6 – Exhibits and Reports on
      Form 8-K
            18Signature
            20Officer
      Certification
            21




2




MANGOSOFT, INC. AND
SUBSIDIARIES





CONSOLIDATED BALANCE
SHEETS


(UNAUDITED)





March
              31,
            
            
            December
              31,2009
            
            
            2008ASSETSCurrent
      Assets:Cash and cash
      equivalents
            
            $
            1,054,094
            
            
            $
            1,982,192Accounts
      receivable
            
            
            12,612
            
            
            
            23,356Note
      receivable
            
            
            600,000
            
            
            
            —Investments in marketable
      securities
            
            
            59,500
            
            
            
            —Interest
      receivable
            
            
            8,133
            
            
            
            —Total
      assets
            
            $
            1,734,339
            
            
            $
            2,005,548LIABILITIES AND STOCKHOLDERS’
      EQUITYCurrent
      Liabilities:Accounts
      payable
            
            $
            27,283
            
            
            $
            153,177Accrued
      compensation
            
            
            7,788
            
            
            
            3,076Other accrued
      expenses
            
            
            24,992
            
            
            
            83,979Total current
      liabilities
            
            
            60,063
            
            
            
            240,232Stockholders’
      Equity:Preferred stock - $.001 par value;
      authorized, 5,000,000 shares; issued and outstanding,
      20,000
            
            
            20
            
            
            
            20Common stock - $.001 par value,
      authorized 15,000,000 shares in March 2009 and December 2008; issued and
      outstanding, 5,443,157 in March 2009 and December
      2008.
            
            
            5,443
            
            
            
            5,443Additional paid-in
      capital
            
            
            90,926,274
            
            
            
            90,926,274Accumulated
      deficit
            
            
            (89,257,461
            )
            
            
            (89,166,421)Total stockholders'
      equity
            
            
            1,674,276
            
            
            
            1,765,316Total liabilities and
      stockholders' equity
            
            $
            1,734,339
            
            
            $
            2,005,548





See notes to the consolidated financial
statements.




3





MANGOSOFT, INC. AND
SUBSIDIARIES





CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS


(UNAUDITED)





Three Months
      Ended
              March 31,2009
            
            
            2008Service
      revenues
            
            $
            53,973
            
            
            $
            65,607Costs and
      expenses:Cost of
      services
            
            
            58,838
            
            
            
            65,601General and
      administrative
            
            
            94,075
            
            
            
            281,642Loss from
      operations
            
            
            (98,940
            )
            
            
            (281,636
            )Investment
      income:Unrealized investment
      loss
            
            
            (12,173
            )
            
            
            —Interest
      income
            
            
            20,073
            
            
            
            4,271Net Investment
      income
            
            
            7,900
            
            
            
            4,271Net
    loss
            
            $
            (91,040
            )
            
            $
            (277,365
            )Net loss per share – basic and
      diluted
            
            $
            (0.02
            )
            
            $
            (0.07
            )Weighted average shares
      outstanding – basic and diluted
            
            
            5,443,157
            
            
            
            4,149,235




See notes to the unaudited condensed
consolidated financial statements.




4




MANGOSOFT, INC. AND
SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH
FLOWS


(UNADUDITED)





Three Months Ended
              March 31,2009
            
            
            2008CASH FLOWS USED IN OPERATING
      ACTIVITIES:Net
    loss
            
            $
            (91,040
            )
            
            $
            (277,365
            )Adjustments to reconcile net loss
      to net cash used by operating activities:Unrealized loss in marketable
      securities
            
            
            12,173
            
            
            
            —Increase (decrease) in cash from
      the change in:Accounts
      receivable
            
            
            10,744
            
            
            
            14,857Accounts
      payable
            
            
            (125,894
            )
            
            
            43,899Other accrued
      expenses
            
            
            (54,274
            )
            
            
            (20,521
            )Net cash used in operating
      activities
            
            
            (248,291
            )
            
            
            (239,130
            )CASH FLOWS USED IN INVESTING
      ACTIVITIES:Note  receivable
            
            
            (600,000
            )
            
            
            —Interest
      receivable
            
            
            (8,133
            )
            
            
            —Investment in marketable
      securities
            
            
            (71,673
            )
            
