UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-KSB

[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934. FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

                                       OR

[ ]   TRANSITION REPORT UNDER 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                                   03062
(Address of principal executive offices)                 (Zip code)

                    ISSUER'S TELEPHONE NUMBER: (603) 324-0400

       SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE

         SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
                         COMMON STOCK, $0.001 PAR VALUE

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

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[ ]

         State issuer's revenues for the most recent fiscal year: $466,225

         State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and ask price of such common equity,
as of a specified date within the past 60 days: $5,824,968. This amount reflects
the average bid and ask price of the Company's common stock on the OTCBB on
February 16, 2005.

         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 March 25, 2005)

         Transitional Small Business Disclosure Format (check one):
                                                                  Yes [ ] No [X]


<PAGE>

                                 MANGOSOFT, INC.

                              INDEX TO FORM 10-KSB


                                     PART I
                                                                            PAGE
                                                                            ----
ITEM 1--  Description of Business............................................. 3
ITEM 2--  Description of Property.............................................11
ITEM 3--  Legal Proceedings...................................................11
ITEM 4--  Submission of Matters to a Vote of the Security Holders.............11

                                     PART II

ITEM 5--  Market for Common Equity and Related Stockholder Matters............12
ITEM 6--  Management's Discussion and Analysis of Financial Condition and
            Results of Operations.............................................14
ITEM 7--  Financial Statements................................................20
ITEM 8--  Changes in and Disagreements With Accountants on Accounting and
            Financial Disclosure..............................................20
ITEM 8A-  Controls and Procedures.............................................20
ITEM 8B-  Other information ..................................................20

                                    PART III

ITEM 9--  Directors and Executive Officers of the Registrant .................21
ITEM 10-- Executive Compensation..............................................22
ITEM 11-- Security Ownership of Certain Beneficial Owners and Management
            And Related Stockholder Matters...................................23
ITEM 12-- Certain Relationships and Related Transactions......................24
ITEM 13-- Exhibits and Reports on Form 8-K....................................25
ITEM 14-- Principal Accountant Fees and Services..............................26

Signature.....................................................................27



                     FACTORS THAT MAY AFFECT FUTURE RESULTS

     The Company's prospects are subject to certain uncertainties and risks.
This Annual Report on Form 10-KSB also contains certain forward-looking
statements within the meaning of the Federal Securities Laws. The Company's
future results may differ materially from its current results and actual results
could differ materially from those projected in the forward-looking statements
as a result of certain risk factors.

     Readers should pay particular attention to the considerations described in
the section of this report entitled "Risk Factors" beginning on page 8 of this
report. Readers should also carefully review the risk factors described in the
other documents the Company files from time to time with the Securities and
Exchange Commission.



                                       2
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

(A)  BUSINESS DEVELOPMENT

     MangoSoft, Inc. ("MangoSoft") was incorporated as First American Clock Co.
("First American") under the laws of the State of Nevada on May 17, 1995. In
connection with the organization of First American, its president and founders
contributed $8,000 cash as initial capital. To raise funds with which to
commence business operations, First American registered a public offering of its
securities on Form SB-2, Commission File No. 33-93994, which became effective on
October 25, 1995. Pursuant thereto, First American sold 187,800 shares of its
common stock (as adjusted for stock splits) to the public at approximately $0.29
per share and raised gross proceeds of $54,150. However, First American did not
generate any significant revenues from its operations and ceased such operations
at the end of 1998.

     Pursuant to an Agreement and Plan of Merger by and among MangoSoft
Corporation, MangoMerger Corp. and First American, dated August 27, 1999 (the
"Merger Agreement"), MangoSoft Corporation, a Delaware corporation engaged in
software development, merged with MangoMerger Corp., a wholly-owned subsidiary
of First American, which changed its name to MangoSoft, Inc., so that MangoSoft
Corporation became a wholly-owned subsidiary of MangoSoft, Inc., the registrant
(such transactions collectively referred to as the "Merger").

     Pursuant to the terms of the Merger Agreement, all of the outstanding
capital stock of MangoSoft Corporation was converted into common stock of
MangoSoft, Inc., par value $0.001 per share (the "Common Stock"), in accordance
with the conversion rates specified in the Merger Agreement. In connection with
the Merger, MangoSoft, Inc. issued 555,889 shares of Common Stock to security
holders and certain debt holders of MangoSoft Corporation. As part of the
Merger, we completed a private placement of 111,112 shares of common stock for
net proceeds of approximately $3.1 million. We also issued 11,112 shares of
common stock to the placement agent in respect of such private placement.
Because First American was a non-operating entity and the closing of such
private placement was contingent upon the closing of the Merger, the Merger was
accounted for as a capital transaction and treated as a reverse acquisition, so
that MangoSoft Corporation was deemed to have acquired First American.
Accordingly, unless otherwise specified, historical references to our operations
are references to the operations of MangoSoft Corporation.

     Effective March 7, 2003, MangoSoft completed a 1-for-27 reverse stock split
of its common stock. As a result of this reverse stock split, our authorized
shares of common stock decreased from 100,000,000 to 3,703,703.

     On March 11, 2003, MangoSoft declared a dividend distribution of one right
(a "Right") to purchase one-tenth of a share of common stock, $0.001 par value,
for each share of MangoSoft common stock, payable to stockholders of record on
March 18, 2003. MangoSoft also authorized and directed the issuance of one Right
with respect to each common share issued thereafter until the distribution date
(as defined in the Rights Agreement) and, in certain circumstances, with respect
to common shares issued after the distribution date. Except as set forth in the
Rights Agreement, each Right, when it becomes exercisable, entitles the
registered holder to purchase from MangoSoft one-tenth of a common share at a
price of $250.00 per whole common share, subject to adjustment, as amended. The
description and terms of the Rights are set forth in a Rights Agreement between
the Company and Interwest Transfer Co., Inc., as Rights Agent, dated as of March
14, 2003, as amended.


                                       3
<PAGE>

(B) BUSINESS OF MANGOSOFT

GENERAL

     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. We have leveraged our patented technology
known as "Pooling" to develop our suite of software solutions. Pooling is a
peer-to-peer clustering technology that utilizes the network and resources of
client personal computers ("PCs") and workstations to deliver easy-to-use
advanced software services. MangoSoft helps businesses gain a competitive
advantage by improving collaboration with customers, partners and colleagues
through smarter, faster Internet communications.

BUSINESS STRATEGY

     We no longer develop new software products or services. We continue to
market, sell and support our software services. Our strategy also includes
seeking strategic business partnerships and distribution channels to leverage
our patented technology.

COMPETITION

     We compete primarily with general technology suppliers such as Microsoft
Corporation, Oracle Corporation, EMC Corporation and Novell, Inc., as well as
emerging Internet collaboration companies such as Groove Networks, Inc. We
anticipate that we will encounter substantial competition from these companies
as well as others entering the Internet storage and collaboration markets.

                                    PRODUCTS

     Our core technology includes our patented, peer-to-peer clustering
technology, originally marketed as Pooling. This technology combines memory and
disk resources of multiple systems on a network into a coherent shared resource,
featuring an efficient distributed directory, dynamic data movement and data
replication. We have applied for ten patents on our technology, five of which
have been granted.

     MangoSoft's software and services make the Internet a better place for
business. Our customers use Mangomind(SM) to easily and securely connect with
remote colleagues, clients and partners around the world. In doing so, Mangomind
enables its users to make smarter and faster business decisions. Mangomind
provides the secure file sharing benefits of a virtual private network ("VPN")
without additional hardware and configuration complexities.

     Mangomind is an adaptation of our patented Pooling technology that delivers
an easy-to-use virtual file service for the Internet. Mangomind combines the
familiarity of Windows applications with the power of the Internet to deliver a
secure means for multiple users to access, share and store important business
files. Mangomind is sold as both a service and a standalone software product.
The Mangomind service provides the security of a VPN without the additional
hardware and configuration complexities. This virtual file service is hosted by
a leading provider of complex Internet services and provides the familiar
interface of a shared network drive. The Mangomind product is sold as a software
license and the typical sale includes installation, training and extended
support services. The Mangomind product is intended for the enterprise customer.