            
            —Net cash used in investing
      activities
            
            
            (679,806
            )
            
            
            —CASH FLOWS FROM FINANCING
      ACTIVITIES:Net Proceeds fromPrivatePlacement of Common
      Stock
            
            
            —
            
            
            
            1,023,546Net cash provided by financing
      activities
            
            
            —
            
            
            
            1,023,546NET INCREASE
      (DECREASE)  IN CASH AND CASH
      EQUIVALENTS
            
            
            (928,097
            )
            
            
            784,416CASH AND CASH EQUIVALENTS,
      BEGINNING OF PERIOD
            
            
            1,982,191
            
            
            
            318,065CASH AND CASH EQUIVALENTS, END OF
      PERIOD
            
            $
            1,054,094
            
            
            $
            1,102,481




SUPPLEMENTAL DISCLOSURES OF CASH
      FLOW INFORMATION:Cash paid for
      interest
            
            NONE
            
            
            NONECash paid for income
      taxes
            
            NONE
            
            
            NONE




See notes to the unaudited condensed
consolidated financial statements.




5




MANGOSOFT, INC. AND
SUBSIDIARIES





NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS





1.
            NATURE OF
      BUSINESS AND BASIS OF
PRESENTATION





MangoSoft, Inc. and subsidiaries (the
"Company") markets, sells and supports Internet business software and services
that improve the utility and effectiveness of Internet-based business
applications. The Company’s software solutions address the networking needs of
small businesses, workgroups and large enterprises. The Company is engaged in a
single operating segment of the computer software industry.




The accompanying unaudited condensed
consolidated financial statements have been prepared on the same basis as the
annual financial statements. In the opinion of management, all significant
adjustments, which are normal, recurring in nature and necessary for a fair
presentation of the financial position, cash flows and results of the operations
of the Company, have been consistently recorded. The operating results for the
interim periods presented are not necessarily indicative of expected performance
for the entire year. 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, 2008 included in the Company’s
Annual Report on Form 10-K filed with the Securities and Exchange
Commission.





As shown in the unaudited condensed
consolidated financial statements, during the three months ended March 31, 2009
and 2008, the Company incurred net losses of $92,973 and $277,365 respectively.
Cash used in operations during the three months ended March 31, 2009 and 2008
was $248,291 and $239,130, 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.




6





The Company received gross proceeds of
approximately $1,023,672 million through the issuance of common stock pursuant
to a rights offering and as a consequence issued, commencing on or about
February 27, 2008, approximately 2,047,344 shares of its common stock to
stockholders who properly exercised their rights in the rights offering.
Pursuant to the rights offering, which concluded as of the close of business on
February 19, 2008, stockholders of record at the close of business on December
21, 2007, received, at no charge, a 0.7032 non-transferable right for each share
of common stock owned by such stockholder on the record date. Each full right
entitled the holder to purchase one share of the Company's common stock at a
purchase price of $0.50 per share.




The Company expects to use approximately
$750,000 of the net proceeds from the rights offering in connection with
pursuing various intellectual property litigations to enforce the Company’s
patent portfolio. The Company anticipates using the balance of the net proceeds
from the rights offering for working capital purposes, including obtaining
directors’ and officers’ insurance.




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 three months ended March 31,
2009 and 2008, the effect of stock options and other potentially dilutive shares
were excluded from the calculation of diluted net loss per common share as their
inclusion would have been antidilutive.




7




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-BASED
      COMPENSATION





The Company currently has one
stock-based compensation plan, which is described more fully in Note 6 in the
Company’s Annual Report on Form 10-K for the period ended December 31, 2008, as
filedon March 30,
2009. As amended, this plan
provides for the issuance of up to 296,297 shares of common stock to employees,
officers, directors and consultants in the form of nonqualified and incentive
stock options, restricted stock grants or other stock-based awards, including
stock appreciation rights. The stock options are exercisable as specified at the
date of grant and expire no later than ten years from the date of grant. As of
March 31, 2009,there were
179,652remaining 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 to be recognized for the first three months of 2006 would
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. 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 three months ended March
31, 2009 and 2007.





5.
            NOTE
      RECEIVABLE





On January 29, 2009, MangoSoft, Inc.
(the “Company” or “MangoSoft”) agreed to loan $600,000 to Plaintiff Holding XI
LLC, a newly formed wholly owned subsidiary (the “Subsidiary”) of Plaintiff
Funding Holding, Inc., d/b/a LawCash (“LawCash”).  Such $600,000 loan
(the “Loan”) is evidenced by a secured promissory note issued by the Subsidiary
to MangoSoft having a term of one (1) year and bearing interest at the rate of
14% per annum (the “MangoSoft Secured Note”).  LawCash, through its
various subsidiaries, is in the business of financing litigations, and the
proceeds of the Loan will be used to fund various plaintiffs’ receivables in the
normal course of LawCash’s business.  The Subsidiary’s obligations
with respect to the MangoSoft Secured Note are guaranteed by LawCash (the
“LawCash Guarantee”), and in addition, Mr. Selig Zises has agreed to guarantee
up to $120,000 of losses incurred by the Company in connection with the
MangoSoft Secured Note (the “Loss Guarantee”).Each of the
Company and LawCash are directly or indirectly controlled by Mr. Selig Zises and
Mr. Jay Zises.




6.
              INVESTMENTS IN
      MARKETABLE SECURITIES
  Investments
in marketable securities consists of common stock and equivalents of a publicly
traded REIT. Fair value is determined for this investment using quoted prices in
active markets for identical assets or liabilities to determine fair value. This
pricing methodology applies to our Level 1 investments




8





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





This Quarterly Report on Form 10-Q
contains forward-looking statements within the safe harbor provisions of thePrivateSecurities Litigation Reform Act of
1995. Any statements in this Quarterly Report that are not statements of
historical facts are forward-looking statements, which involve risks and
uncertainties. Without limiting the foregoing, the words “believes,”
“anticipates,” “plans,” “expects,” and similar expressions are intended to
identify forward-looking statements. Our actual results may differ materially
from those indicated in the forward-looking statements as a result of the
factors set forth elsewhere in this Quarterly Report on Form 10-Q, including
under “Risk Factors.” You should read the following discussion and analysis
together with our unaudited condensed consolidated financial statements for the
periods specified and the related notes included herein. Further reference
should be made to our Annual Report on Form 10-K for the period ended December
31, 2008 filed with the Securities and Exchange Commission.





Overview





We market, sell and support Internet
business software and services that improve the utility and effectiveness of
Internet-based business applications. Our software solutions address the
networking needs of small businesses, workgroups and large enterprises. Our
products and services enhance the performance of PC networks and deliver
improved service utilizing existing equipment. We no longer develop new software
products or services.




MangomindSMis 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. MangomindSMprovides the secure file sharing
benefits of a VPN without additional hardware and configuration complexities.
MangomindSMis sold as both a service and a
standalone software product.





fileTRUSTSMis an online data storage service.
fileTRUSTSMusers can access their stored files
from any Internet-connected system. The fileTRUSTSMservice compliments our
MangomindSMservice by providing customers with a
lower cost online storage system.





Critical Accounting
Policies





Our accounting policies are fully
described in Note 2 in the Company’s Annual Report on Form 10-K for the period
ended December 31, 2008, as filed on March 30, 2009. The following describes the
application of accounting principles that have significant impact on our
unaudited consolidated financial statements:





Going Concern
Assumption– The unaudited
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 unaudited 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.




9




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
MangomindSMand fileTRUSTSMservices as the service is provided. We
recognize revenue generated from the sale of the MangomindSMproduct 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.





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. Compensation for stock options
issued to employees is 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. 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. Because of the cashless exercise feature of
the stock options granted in 1999 and the repricing of options granted in 2000
and 2003, we are required to remeasure the compensation related to these awards
at each reporting date. As the quoted market price of our common stock
fluctuates, our reported operating expenses will continue to fluctuate. These
fluctuations can be significant.





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
MangomindSMand fileTRUSTSMservices. These expenses consist
primarily of salaries and related personnel costs, the cost of our outsourced
data center, the license royalties we pay to our e-security software provider
for the encryption used in the MangomindSMservice and the fees we pay to Built
Right Networks to manage our billable services
infrastructure.