     Mangomind facilitates business-to-business communications using the
following features:

     o    SIMULTANEOUS, MULTI-USER FILE ACCESS. Mangomind is an Internet
          file-sharing system that allows multiple users in any location to
          simultaneously access and share files.


                                       4
<PAGE>

     o    ONLINE WORKGROUP COLLABORATION. Mangomind allows multiple users to
          collaborate online using Windows database applications commonly used
          in accounting, contact management, calendars, appointment scheduling
          and project management software packages.

     o    ROBUST, SAFE AND SECURE. Mangomind allows users to set access
          permissions for files and folders on a Mangomind drive. Data
          encryption (128-bit) at the client (user) level ensures that all files
          are securely transmitted and stored. Service level agreements ensure
          that a user's files are available and protected.

     o    BUSINESS LEVEL SECURITY THROUGH ENCRYPTION. Access to shared files is
          restricted to clients authenticated by using public/private keys; each
          Mangomind user is authenticated using state-of-the-art private key
          encryption. Data is stored in encrypted form to prevent unauthorized
          access.

     o    FILE ACCESS PERMISSIONS. The Mangomind file system allows users to
          define access permissions for users or groups of users on individual
          drives, files and folders. Permission settings are easily specified
          using the same familiar Microsoft Windows procedures.

     o    FAMILIAR WINDOWS INTERFACE. Mangomind looks and operates just like a
          local drive and is completely integrated with Windows. No user
          training is required; applications run as if on a local drive.

     o    ACCESS ANYTIME, EVEN WHEN OFFLINE. When disconnected from the
          Internet, users can continue to work on their files offline because
          Mangomind caches the latest version of a file into a system's local
          memory. Mangomind automatically synchronizes the files when the user
          reconnects to the Internet.

     o    HIGH AVAILABILITY SERVICE. The Mangomind service provides automatic
          backup and restore functions, full-time customer support and service,
          and service level agreements to ensure high availability of the
          service. The Mangomind service is hosted and managed by leading
          service providers.

     fileTRUST(SM) is an online data storage service we purchased from Bank of
America (formerly FleetBoston) in February 2002. fileTRUST(SM) users can access
their stored files from any Internet-connected system. The fileTRUST(SM) service
complements our Mangomind service by providing our customers with a lower cost
online storage system. In conjunction with our purchase of fileTRUST(SM), we
executed a two-year enterprise license agreement with Bank of America (formerly
FleetBoston) for the internal use of fileTRUST(SM) by Bank of America (formerly
FleetBoston), which expired in February 2004. The terms and conditions of this
agreement provide for automatic renewals on a month-to-month basis. Bank of
America (formerly FleetBoston) terminated its license agreement with us in
September 2004. The loss of Bank of America (formerly FleetBoston) as a customer
will have a material adverse affect on our business.

     Cachelink(TM) is a software-based web-caching product that increases the
delivery speed of Internet and Intranet content to end-users. Cachelink utilizes
our peer-to-peer clustering technology to efficiently link together the
individual browser caches of multiple systems on a LAN into an aggregated, super
cache, resulting in much faster Internet access without the expense of a
dedicated hardware caching appliance or server. Cachelink is a pure peer-to-peer
architecture, including a completely decentralized directory. Cachelink stores
web information within a local network, a technique known as "caching."
Cachelink aggregates the cache from all the PCs on a LAN and makes it available
to the entire network. Therefore, rather than going "outside" to the Internet to
collect information, Cachelink enables the information to be gathered "inside"
within the LAN. In addition to increasing the delivery speed of downloading web
sites, Cachelink also reduces a company's Internet traffic, and as a result
maximizes bandwidth. Effective January 1, 2004, we discontinued our marketing
activities with respects to Cachelink.


                                       5
<PAGE>

MARKETING AND SALES

     Our marketing and sales strategy is focused on small to medium size
companies as well as enterprise accounts. We market our products and services
primarily through a reseller channel. Effective September 30, 2002, we executed
an Information Management Service Agreement (the "Outsourced Services
Agreement") with Built Right Networks, LLC ("Built Right Networks"). Under the
terms of the Outsourced Services Agreement, Built Right Networks now provides
reseller channel management in addition to information systems and technical
end-user support for our products and services. We continue to seek strategic
relationships with business partners capable of rapidly expanding the
distribution of our products and services in targeted industry segments.

     The success of our marketing and sales activities is dependent, among other
things, on our ability to retain and attract qualified resellers and original
equipment manufacturers ("OEMs") as well as the overall market perception of our
products and services.

     MANGOMIND

     In January 2001, we commercially released our Mangomind service (version
1.5) to the business community. Since its original commercial release, the
Mangomind service has been enhanced several times and is currently on version
3.1.1. In May 2002, we released Mangomind as an enterprise product to the
business community. Since its release the product has been enhanced and is
currently on version 3.0.

     We have identified small and medium sized business in the financial
services, consulting, manufacturing, healthcare, real estate and architecture
industries as key vertical markets to focus our marketing of the Mangomind
service. These industries are characterized by a high degree of interaction with
workgroups outside their organization and a need for an efficient and secure
means of file sharing and project collaboration. Our recruitment of resellers is
targeted toward those resellers that have existing penetration within these
targeted vertical markets. We offer 15-day risk-free trials to participants
responding to our resellers' marketing programs. These participants have become
valuable prospects for our direct sales efforts.

     The introduction of our Mangomind product has allowed our reseller channel
to increase its focus on the enterprise customer. Enterprise sales are
lead-driven and generally require on-site product demonstrations. An enterprise
customer will then enter into a pilot implementation and ultimately a full-scale
deployment. Enterprise sales are a lengthy process and may take three to six
months to close. We currently have one enterprise implementation with a Fortune
100 insurance company.

     fileTRUST

     In connection with our purchase of fileTRUST from Bank of America (formerly
FleetBoston) in February 2002, we executed a two-year enterprise license
agreement with Bank of America (formerly FleetBoston) for their internal use of
fileTRUST. This initial term of this agreement concluded in February 2004. The
terms of this agreement provide for automatic renewals on a month-to-month
basis. Bank of America (formerly FleetBoston) terminated its license agreement
with us in September 2004. Bank of America (formerly FleetBoston) was our
largest customer. We continue to seek organizations similar to Bank of America
(formerly FleetBoston) to whom to market and sell fileTRUST.


                                       6
<PAGE>

PRODUCT SUPPORT

     Built Right Networks provides our end-users and reselling channel with
product support under the terms of the Outsourced Services Agreement. Technical
support is primarily provided through Internet communication, electronic mail
and a traditional telephone support line. We depend on Built Right Networks to
provide end-user support and troubleshooting. We maintain a specific reseller
site on our web page that includes a frequently asked questions page and
regularly updated support information for our reselling channel. Analysis of
support calls is used to improve and enhance both the product and the web site
content.

     Our Mangomind and fileTRUST customers are provided with twenty-four hour
customer support. Direct customer support is available through a dedicated
telephone line or e-mail and is managed by Built Right Networks. In addition, we
maintain certain customer support information on our web site.

CONCENTRATIONS

     We generate the majority of our revenues from the sale of our products and
services in North America. All of our 2004, 2003 and 2002 revenues were
generated from sales to North American customers.

     One customer accounted for approximately 35% of our 2004 net revenues. Two
customers accounted for approximately 52% of our 2003 net revenues and three
customers accounted for approximately 76% of our 2002 revenues.

INTELLECTUAL PROPERTY

     To date, we have been granted five patents as follows: (i) System and
Method for Providing Highly Available Data Storage Using Globally Addressable
Memory (June 1, 1999); (ii) Structured Data Storage Using Globally Addressable
Memory (June 29, 1999); (iii) Remote Access and Geographically Distributed
Computers in a Globally Addressable Storage Environment (November 16, 1999);
(iv) Shared client-side Web Caching Using Globally Addressable Memory (February
15, 2000); and (v) Shared Memory Computer Networks (November 14, 2000). We have
applied for five additional U.S. patents which applications are still pending.
Our patents cover aspects of our peer-to-peer clustering technology, Cachelink
and Mangomind. We have also filed patent applications outside of the U.S. that
are counterparts to the issued patents and pending applications. We also own
trademarks on "Cachelink," "Medley," "Mango," and "MangoSoft." In addition, we
also own service marks on "Mangomind," "fileTRUST" and "the Business Internet
File Service."

     We consider elements of our software and peer-to-peer clustering technology
to be proprietary. 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 intellectual property,
proprietary technology and know-how. Our future results of operations are highly
dependent on the proprietary technology that we have developed internally.
Consequently, we have taken actions to secure our proprietary technology in the
form of patent protection. If we are denied our patent requests, either
individually or as a group, we believe that there would be a material adverse
impact on our business.

     On November 22, 2002, we filed a complaint in United States District Court,
District of New Hampshire against Oracle Corporation ("Oracle") for infringement
of two of our patents; 1) Structured Data Storage Using Globally Addressable
Memory (June 29, 1999) and 2) Shared Memory Computer Networks (November 14,
2000). On July 2, 2003, we filed a similar complaint in United Stated District
Court, Northern District of California, against Oracle, Sun Microsystems, Inc.,
Dell Computer Corp. and Electronic Arts, Inc. for infringement of these two
patents. On May 15, 2003, Oracle filed a complaint against us alleging that
various software we have developed, including Mangomind, infringes on a patent
held by Oracle.


                                       7
<PAGE>

     We license encryption software from a leading e-security software provider.
This encryption software allows multiple users to more securely transmit, share
and store files via the Mangomind service. All files shared, stored and
transmitted over the Internet using the Mangomind service are protected with
128-bit encryption. We are required to make royalty payments to the software
provider based on the volume of our sales.

EMPLOYEES

     As of December 31, 2004 we had 2 full-time employees. Our success is highly
dependent on our ability to attract and retain qualified resellers and to retain
qualified outsourced information system management. To date, we believe we have
been successful in our efforts, but there is no assurance that we will continue
to be as successful in the future. None of our employees are subject to
collective bargaining agreements.

RISK FACTORS

We Have a Limited Operating History and Substantial Cumulative Operating Losses.

     We have a history of substantial operating losses and an accumulated
deficit of $88,722,912 as of December 31, 2004. For the years ended December 31,
2004, 2003 and 2002, our losses from operations, excluding the net effects of
stock-based compensation, were $351,124, $1,041,618 and $5,982,523,
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 of 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.

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.


                                       8
<PAGE>

Our High-Yield Investments Could Become Impaired.

     We have approximately $347,000 invested in high-yield, secured corporate
notes with related parties. These investments represent a significant portion of
our total assets at December 31, 2004. Investments in high-yield corporate notes
entail a higher risk of delinquency or even complete loss. No assurance can be
given that we will not experience any losses or that our debtors will timely
remit on the maturity of these notes. If we experience any loss or impairment on
these investments, our business, financial condition and results of operations
will be materially and adversely affected.

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 may be 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
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


                                       9
<PAGE>

are unable to compete effectively, our business, operating results and financial
condition will be materially and adversely affected.

Litigation Concerning Intellectual Property Could Adversely Affect Our Business.

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

Defects in Our Software Products May Adversely Affect Our Business.

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

We Have Limitations On The Effectiveness Of Our Internal Controls.

     We have two full-time employees, each 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.


                                       10
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY

     We terminated our lease, which was located in Nashua, New Hampshire and
consisted of approximately 2,400 square feet of office space. The Company no
longer leases its own facility. Effective, December 1, 2004 the Company uses the
office space of BuiltRight Networks at no specific rent. Our office had the
capacity to accommodate approximately twenty people. Our office was leased from
Forward Journey LLC, an independent third party lessor. In 2004 and 2003, we
recorded approximately $28,000 and $30,000 in rent expense for this facility.

     Until October 2002, our former principal corporate offices were located in
Westborough, Massachusetts. We restructured this facility lease on several
occasions beginning in January 2002. This lease expired in September 2003. We
recorded approximately $71,000 of rent expense in 2003 in connection with this
facility. At December 31, 2004, we have no accrued rent on this facility.

ITEM 3. 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.

     Other than the matter 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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS

     No matters were submitted during the fourth quarter of the year ended
December 31, 2004 to a vote of our security holders, through the solicitation of
proxies or otherwise.


                                       11
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(A) MARKET INFORMATION

     Our common stock, $0.001 par value, began trading in October 1999 on the
Over-The-Counter Bulletin Board Market ("OTCBB") under the symbol "MGNX."
Effective March 7, 2003, our common stock began trading under the symbol "MGOF."
Our symbol change is attributable to our March 7, 2003 1-for-27 reverse stock
split.

     The following sets forth the high and low bid price quotations for each
calendar quarter in which trading occurred during the last two fiscal years,
adjusted to reflect the effects of the March 7, 2003 reverse stock split. Such
quotations reflect interdealer prices, without retail markup, markdown or
commission, and may not represent actual transactions:

      2004                                          HIGH          LOW
      ----                                          ----          ---
      First Quarter ............................    $4.00        $1.55
      Second Quarter ...........................     7.20         2.45
      Third Quarter ............................     6.00         3.30
      Fourth Quarter ...........................    10.00         3.60

      2003                                          HIGH          LOW
      ----                                          ----          ---
      First Quarter ............................    $3.24      $ 1.05
      Second Quarter ...........................     2.25        1.20
      Third Quarter ............................     2.00        1.45
      Fourth Quarter ...........................     2.50        1.50

     On February 16, 2005, the last reported sale price of our common stock on
the OTCBB was $5.75 per share.

(B) HOLDERS

     As of December 31, 2004, there were approximately 385 holders of record of
our common stock. This number does not include stockholders for whom shares were
held in a "nominee" or "street name."

(C) DIVIDENDS

     We have not previously paid any cash dividends on our common stock and do
not anticipate or contemplate paying cash dividends on our common stock in the
foreseeable future. It is the present intention of management to utilize all
available funds for future operations.

     The only restrictions that limit the ability to pay dividends on the common
stock are those imposed by corporate law. Under Nevada corporate law, no
dividends or other distributions may be made which would render us insolvent or
reduce assets to less than the sum of our liabilities plus the amount needed to
satisfy any liquidation preference.


                                       12
<PAGE>

(D) SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

     The following sets forth information surrounding compensation plans in
which we have authorized the future issuance of our common stock, adjusted to
reflect the effects of the March 7, 2003 reverse stock split:

<TABLE>
<CAPTION>
                                  NUMBER OF SECURITIES TO BE    WEIGHTED-AVERAGE EXERCISE        NUMBER OF SECURITIES
                                   ISSUED UPON EXERCISE OF         PRICE OF OUTSTANDING        REMAINING AVAILABLE FOR
                                     OUTSTANDING OPTIONS,      OPTIONS, WARRANTS AND RIGHTS     FUTURE ISSUANCE UNDER
                                     WARRANTS AND RIGHTS                                      EQUITY COMPENSATION PLANS
                                                                                                (EXCLUDING SECURITIES
                                                                                               REFLECTED IN COLUMN (a))
                                             (a)                           (b)                            (c)
<S>                                        <C>                            <C>                          <C>
Equity compensation plans
approved by security
holders..............................      110,254                        $12.99                       179,910

Equity compensation plans not
approved by security holders.........       13,111                         43.13                         N/A
                                           -------                        ------                       -------
Total................................      123,356                        $16.19                       179,910
                                           =======                        ======                       =======
</TABLE>

(E) RECENT SALES OF UNREGISTERED SECURITIES

     On July 24, 2003, we issued 20,000 shares of Series B Convertible Preferred
Stock to two significant shareholders for $50,000, one of which is our former
co-chairman of the board of directors. Each of the shareholders are accredited
investors. Each share of preferred stock is convertible into one share of common
stock at the option of the holder. In addition to the convertible features of
this private placement, the holders of the preferred stock are entitled to
twenty-five votes per share of preferred stock on any matter brought to the vote
of shareholders.