Engineering and
Development Expenses-
Engineering and development expenses consist primarily of 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. At
March 31, 2009, there were no full time employees performing engineering or
development on our products and services. We have outsourced the maintenance of
our billable services infrastructure as well as product and customer support to
Built Right Networks.





Other Operating
Expenses –Selling and
marketing expenses consist primarily of costs incurred to market our products
and services such as the costs of attending and presenting at trade shows.
General and administrative expenses consist primarily of salaries and related
personnel costs and other general corporate costs such as facility costs,
commercial and general liability insurance, accounting and legal expenses and
other costs typical of a publicly held corporation. At March 31, 2009, there
were no full time employees performing selling and marketing activities. Our
remaining employee is performing 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 March 31, 2009, we had one employee,
working in a general and administrative capacity.




10




Results of Operations–Three Months Ended
March 31, 2009 and 2008





Revenues for the three months ended
March 31, 2009 decreased $11,634 or 17.7% to $53,973 from $65,607 for the
comparable period in 2008. No customer accounted for more than 10% of our
revenues for either period.





We recognized $51,199 from the sale of
our MangomindSMservice and $2,774 from the sale of our
fileTRUSTSMservice during the three months ended
March 31, 2009. During the comparable period in 2008, we recognized $62,552 from
the sale of the MangomindSMservice and $3,055 from the sale of our
fileTRUSTSMservice.




Cost of services for the three months
ended March 31, 2009 decreased $6,763 or 10.3% to $58,838 compared to $65,601
for the comparable period in 2008. 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. In response to our loss of Bank of America (formerly
FleetBoston) as a customer, we have instituted cost reductions to lessen the
adverse effects of the loss of the Bank of America (formerly FleetBoston)
revenues, including restructuring our business relationships with key vendors
such as Built Right Networks.




For the
three months ended March 31, 2009, other operating expenses including selling
and marketing and general and administrative expenses decreased $187,567 or
66.6% to $94,075 compared with $281,642 for the comparable period in 2008. The
decrease in other operating expenses was due primarily to a decrease in legal
costs incurred in pursuit and defense of our patents combined with a reduction
of public relations, legal and other corporate consultants. During the three
months ended March 31, 2009 and 2008, our one (1) full-time employee was working
in a general and administrative capacity.




There was a $12,173 unrealized loss from
an investment held at Ladenburg Thalmann.





Our loss from operations decreased
$182,696 to $98,940 for the three months ended March 31, 2009 compared with a
loss from operations of $281,636 for the comparable period in 2008, as a result
of the above factors.





Interest income increased $15,802 to
$20,073 for the three months ended March 31, 2009 compared to $4,271 for the
comparable period in 2008 due to the availability of working capital and
addition ofthe note
receivable.




Financial Condition, Liquidity and
Capital Resources





We were formed in June 1995 and, since
our formation, have raised approximately $76,449,000 in financing fromprivateplacements of debt and equity
securities. In addition to the financing we received through the sale of our
securities, we have, at times, depended upon loans from stockholders and
directors and credit from suppliers to meet interim financing needs. Borrowings
from stockholders and directors have generally been refinanced with new debt
instruments or converted into additional equity. At March 31, 2009, approximately
$60,000 in additional financing was provided through accounts payable, accrued
expenses and other trade credit.




11




The Company received gross proceeds of
approximately $1,023,672 through the issuance of common stock pursuant to a
rights offering and as a consequence issued, completed on or about February 19,
2008, approximately 2,047,344 shares of its common stock to stockholders who
properly exercised their rights in the rights offering. Pursuant to the rights
offering, which concluded as of the close of business on February 19, 2008,
stockholders of record at the close of business on December 21, 2007, received,
at no charge, a 0.7032 non-transferable right for each share of common stock
owned by such stockholder on the record date. Each full right entitled the
holder to purchase one share of the Company’s common stock at a purchase price
of $0.50 per share.





On January29, 2009, Form 8-K was filed indicating
that Mangosoft agreed to loan $600,000 to Plaintiff Holding XI LLC, a newly
formed wholly owned subsidiary (the “Subsidiary”) of Plaintiff Funding Holding,
Inc., d/b/a LawCash. Such loan is evidenced by a secured promissory note issued
by the Subsidiary to Mangosoft having a term of one year and bearing
interest at the rate of 14%
per annum.