                                       13
<PAGE>

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

     This Annual Report on Form 10-KSB contains forward-looking statements
within the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Any statements in this Annual 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 Annual Report on Form 10-KSB, 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, 2004
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 we purchased from Bank of
America (formerly FleetBoston) in February 2002 for approximately $427,000, of
which $175,000 was paid in cash and the balance in our common stock and warrants
to purchase our common stock at $14.31 per share. fileTRUST(SM) users can access
their stored files from any Internet-connected system. The fileTRUST(SM) service
compliments our Mangomind(SM) service by providing customers with a lower cost
online storage system. In conjunction with our purchase of fileTRUST(SM), we
executed a two-year enterprise license agreement with Bank of America (formerly
FleetBoston) for the internal use of fileTRUST(SM) by Bank of America (formerly
FleetBoston), which expired in February 2004. The terms and conditions of this
agreement provided for automatic renewals on a month-to-month basis. We recorded
approximately $493,000 in net revenues from the inception of this agreement
through December 31, 2004. Bank of America (formerly FleetBoston) terminated its
license agreement with us in September 2004.

     Net revenues from Bank of America (formerly FleetBoston) for the year ended
December 31, 2004 were approximately $163,000. We are actively seeking new
business opportunities to replace this lost revenue. If we are unable to replace
this revenue, our operations may be adversely affected. During September 2004,
we have instituted cost reductions to lessen the adverse effects of this loss of
revenue, including restructuring our business relationships with key vendors
such as Built Right Networks.


                                       14
<PAGE>

CRITICAL ACCOUNTING POLICIES

     Our accounting policies are fully described in Note 2 to our consolidated
financial statements. The following describes the application of accounting
principles that have 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.

     Investments - At December 31, 2004, we have approximately $347,000 invested
in several high-yield, secured corporate notes with related parties to better
maximize our rate of return on our cash. These investments represent a
significant portion of our total assets at December 31, 2004. These investments
are classified as held-to-maturity and are carried at their amortized cost.
Investments and maturities of less than one year are classified as short-term
investments.

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


                                       15
<PAGE>

     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 December 31, 2004, there were
no full time employees performing engineering or development on our products and
services. Effective September 30, 2002, 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 December 31, 2004, there were no full time employees
performing selling and marketing activities. Our remaining two employees are
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 December 31, 2004, we had two employees, each working in a general
and administrative capacity.

RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 2004 AND 2003

     Revenues for year ended December 31, 2004 decreased $37,931 or 8% to
$466,225 from $504,156 for the comparable year in 2003. One customer, Bank of
America (formerly FleetBoston) represented approximately 35% of our revenues for
the year ended December 31, 2004. In 2003, Bank of America (formerly
FleetBoston) and New York Life Insurance Company ("New York Life") accounted for
approximately 39% and 13% of our revenues, respectively. In September 2004, we
were notified by Bank of America (formerly FleetBoston) that it had terminated
its February 2002 enterprise license agreement with us. We are investigating
options to replace the loss of this revenue. No other customer accounted for
more than 10% of our revenues for either period.

     We recognized $270,660 from the sale of our Mangomind(SM) service and
$195,565 from the sale of our fileTRUST(SM) service during the year ended
December 31, 2004. During the year 2003, we recognized $729 from the sale of the
Cachelink product, $36,698 from the sale of our Mangomind(SM) product, $256,959
from the sale of the Mangomind(SM) service and $209,770 from the sale of our
fileTRUST(SM) service.

     Cost of services for year ended December 31, 2004 decreased $113,980 or 23%
to $390,676 compared to $504,656 for the comparable year in 2003. 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.

     There was no engineering and development expense for the years ended
December 31, 2004. In 2003, engineering and development expense was $4,205.
During the years ended December 31, 2004 and 2003, we had no full-time employees
performing engineering or development activities

     For the year ended December 31, 2004, other operating expenses including
selling and marketing and general and administrative expenses decreased $610,290
or 59% to $426,623 compared with $1,036,913 for the comparable period in 2003.
The decrease in other operating expenses was due primarily to our reduced
spending in the areas of marketing and sales consultants, public relations,
legal and other corporate consultants and facility rent in addition to
reductions in our marketing, selling and general and administrative personnel
associated with our work force reductions. During the year ended December 31,


                                       16
<PAGE>

2004, each of our two (2) full-time employees were working in a general and
administrative capacity. Additionally, management has elected to discontinue
providing for $149,000 of previously accrued rent for its facility which it
abandoned in September 2002. This was an expense reduction in 2004 of $149,000.

     Stock-based compensation expense of $1,032 was recorded for the year ended
December 31, 2004 compared to $32,107 for the comparable year in 2003. The
decrease in this expense was primarily attributable to the decrease in the
number of outstanding employee stock options subject to compensation expense.
The expense represents the ratable recognition of stock-based compensation for
stock option awards granted in 2000 at exercise prices that were less than the
fair value at the time of grant. See Note 8 to the condensed consolidated
financial statements.

     Our loss from operations decreased $699,659 to $374,066 for the year ended
December 31, 2004 compared with a loss from operations of $1,073,725 for the
comparable year in 2003 as a result of the above factors.

     Interest income decreased $35,814 to $81,967 for the year ended December
31, 2004 compared to $117,781 for the year ended December 31, 2003. Our cash
balances available for investment have decreased period over period, however we
have invested approximately $347,000 in several high-yield, secured corporate
notes that deliver greater returns than our previous interest-bearing cash
accounts.

RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 2003 AND 2002

     Revenue decreased $12,864 from $517,020 in 2002 to $504,156 in 2003, a
decrease of approximately 2%. In 2003, we recognized $729 from the sale of the
Cachelink product, $36,698 from the sale of the Mangomind product, $256,959 from
the sale of the Mangomind service and $209,770 from the sale of the fileTRUST
service. In 2002, we recognized $2,597 from the sale of the Cachelink product,
$47,234 from the sale of the Mangomind product, $323,239 from the sale of the
Mangomind service and $143,950 from the sale of the fileTRUST service. The
decrease in revenues was primarily attributable to the decreases in Mangomind
service revenue offset by the significant increase in fileTRUST service.
Customers representing more than 10% of our 2003 revenues were FleetBoston and
New York Life Insurance Company approximately 39% and 13%, respectively. In
2002, customers representing more than 10% of our 2002 revenues were
FleetBoston, New York Life Insurance Company and Veritas Software Company,
approximately 38%, 20% and 18%, respectively.

     Cost of services for the year ended December 31, 2003 decreased $195,409 or
28% from $700,065 in 2002 to $504,656 in 2003. The decrease in our cost of
services is due primarily to the significant reduction in our operations
personnel as a result of our 2001 and 2002 reductions in force. At December 31,
2003, we no longer have any internal personnel dedicated to maintaining our
services. We have outsourced these services to Built Right Networks for
approximately $30,000 each month. In addition, we will continue to incur costs
of service in the area of our security license royalties and our outsourced data
center.

     Engineering and development expenses decreased approximately 99% or
$1,813,646 from $1,817,851 in 2002 to $4,205 in 2003. The decrease in
engineering and development expenses is due primarily to the reductions in our
engineering and development personnel headcount and its related effect on
salaries and related personnel costs. At December 31, 2003, we no longer have
any internal personnel dedicated to advancing our existing products and services
or developing new products and services.

     Other operating expenses including selling and marketing and general and
administrative expenses decreased approximately 72% or $2,711,932 to $1,036,913
in 2003 from $3,748,845 in 2002. The significant decrease in other operating
expenses is primarily attributable to the reductions in our selling and
marketing and general and administrative personnel. In addition, we continued
our aggressive cost savings plan that began in the third quarter of 2000. We no
longer maintain a selling and marketing team. These activities have been


                                       17
<PAGE>

outsourced to Built Right Networks as part of our September 30, 2002 Outsourced
Services Agreement. Future selling and marketing expenses will consist primarily
of sales commissions and various marketing programs intended to complement our
sales channel. Our two remaining employees are performing our general and
administrative activities. We will continue to incur general and administrative
costs necessary to operate our business. These costs typically include salaries
and related personnel costs, facility rent, commercial insurance, accounting and
legal expenses and other costs typical of a publicly held corporation.

     Stock-based compensation expense decreased $449,923 to $32,107 in 2003
compared to $482,030 in 2002. The decrease is due to the significant decrease in
the number of outstanding options to purchase our common stock as a result of
stock option cancellations and their related effect on stock-based compensation.
Terminated employees are given ninety days from the date of their termination to
exercise their vested stock options. No employee exercised their stock options
in 2003. See Note 8 to the consolidated financial statements.

     We recorded a $232,782 charge in 2002 primarily as a result of our
write-down of certain computer hardware and related equipment that are no longer
used in our operations. As a result of our shift in outsourced data centers, we
significantly changed the configuration and therefore the computer equipment
requirements used to operate our billable services infrastructure. As the net
book value of these assets may not be recovered through the expected future cash
flows from their use and eventual disposition, we wrote down these assets.

     Excluding the effects of stock-based compensation and our asset write-down,
our loss from operations decreased approximately 82% or $4,708,123 to $1,041,618
in 2003 from $5,749,741 in 2002 as a result of the above factors.

     Interest income increased $37,630 to $117,781 in 2003 compared to $80,151
in 2002. The increase was attributable to the increased rate of return on our
investments in high yield instruments. Other income of $29,300 in 2003 primarily
represents our miscellaneous sale of an Internet domain to an unrelated third
party for approximately $25,000 in November 2003.

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 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 December 31, 2004,
approximately $793,200 in additional financing was provided through accounts
payables, accrued expenses and other trade credit, a significant portion of
which is past due.

     At December 31, 2004, we had a cash balance of approximately $458,000 and
working capital of approximately $3,388. Excluding our Nashua, NH facility lease
which expired in November 2004, 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.

     At December 31, 2004, we had approximately $347,000 invested in several
high-yield short-term investments with related parties. Approximately $123,000
of the corporate notes receivable outstanding at December 31, 2004 were issued
to Plaintiff Funding Corporation, a privately held corporation in which Selig
Zises is a stockholder. At December 31, 2004, two corporate notes receivable
totaling approximately $224,000 were due from Unicrown Partners LLC, a privately
held company in which Selig Zises and Jay Zises are members. Selig Zises and Jay
Zises are stockholders of MangoSoft, Inc. Selig Zises was the former co-chairman


                                       18
<PAGE>

of our Board of Directors. Investments in high-yield securities pose higher
risks than investments in lower-yield securities, including the risk of total
loss.

     We did not make any capital expenditures during the fiscal year 2004.

     We have significantly modified our operations and reduced our work force on
four separate occasions since April 2001. We currently have two (2) employees,
each 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 audited condensed consolidated financial statements, during
the years ended December 31, 2004, 2003 and 2002, we incurred net losses of
$297,124, $926,644 and $6,384,402, respectively. Cash used in operations during
the years ended December 31, 2004, 2003 and 2002 was $327,592, $481,293 and
$5,178,249, 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

     Excluding our Nashua, NH facility lease which expired in November 2004, 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.

RECENTLY ISSUED ACCOUNTING STANDARDS

     In January 2003, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 46, "Consolidation of Variable Interest Entities," ("FIN
46") which clarifies the application of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements," relating to consolidation of certain
entities. FIN 46 will require identification of the Company's participation in
variable interest entities ("VIEs"), which are defined as entities with a level
of invested equity that is not sufficient to fund future activities to permit it
to operate on a standalone basis. For entities identified as a VIE, FIN 46 sets
forth a model to evaluate potential consolidation based on an assessment of
which party to the VIE (if any) bears a majority of the exposure to its expected
losses or stands to gain from a majority of its expected returns. The
interpretation is effective after January 31, 2003 for any VIE created after
that date and is effective July 1, 2003 for VIEs created before February 1,
2003. The adoption of the FIN 46 did not have a material impact on our results
of operations or financial position.

     In April 2003, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities." SFAS No. 149 amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities under SFAS No. 133,
"Accounting for Derivative instruments and Hedging Activities." SFAS No. 149 is
effective for contracts entered into or modified after June 30, 2003. The
adoption of SFAS No. 149 did not have a material impact on our results of
operations or financial position.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability. SFAS No. 150 is effective for financial instruments entered into
or modifies after May 31, 2003, and otherwise is effective at the beginning of
the first interim period beginning after June 15, 2003. The adoption of SFAS No.
150 did not have a material impact on our results of operations or financial
position.


                                       19
<PAGE>

     In December 2003, the SEC issued Staff Accounting Bulletin ("SAB") No. 104,
"Revenue Recognition," which supercedes SAB No. 101, "Revenue Recognition in
Financial Statements." SAB No. 104 rescinds accounting guidance in SAB No. 101
related to multiple element arrangements, which was previously superceded by
EITF 00-21 (see above). The adoption of SAB No. 104 did not have a material
impact on our results of operations or financial position.

ITEM 7. FINANCIAL STATEMENTS

     Our consolidated financial statements and related notes, which are attached
to this Annual Report on Form 10-KSB beginning on page 29, are incorporated by
reference.

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

     None.


ITEM 8A. CONTROLS AND PROCEDURES

         We have significantly reduced our work force on several occasions
during 2001 and 2002. At December 31, 2004 and 2003, we had two (2) employees,
including 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-KSB. 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 December 31, 2004 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

ITEM 8B. OTHER INFORMATION

     None.


                                       20
<PAGE>

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Dale Vincent, age 58, is our President, Chief Executive Officer and sole
director. Mr. Vincent provides his services on a full-time basis. Mr. Vincent
was appointed President, Chief Executive Officer and elected a Director in
September 1999. Previously, he served as the Chief Executive Officer of
MangoSoft Corporation since May 1999, as its Chief Financial Officer from
September 1998 to May 1999, and as a Director of MangoSoft Corporation since
July 1995. Mr. Vincent has over 25 years of senior financial and business
management experience, with the last 10 years developing and funding companies
in the software industry. Since April 1990, Mr. Vincent has served as a Managing
Director of ACAP, a private investment company, the general partner of
Associated Capital L.P., a private investment company, and consults with
Associated Capital L.P with respect to its investment and marketing activities.
He has also served as a Director of MaMaMedia, Inc. since 1996.

SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Exchange Act and the rules thereunder require our
directors and officers and persons who own more than 10% of our outstanding
common stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission"). Our personnel generally
prepare these reports on the basis of information obtained from each director
and officer, and greater than 10% stockholders are required by the Commission to
furnish the Company with copies of all reports filed. To the best of our
knowledge, all reports required by Section 16(a) of the Exchange Act to be filed
by our directors, officers and 10% or greater stockholders during our fiscal
year ended December 31, 2004 were filed on time with one exception. The
statement of changes in beneficial ownership, Form 4, for the issuance of stock
options to Mr. Dale Vincent was inadvertently filed late.

AUDIT COMMITTEE

     We do not have an Audit Committee comprised of independent directors. Dale
Vincent is our President, Chief Executive Officer and sole director. In that
capacity, Mr. Vincent performs the functions of a typical Audit Committee. Mr.
Vincent has been determined to be a financial expert.