At March 31, 2009, we had a cash balance
of $1,054,094 and working capital of approximately $1,674,276. We do not have
any commercial commitments or off balance sheet financing. Our commitments are
described in Note 8 in the Company’s Annual Report on Form 10-K for the period
ended December 31, 2008, as filed on March 30, 2009.





We did not make any capital expenditures
during the three months ended March 31, 2009.





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 $19,500 per month, under an
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 consolidated
financial statements, during the three months ended March 31, 2009 and 2008, we
incurred a net loss of $91,040 and $277,365, respectively. Cash used in
operations during the three months ended March 31, 2009 and 2008 was $248,291
and $239,130, 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 are described in
Note 8 to our consolidated financial statements filed on Form 10-K for the
period ended December 31, 2008, as reported to the Securities and Exchange
Commission.




12




ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





The accompanying unaudited consolidated
financial statements include estimated fair value information as of March 31,
2009 as required by SFAS No. 107, “Disclosure About Fair Value of Financial
Instruments”. Disclosure of the estimated fair values of financial instruments
often requires the use of estimates. The Company uses the following methods and
assumptions to estimate the fair value of financial
instruments.





CASH





The carrying amounts approximate fair
market value at March 31, 2009.





NOTE
RECEIVABLE





The carrying amounts approximate fair
market value at March 31, 2009.





MARKETABLE
SECURITIES





The carrying amounts approximate fair
market value at March 31, 2009.


In accordance with SFAS 159, the company
is recording unrealized losses on the Statement of
Operations.




ITEM 4. CONTROLS AND
PROCEDURES





We have significantly reduced our work
force on several occasions during 2001 and 2002. At March 31, 2008 and 2009, 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 Annual Report on Form 10-K. 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 overfinancial
reporting(as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during
the quarter ended March 31, 2009 that has materially affected, or is reasonably
likely to materially affect, our internal control overfinancial reporting.




ITEM 5.SUBSEQUENT
EVENT





On April 22, 2009, Dale Vincent, the
Chief Executive Officer and President and sole Director and sole employee of
MangoSoft, Inc. (the “Company”), passed away.  As a result of the vacancy created by
the death of Mr. Vincent, on April 28, 2009, Selig Zises was elected as a
Director of the Company by written consent of a majority of the stockholders of
the Company in lieu of a stockholders’ meeting.  Thereafter, Mr. Zises
appointed himself as Interim Chief Executive Officer and Interim Secretary
of the Company.  Mr. Zises will not receive any compensation as an
officer or director of the Company.  Mr. Zises is 67 years of age and has
been aprivateinvestor for the past five (5) years.
There is no family relationship between Selig Zises and any other former
executive officer or director of the Company, and there is no arrangement or
understanding under which Selig Zises was appointed Director, Interim Chief
Executive Officer or Interim Secretary.




13




PART II–OTHER
INFORMATION





ITEM 1. LEGAL
PROCEEDINGS





On November 22, 2002, the Company filed
a complaint in the United States District Court of New Hampshire, against Oracle
Corporation for infringement of U.S. Patent No. 6,148,377 and U.S. Patent No.
5,918,229. The complaint seeks unspecified monetary damages and injunctive
relief and awards for interest, costs and attorneys’ fees.





On May 15, 2003, Oracle Corporation
filed a complaint in the United States District Court, Northern District of
California, against the Company and Built Right Networks for infringement of a
patent held by Oracle Corporation. The complaint seeks unspecified monetary
damages and injunctive relief and awards for interest, costs and attorneys’
fees.





On July 2, 2003, the Company filed a
complaint in the United States District Court, Northern District of California,
against Oracle Corporation, Sun Microsystems, Inc., Dell Computer Corporation
and Electronic Arts, Inc. for infringement of U.S. Patent No. 6,148,377 and U.S.
Patent No. 5,918,229. The complaint seeks unspecified monetary damages and
injunctive relief and awards for interest, costs and attorneys’
fees.




On March 14, 2006, the U,S., District
Court in New Hampshire ruled in favor of Oracle’s motion for summary judgment
that 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 ofLuxembourg. The Complaint alleges that
each of the defendants have infringed, and continue to infringe, U.S. Patent No.
6,647,393 entitled "Dynamic Directory Service" in violation of one or more
provisions of 35 U.S.C. section 271. The complaint seeks damages for willful
infringement as well as injunctive relief.