CODE OF ETHICS

     The Company has adopted a Code of Ethics that applies to the Company's two
employees, its President and Chief Executive Officer and its accounting
personnel. The Company will provide, without charge, a copy of the Code of
Ethics on the written request of any person, addressed to the Company's Chief
Executive Officer at MangoSoft, Inc., 12 Technology Way, Nashua, New Hampshire.
A copy of this code of ethics is attached to this Annual Report on Form 10-KSB
as exhibit 14. The Company will post a copy of this code of ethics on its
corporate website - www.mangosoft.com.


                                       21
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

     The following table sets forth information concerning the total
compensation we paid to our chief executive officer in 2004, 2003 and 2002 (the
"Named Executive Officer").

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                               LONG TERM COMPENSATION
                                  ANNUAL COMPENSATION               RESTRICTED                                 ALL
   NAME AND PRINCIPAL                                  OTHER ANNUAL   STOCK     SECURITIES UNDER    LTIP      OTHER
      POSITION             YEAR    SALARY      BONUS   COMPENSATION   AWARDS      OPTIONS/SARs     PAYOUTS    COMP.
   ------------------      ----    ------      -----   ------------   ------      ------------     -------    -----
<S>                       <C>      <C>           <C>       <C>         <C>             <C>           <C>       <C>
Dale Vincent ..........   2004     $204,046      --        --          --              --            --        --
President and Chief       2003      202,500      --        --          --              --            --        --
Executive Officer         2002      214,177      --        --          --              --            --        --
</TABLE>


OPTIONS

     The following tables sets forth information concerning grants of stock
options to, and exercises of stock options by, the Named Executive Officer
during 2004, and the number and value of unexercised options held by him at
December 31, 2004. The value of the unexercised in-the-money options is based on
the average bid and ask price of our common stock on the OTCBB on December 31,
2004 ($7.75).

                    OPTIONS / SAR GRANTS IN LAST FISCAL YEAR

                                         % of total
                          Number of       options
                          securities     granted to
                          underlying     employees     Exercise
                           options     during fiscal    price     Expiration
             Name          granted          year        ($/sh)       date
        --------------    ----------   -------------   --------  -------------
        Dale Vincent        37,963          100%        $4.05    July 14, 2014



                       FISCAL YEAR-END OPTION / SAR VALUES

<TABLE>
<CAPTION>
                                                                NO. OF SECURITIES UNDERLYING          VALUE OF UNEXERCISED
                                                                    UNEXERCISED OPTIONS               IN-THE-MONEY OPTIONS
                                    SHARES                      ----------------------------          --------------------
                                 ACQUIRED ON      VALUE
             NAME                  EXERCISE      REALIZED      EXERCISABLE     UNEXERCISABLE     EXERCISABLE      UNEXERCISABLE
             ----                  --------      --------      -----------     -------------     -----------      -------------
<S>                                   <C>           <C>           <C>               <C>            <C>                <C>
Dale Vincent .................        --            --            75,000            --             390,426            $  --
</TABLE>

COMPENSATION OF DIRECTORS

     There were no outside directors in 2004. Accordingly, with the exception of
the compensation we paid to Mr. Vincent for his services as our president and
chief executive officer, no other compensation was paid to any director in 2004.

EMPLOYMENT CONTRACTS

     None.

REPORT ON REPRICING OF OPTIONS/SARs

     On July 24, 2003, the Company amended its outstanding and vested stock
options granted to its Chief Executive Officer. Vested and outstanding options
to purchase 22,222 and 14,815 shares of the Company's common stock at $27.81 and


                                       22
<PAGE>

$33.75 per share, respectively, were cancelled. The Company granted its Chief
Executive Officer options to purchase 37,037 shares of its common stock at an
exercise price of $1.00 per share. The newly granted options are completely
vested. The Company recognized $29,253 in stock-based compensation expense
relating to this re-pricing in 2003.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

     The following table sets forth certain information as of March 1, 2005 with
respect to beneficial ownership of our common stock by (i) each person we know
to own beneficially more than 5% of our outstanding common stock; (ii) each
director and named executive officer; and (iii) all directors and named
executive officers as a group. The percentages in the last column are based on
1,013,038 shares of common stock outstanding on March 1, 2005. In each case,
except as otherwise indicated in the footnotes to the table, the shares shown in
the second column are owned directly by the individual or members of the group
named in the first column and such individual or group members have sole voting
and dispositive power with respect to the shares shown. For the purposes of this
table, beneficial ownership is determined in accordance with the federal
securities laws and regulations; inclusion in the table of shares not owned
directly by the named director or executive officer does not constitute an
admission that such shares are beneficially owned by the director or officer for
any other purpose.

<TABLE>
<CAPTION>
                                            NUMBER OF SHARES OF COMMON     PERCENT OF OUTSTANDING COMMON
BENEFICIAL OWNERS:                                  STOCK OWNED                     STOCK OWNED
------------------                          --------------------------     -----------------------------
<S>                                                   <C>                            <C>
Selig Zises (2)(4).........................           119,859                        11.8%
  988 Fifth Avenue, 9th Floor
  New York, NY 10021
Jay Zises (1)(4)...........................           117,851                        11.6
  767 3rd Avenue, 16th Floor
  New York, NY 10017
Directors and officers:
  Dale Vincent  (3)........................            76,116                         7.0

All Directors and officers as a group......            76,116                         7.0%
</TABLE>

(1)  Total shares of common stock beneficially owned by Jay Zises, the brother
     of the former co-chairman of our Board of Directors Selig Zises, include
     the following: 2,481 shares owned by Jay Zises; 104,530 shares owned by
     Delaware Guarantee & Trust TTEE FBO Jay Zises IRA (a self-directed IRA);
     701 shares owned by Nancy Zises as custodian for Meryl Shane Zises; and 139
     shares owned by Jay Zises as custodian for Justin Zises. Nancy Zises is the
     wife of Jay Zises. Other than the Zises family relationships referenced in
     this table and the related footnotes, there are no affiliations between Jay
     Zises and any other persons or entities identified in such table or
     footnotes.

(2)  Total shares of common stock beneficially owned by the former co-chairman
     of our Board of Directors Selig Zises include the following: 103,114 shares
     owned by Selig Zises; 4,196 shares owned by Guarantee & Trust Co. TEE FBO
     Selig Zises R-IRA DTD 5-20-96 (a self-directed IRA); and 2,549 shares owned
     by his daughter Lynn Zises. Selig Zises is the brother of Jay Zises, both
     of whom are principal stockholders of the MangoSoft. Other than the Zises
     family relationships references in this table and the related footnotes,
     there are no affiliations between Selig Zises and any other persons or
     entities identified in such table or footnotes.


                                       23
<PAGE>

(3)  Includes 75,000 shares of common stock Mr. Vincent has the right to acquire
     through the exercise of stock options. Mr. Vincent's address is c/o
     MangoSoft, Inc., 12 Technology Way, Nashua, NH 01062.

(4)  Jay Zises and Selig Zises own 10,000 shares each of the Series B
     Convertible Preferred Stock issued on July 23, 2003. Each share of
     Preferred stock is convertible into one share of common stock at the option
     of the holder. In addition to its convertible features, the holders of the
     Preferred Stock are entitled to twenty-five votes per share of Preferred
     Stock on any matter brought to the vote of shareholders.


SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

See information provided under the Section titled "Securities Authorized for
Issuance Under Equity Compensation Plans" under Part II, Item 5 above.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(A)      TRANSACTIONS WITH DIRECTORS AND OFFICERS

     At December 31, 2004, we had approximately $347,000 invested in several
high-yield short-term investments with related parties. Approximately $123,000
of the corporate notes receivable outstanding at December 31, 2004 were issued
to Plaintiff Funding Corporation, a privately held corporation in which Selig
Zises is a stockholder. At December 31, 2004, two corporate notes receivable
totaling approximately $224,000 were due from Unicrown Partners LLC, a privately
held company in which Selig Zises and Jay Zises are members. Selig Zises and Jay
Zises are stockholders of MangoSoft, Inc. Selig Zises was the former co-chairman
of our Board of Directors. Investments in high-yield securities pose higher
risks than investments in lower-yield securities, including the risk of total
loss.

     In July 2003, Jay Zises and Selig Zises each purchased 10,000 shares of
Series B Convertible Preferred Stock for $50,000. Each share of preferred stock
is convertible into one share of common stock at the option of the holder. In
addition to the convertible features of this private placement, the holders of
the preferred stock are entitled to twenty-five votes per share of preferred
stock on any matter brought to the vote of shareholders.



                                       24
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)  EXHIBITS:

     EXHIBIT
      NUMBER                           DESCRIPTION OF EXHIBIT

         2.1        Agreement and Plan of Merger by and among First American
                    Clock Co., MangoSoft Corporation and MangoMerger Corp.,
                    dated as of August 27,1999. (1)
         3.1        Articles of Incorporation, as amended. (2)
         3.2        By-laws. (2)
         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 and amended on July
                    25, 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
     years 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 year ended
December 31, 2004.


                                       25
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     On September 26, 2002, we engaged Stowe & Degon as our new independent
accountants. Prior to the appointment of Stowe & Degon, Deloitte & Touche LLP
were our independent accountants.

AUDIT FEES

     Fees billed by Stowe & Degon for the audit of our annual financial
statements for the fiscal years ended December 31, 2004 and 2003 and the review
of our quarterly financial statements included in our quarterly reports on Form
10-QSB were approximately $32,000 and $35,500, respectively. In 2002, Deloitte &
Touche billed us approximately $12,000 for the review of our quarterly financial
statements included in our quarterly reports on Form 10-QSB.

AUDIT-RELATED FEES

     There were no other fees billed by Stowe & Degon or Deloitte & Touche
during the last two fiscal years for assurance and related services that were
reasonably related to the performance of the audit or review of the Company's
financial statements and not reported under "Audit Fees" above.

TAX FEES

     The aggregate fees billed by Stowe & Degon in 2002 for professional
services for tax compliance, tax advice and tax planning was $5,000. We did not
engage Stowe & Degon to provide us with any tax services in 2003 or 2004.

ALL OTHER FEES

     In 2002, Deloitte & Touche billed us $3,500 for other services in
connection with the transition of the audit from Deloitte & Touche to Stowe &
Degon. There were no other fees billed by Stowe & Degon or Deloitte & Touche LLP
during the last two fiscal years for products and services.

AUDIT COMMITTEE PRE-APPROVAL

     Mr. Vincent is the sole director of MangoSoft. As such, he has the
authority to approve 100% of audit, accounting and tax services and none of the
fees were approved by an independent audit committee.



                                       26
<PAGE>

                                   SIGNATURES

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


March 28, 2005

                                    MANGOSOFT, INC.

                                    /s/ Dale Vincent
                                    --------------------------------------------
                                    Dale Vincent
                                    President, Chief Executive Officer and
                                    Chairman of the Board of Directors
                                    (Principal Financial and Accounting Officer)



                                       27
<PAGE>


                         MANGOSOFT, INC. AND SUBSIDIARY

                          INDEX TO FINANCIAL STATEMENTS



                                                                            Page

Independent Auditors' Report..................................................29

Consolidated Balance Sheets as of December 31, 2004 and 2003..................30

Consolidated Statements of Operations For The Years Ended December 31,
  2004, 2003, and 2002........................................................31

Consolidated Statements of Stockholders' Equity For The Years Ended
   December 31, 2004, 2003 and 2002 ..........................................32

Consolidated Statements of Cash Flows For The Years Ended December 31,
  2004, 2003 and 2002.........................................................33

Notes to Consolidated Financial Statements....................................34



                                       28
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of MangoSoft, Inc.:

We have audited the accompanying consolidated balance sheets of MangoSoft, Inc.
and subsidiary (the "Company") as of December 31, 2004, 2003 and 2002, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the three years ended December 31, 2004. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of MangoSoft, Inc. and
subsidiary as of December 31, 2004, 2003 and 2002, and the results of their
operations and their cash flows for the three years ended December 31, 2004, in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1, the
Company's recurring losses from operations and its dependency on financing raise
substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are also discussed in Note 1. The consolidated
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.


/s/ Stowe & Degon

Worcester, MA
March 1, 2005



                                       29
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                                     2004            2003
                                                                 ------------    ------------
<S>                                                              <C>             <C>
                                      ASSETS
Current Assets:
     Cash and cash equivalents ...............................   $    458,032    $    317,444
     Short-term investments ..................................        346,508         607,439
     Accounts receivable .....................................         12,512          27,281
     Prepaid expenses and other current assets ...............             --           1,625
                                                                 ------------    ------------
          Total current assets ...............................        817,052         953,789
Property and equipment - net .................................             --          58,765
Long-term investments ........................................             --         180,547
Intangibles - net ............................................             --         140,195
Other assets .................................................             --           5,916
                                                                 ------------    ------------
               Total .........................................   $    817,052    $  1,339,212
                                                                 ============    ============

                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
     Accounts payable ........................................   $    731,850    $    671,383
     Accrued compensation ....................................         10,073          12,392
     Other accrued expenses and current liabilities ..........         51,274         335,981
     Deferred revenue ........................................         20,467          19,976
                                                                 ------------    ------------
          Total current liabilities ..........................        813,664       1,039,732
                                                                 ------------    ------------

Commitments and Contingencies (Note 10)

Stockholders' Equity:
     Preferred stock - $0.001 par value; authorized, 5,000,000
       shares; issued and outstanding, 20,000 ................             20              20
     Common stock ............................................          1,013           1,013
     Additional paid-in-capital ..............................     88,725,694      88,725,694
     Deferred compensation ...................................           (428)         (1,460)
     Accumulated deficit .....................................    (88,722,911)    (88,425,787)
                                                                 ------------    ------------
          Total stockholders' equity .........................          3,388         299,480
                                                                 ------------    ------------
               Total .........................................   $    817,052    $  1,339,212
                                                                 ============    ============
</TABLE>

               See notes to the consolidated financial statements.


                                       30
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                    2004           2003           2002
                                                                -----------    -----------    -----------
<S>                                                             <C>            <C>            <C>
Service revenues ............................................   $   466,225    $   466,729    $   467,189
Software license revenues ...................................            --         37,427         49,831
                                                                -----------    -----------    -----------
     Total revenues .........................................       466,225        504,156        517,020
Costs and expenses:
  Cost of services (1) ......................................       390,676        504,656        700,065
  Engineering and development (1) ...........................            --          4,205      1,817,851
  Selling and marketing (1) .................................            --          6,119        721,957
  General and administrative (1) ............................       426,673      1,030,794      3,026,888
  Loss on the disposal of equipment .........................        21,910             --             --
  Equipment write-down ......................................            --             --        232,782
  Stock-based compensation expense ..........................         1,032         32,107        482,030
                                                                -----------    -----------    -----------
     Loss from operations ...................................      (374,066)    (1,073,725)    (6,464,553)
Interest income .............................................        81,967        117,781         80,151
Other expense ...............................................        (5,025)        29,300             --
                                                                -----------    -----------    -----------
Net loss ....................................................   $  (297,124)   $  (926,644)   $(6,384,402)
                                                                ===========    ===========    ===========

Net loss per share - basic and diluted ......................         (0.29)   $     (0.91)   $     (6.31)
Weighted average shares outstanding - basic and diluted .....     1,013,038      1,013,038      1,011,547

(1) Excludes stock-based compensation expense as follows:
    Cost of services ........................................   $        --    $        --    $    37,125
    Engineering and development .............................            --          1,798        182,618
    Selling and marketing ...................................            --             --         16,417
    General and administrative ..............................         1,032         30,309        245,870
                                                                -----------    -----------    -----------
                                                                $     1,032    $    32,107    $   482,030
                                                                ===========    ===========    ===========
</TABLE>


              See notes to the consolidated financial statements.