On October 26, 2006 Mangosoft Inc. was
successful in its motion for summary judgment of non-infringement of United
States Patent No. 6,371,790 in an action brought by Oracle International Corp.
Oracle's motion for summary adjudication of patent validity, along with
Mangosoft's motion to amend its final contentions of patent invalidity, and
Oracle's motion to preclude Mangosoft from asserting a defense of inequitable
conduct were denied by the United States District Chief
Judge.





On March 29, 2007 the Company filed a
Notice of Appeal in the United States District Court for the District of New
Hampshire in the case ofMangosoft,
Inc., et al. v. Oracle Corporation, C.A. No. 02-545-M. By filing the
Notice of Appeal, Mangosoft has commenced an appeal in the United States Court
of Appeals for the Federal Circuit challenging, among other things, the District
Court’s claim construction Order of September 21, 2004, the District Court’s
order granting defendant Oracle Corporation’s motion for summary judgment of
non-infringement entered on March 14, 2006, and the District Court’s entry of
final judgment entered on March 29, 2007.





On May 14, 2008, Form 8-K was filed
indicating that the United States Court of Appeals for the Federal Circuit
issued an opinion in the case Mangosoft, Inc. et al. v. Oracle Corporation. The
opinion affirmed the District Court’s claim construction order of September 21,
2004 and the District’s Court’s decision granting defendant’s motion for summary
judgment on non-infringement entered by the District Court on March 28,
2007.





On December 4, 2008, Form 8-K was filed
indicating that Mangosoft, Inc. entered into an agreement to settle its patent
litigation with Skype Technologies SA, Skype Software SARL and eBay Inc. titled
Mangosoft Intellectual Property, Inc. V. Skype Technologies, S.A. et al., Civil
Action No. 2:06CV-390 TJW, which was pending in the United States District Court
for the Eastern District of Texas. Under the terms of the Agreement, eBay and
its affiliates and subsidiaries will receive a non-exclusive license to all of
the patents or patent applications now owned by the Company, or in which the
Company has a controlling interest, for a one time fee in the amount of
$2,300,000. The Agreement also provides for general releases and dismisses the
existing litigation between the parties.





Other than the matters listed above,
there are no material pending legal proceedings, other than the routine
litigation occurring in the normal course of operations, to which we are party
or of which any of our properties are subject.




14




ITEM
1a.–Risk
Factors





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





We have a history of substantial
operating losses and an accumulated deficit of $89,257,461as of March 31, 2009. For the three
months ended March 31, 2009, our loss from operations was $91,040.





We have historically experienced cash
flow difficulties primarily because our expenses have exceeded our revenues. We
expect to incur additional operating losses. These factors, among others, raise
significant doubt about our ability to continue as a going concern. If we are
unable to generate sufficient revenue from our operations to pay expenses or we
are unable to obtain additional financing on commercially reasonable terms, our
business, financial condition and results of operations will be materially and
adversely affected.





However, for the year ended December 31,
2008 we had income from operations of $547,660. This was primarily due to
litigation settlement income, which is described in Note 3 to our consolidated
financial statements filed on Form 10-Kfor the period ended December 31,
2008.




We Will Need Additional
Financing.





We may require additional capital to
finance our future operations. We can provide no assurance that we will obtain
additional financing sufficient to meet our future needs on commercially
reasonable terms or otherwise.





Our Success Depends On Our Outsourced
Services Agreement.





Effective September 30, 2002, we
outsourced the management of our internal information systems, billable services
infrastructure, software code base, customer support and reseller channel
management to Built Right Networks under our September 30, 2002 Information
Management Services Agreement (the “Outsourced Services Agreement”). The
principals of Built Right Networks are all former MangoSoft employees. 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 MangomindSMand fileTRUSTSM. Due to our small size and need to
conserve capital, our selling and marketing activities for these products and
services is limited. If markets for our products fail to develop, develop more
slowly than expected, are subject to substantial competition or react negatively
to Bank of America’s (formerly FleetBoston) termination of its February 2002
enterprise license agreement with us, our business, financial condition and
results of operations will be materially and adversely
affected.





We Depend On Strategic Marketing
Relationships.





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




15





There May Be Limited Liquidity In Our
Common Stock And Its Price May Be Subject to Fluctuation.





Our common stock is currently traded on
the OTC Bulletin Board and there is only a limited market for our common stock.
We can provide no assurances that we will be able to have our common stock
listed on an exchange or quoted on Nasdaq or that it will continue to be quoted
on the OTC Bulletin Board. If there is no trading market for our common stock,
the market price of our common stock will be materially and adversely
affected.





SEC Rules Concerning Sales Of Low-Priced
Securities May Hinder Re-Sales Of Our Common Stock





Because our common stock has a market
price that is less than five dollars per share, our common stock is not listed
on an exchange or quoted on Nasdaq and is traded on the OTC Bulletin Board.
Brokers and dealers who handle trades in our common stock are subject to certain
SEC disclosure rules when effecting trades in our common stock, including
disclosure of the following: the bid and offer prices of our common stock, the
compensation of the brokerage firm and the salesperson handling a trade and
legal remedies available to the buyer. These requirements may hinder re-sales of
our common stock and may adversely affect the market price of our common
stock.





Rapidly Changing Technology And
Substantial Competition May Adversely Affect Our Business.





Our business is subject to rapid changes
in technology. We can provide no assurances that research and development by
competitors will not render our technology obsolete or uncompetitive. We compete
with a number of computer hardware and software design companies that have
technologies and products similar to those offered by us and have greater
resources, including more extensive research and development, marketing and
capital than us. We can provide no assurances that we will be successful in
marketing our existing products and developing and marketing new products in
such a manner as to be effective against our competition. If our technology is
rendered obsolete or we are unable to compete effectively, our business,
operating results and financial condition will be materially and adversely
affected.




Litigation Concerning Intellectual
Property Could Adversely Affect Our Business.




We rely on a combination of trade
secrets, copyright andtrademarklaw, contractual provisions,
confidentiality agreements and certain technology and security measures to
protect our trademarks, patents, proprietary technology and know-how. However,
we can provide no assurance that our rights in our intellectual property will
not be infringed upon by competitors or that competitors will not similarly make
claims against us for infringement. If we are required to be involved in
litigation involving intellectual property rights, our business, operating
results and financial condition will be materially and adversely
affected.





Defects In Our Software Products May
Adversely Affect Our Business.




Complex software such as the software
developed by MangoSoft may contain defects when introduced and also when updates
and new versions are released. Our introduction of software with defects or
quality problems may result in adverse publicity, product returns, reduced
orders, uncollectible or delayed accounts receivable, product redevelopment
costs, loss of or delay in market acceptance of our products or claims by
customers or others against us. Such problems or claims may have a material and
adverse effect on our business, financial condition and results of
operations.




16




We Have Limitations On The Effectiveness
Of Our Internal Controls.





We have one full-time employee. This
employee is 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.




17




ITEM
6. EXHIBITS AND REPORTS ON
FORM 8-K





(a)
            Exhibits:





Number
            Description of
      Exhibit2.1
            Agreement and Plan of Merger by
      and among First American Clock Co., MangoSoft Corporation and MangoMerger
      Corp., dated as of August 27, 1999. (1)3.1
            Articles of Incorporation, as
      amended. (2)3.2
            By-laws.
  (2)4.1
            Rights Plan.
      (6)10
            Lease ofWestboroughOffice Park, Building Five, dated November
      10, 1995. (3)14
            Code of Ethics.
      (7)21
            Subsidiary of the Registrant.
      (2)31.1
            Certification of Principal
      Executive Officer required by Rule 13a 14(a) or Rule 15-d14 (a) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
            Certification of Chief Executive
      Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002.99.1
            1999 Incentive Compensation Plan,
      as amended and restated on May 1, 2000. (1)99.2
            Form of Subscription Agreement for
      purchase of common stock, dated as of March 20, 2000.
      (1)99.3
            Form of Warrant Agreement.
      (1)99.4
            Asset Purchase Agreement, dated
      February 11, 2002, between MangoSoft, Inc. and Fleet National Bank.
      (4)99.5
            Warrant Agreement, dated February
      11, 2002, between MangoSoft, Inc. and Fleet National Bank.
      (4)99.6
            Information Management Services
      Agreement, dated September
              30, 2002, between MangoSoft, Inc.
      and Built Right Networks LLC. (5)99.7
            Rights Agreement, dated March 14,
      2003, between MangoSoft, Inc. and Interwest Transfer Co., Inc.
      (6)




(1)
            Filed as an
      exhibit to our Current Report on Form 8-K for an event dated September 7,
      1999 and hereby incorporated by reference
  thereto.


(2)
            Filed as an
      exhibit to our Registration Statement on Form 10-SB, filed June 9, 2000,
      and hereby incorporated by reference
  thereto.


(3)
            Filed as an
      exhibit to our Quarterly Report filed November 9, 1999 for the quarter
      ended September 30, 1999 and hereby incorporated by reference
      thereto.


(4)
            Filed as an
      exhibit to our Quarterly Report filed August 14, 2002 for the quarter
      ended June 30, 2002 and hereby incorporated by reference
      thereto.


(5)
            Filed as an
      exhibit to our Current Report on Form 8-K for an event dated September 30,
      2002 and hereby incorporated by reference
  thereto.


(6)
            Filed as an
      exhibit to our Current Report on Form 8-K for an event dated March 21,
      2003, as amended on July 25, 2003, and hereby incorporated by reference
      thereto.


(7)
            Filed as an
      exhibit to our Annual Report filed on March 26, 2004 for the year ended
      December 31, 2003 and hereby incorporated by reference
      thereto.





18





(b) Reports on Form
8-K:






(1)
            On January 22,
      2008, Form 8-K was filed indicating that its Board of Directors has
      extended the expiration date of its previously announced rights offering
      from January 29, 2008 to February 18, 2008.(2)
            On January 29,
      2008, Form 8-K was filed indicating that its Board of Directors has
      extended the expiration date of its previously announced rights offering
      from February 18, 2008 to February 19, 2008.(3)
            On February 27, 2008, Form 8-K was
      filed indicating the closing and the results of its rights offering which
      ended as of the close of business on February 19, 2008. The Company
      received gross proceeds of approximately $1,023,672 and will issue
      approximately 2,047,344 shares of its common stock to its stockholders who
      properly exercised their rights in the rights offering. The Company
      expects to commence issuing the shares of common stock on or about
      February 27, 2008.(4)
            On May 14 2008, Form 8-K was filed
      indicating that the United States Court of Appeals for the Federal Circuit
      issued an opinion in the case Mangosoft, Inc. et al. v. Oracle
      Corporation. The opinion affirmed the District Court’s claim construction
      order of September 21, 2004 and the District Court’s decision granting
      defendant’s motion for summary judgment on non-infringement entered by the
      District Court on March 28, 2007.(5)
            On December 4, 2008, Form 8-K was
      filed indicating that Mangosoft, Inc. entered into an agreement to settle
      its patent litigation with Skype Technologies SA, Skype Software SARL and
      eBay Inc. titled Mangosoft Intellectual Property, Inc. V. Skype
      Technologies, S.A. et al., Civil Action No. 2:06CV-390 TJW, which was
      pending in the United States District Court for the Eastern District of
      Texas. Under the terms of the Agreement, eBay and its affiliates and
      subsidiaries will receive a non-exclusive license to all of the patents or
      patent applications now owned by the Company, or in which the Company has
      a controlling interest, for a one time fee in the amount of $2,300,000.
      The Agreement also provides for general releases and dismisses the
      existing litigation between the parties.(6)
            On
      January 29, 2009, Form 8-K was filed indicating that Mangosoft agreed to
      loan $600,000 to Plaintiff Holding XI LLC, a newly formed wholly owned
      subsidiary (the “Subsidiary”) of Plaintiff Funding Holding, Inc., d/b/a
      LawCash. Such loan is evidenced by a secured promissory note issued by the
      Subsidiary to Mangosoft having a term of one year and bearing interest at the rate of 14% per annum.Each of the Company and LawCash are directly or indirectly
      controlled by Mr. Selig Zises and Mr. Jay
Zises.






19




SIGNATURE





In accordance with the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.





May 15,
2009
            MANGOSOFT,
    INC./S/Selig
      ZisesSelig Zises
              Interim Chief Executive
      Officer




20