                                       31
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                     CONVERTIBLE                            ADDITIONAL
                                   PREFERRED STOCK        COMMON STOCK        PAID-IN        DEFERRED     ACCUMULATED
                                   SHARES    AMOUNT     SHARES      AMOUNT     CAPITAL     COMPENSATION     DEFICIT        TOTAL
                                  -------   -------  ----------    -------  ------------   -----------   ------------   -----------
<S>                               <C>       <C>       <C>         <C>       <C>            <C>           <C>            <C>
Balance, January 1,2002 .........      --   $    --   1,000,075   $  1,000  $ 89,586,433   $(1,678,303)  $(81,114,741)  $ 6,794,389
  Issuance of 12,963 shares
    of common stock and warrants
    to purchased 5,556 shares of
    common stock at $14.31 per
    share for the purchase of
    fileTrust ...................      --        --      12,963         13       251,987            --             --       252,000
  Stock-based compensation ......      --        --          --         --    (1,178,297)    1,660,327             --       482,030
  Net loss ......................      --        --          --         --            --            --     (6,384,402)   (6,384,402)
                                  -------   -------  ----------    -------  ------------   -----------   ------------   -----------
Balance, December 31, 2002 ......      --        --   1,013,038      1,013    88,660,123       (17,976)   (87,499,143)    1,144,017
Issuance of convertible preferred
  stock, Series B                  20,000        20          --                   49,980                                     50,000
  Stock-based compensation ......      --        --          --         --        15,591        16,516             --        32,107
  Net loss ......................      --        --          --         --            --            --       (926,644)     (926,644)
                                  -------   -------  ----------    -------  ------------   -----------   ------------   -----------
Balance, December 31, 2003 ......  20,000        20   1,013,038      1,013   $88,725,694        (1,460)   (88,425,787)      299,480
  Stock-based compensation ......      --        --          --         --            --            --             --            --
   Stock options exercised ......      --        --          --         --            --         1,032             --         1,032
   Net loss ......................     --        --          --         --            --            --       (297,124)     (297,124)
                                  -------   -------  ----------    -------  ------------   -----------   ------------   -----------
Balance, December 31, 2004 ......  20,000   $    20   1,013,038   $  1,013  $ 88,725,694   $      (428)  $(88,722,911)  $     3,388
                                  =======   =======  ==========   ========  ============   ===========   ============   ===========
</TABLE>


               See notes to the consolidated financial statements.


                                       32
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                        2004            2003           2002
                                                                     -----------    -----------    -----------
<S>                                                                  <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .........................................................   $  (297,124)   $  (926,644)   $(6,384,402)
Adjustments to reconcile net loss to net cash
  used in operating activities:
    Depreciation, amortization and equipment write-down ..........       147,132        301,309        831,612
    Loss on the disposal of equipment ............................        21,910             --             --
    Intangible assets impairment loss ............................        29,916             --             --
    Stock-based compensation .....................................         1,032         32,107        482,030

    Increase (decrease) in cash from the change in:
      Accounts receivable ........................................        14,769         (7,055)        21,699
      Prepaid expenses and other current assets ..................         1,625         97,035        100,993
      Accounts payable ...........................................        60,467        (35,740)       (65,796)
      Accrued compensation .......................................        (2,319)       (10,750)      (286,284)
      Other accrued expenses and current liabilities .............      (284,705)       115,659         78,698
      Deferred revenue ...........................................           491        (45,341)        52,258
                                                                     -----------    -----------    -----------
          Net cash used in operating activities ..................      (306,806)      (479,420)    (5,169,192)
                                                                     -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment ............................            --             --        (29,348)
Cash paid for fileTRUST assets ...................................            --             --       (175,000)
Cash paid for short and long-term investments ....................            --       (414,112)    (1,564,669)
Investment maturities ............................................       462,264        743,396        458,329
Interest receivable ..............................................       (20,786)        (1,873)        (9,057)
Other assets .....................................................         5,916         (5,916)         2,400
                                                                     -----------    -----------    -----------
          Net cash provided by (used in) investing activities ....       447,394        321,495     (1,317,345)
                                                                     -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the issuance of preferred shares ...............            --         50,000             --
                                                                     -----------    -----------    -----------
          Net cash provided by financing activities ..............            --         50,000             --
                                                                     -----------    -----------    -----------
NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS ....................................................       140,588       (107,925)    (6,486,537)
CASH AND CASH EQUIVALENTS, BEGINNING OF
  YEAR ...........................................................       317,444        425,369      6,911,906
                                                                     -----------    -----------    -----------
CASH AND CASH EQUIVALENTS, END OF YEAR ...........................   $   458,032    $   317,444    $   425,369
                                                                     ===========    ===========    ===========
</TABLE>

               See notes to the consolidated financial statements.


                                       33
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   NATURE OF BUSINESS AND OPERATIONS

     THE COMPANY

     MangoSoft, Inc. and subsidiary (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.

     On September 7, 1999, MangoMerger Corp., a wholly-owned subsidiary of First
American Clock Co. ("First American"), merged with and into MangoSoft
Corporation, pursuant to an Agreement and Plan of Merger (the "Merger") dated
August 27, 1999. Following the Merger, the business to be conducted by First
American was the business conducted by MangoSoft Corporation prior to the
Merger. In conjunction with the Merger, First American, which is the legal
acquirer and surviving legal entity, changed its name to MangoSoft, Inc.

     Immediately after the Merger, the former common and preferred stockholders
of MangoSoft Corporation held 6,008,998 shares of the Company's common stock,
while the former common stockholders of First American held 1,575,000 shares of
the Company's common stock. In addition, the 12% Senior Secured Convertible
Notes (the "12% convertible notes") in the aggregate of $6,000,000 held by
creditors of MangoSoft Corporation were converted into an aggregate of 9,000,000
shares of the Company's common stock. As part of the Merger, the Company
completed a Private Placement (the "Private Placement") of 3,000,000 shares of
common stock for net proceeds of $3,098,827. The Company also issued 300,000
shares of common stock to the placement agent in respect of such Private
Placement.

     At the time of the Merger, the common shares issued to the former
stockholders of MangoSoft Corporation represented a majority of the Company's
common stock, enabling them to retain voting and operating control of the
Company. Because First American was a nonoperating entity and the closing of the
Private Placement was contingent upon the closing of the Merger, the Merger was
accounted for as a capital transaction and was treated as a reverse acquisition,
as the shareholders of MangoSoft Corporation received the larger portion of the
voting interests in the combined enterprise. Estimated costs of the Merger of
$276,173 and the value ($375,000) of the 300,000 shares of common stock issued
to the placement agent have been recorded as issuance costs of the Private
Placement.

     As shown in the consolidated financial statements, during each of the three
years in the period ended December 31, 2004, the Company incurred net loss of
$(297,124), $(926,644) and $(6,384,402), respectively. Cash used in operations
during each of the three years in the period ended December 31, 2004 was
$306,806 $479,420 and $5,169,192, respectively. These factors, among others,
raise significant doubt about the Company's ability to continue as a going
concern. 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 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.

     The Company has reduced its work force on four separate occasions since
April 23, 2001 due to adverse economic conditions and the Company's need to
conserve capital. At December 31, 2004 and 2003, the Company had two (2)
employees, each working in a general and administrative capacity.


                                       34
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation - The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiary after the
elimination of all significant intercompany balances.

     Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the balance sheet dates. Actual results could differ from those
estimates.

     Cash and Equivalents - Cash and equivalents include cash on hand, cash
deposited with banks and highly liquid debt securities with remaining maturities
of ninety days or less when purchased.

     Investments - Investments in which the Company has the ability and positive
intent to hold to maturity are carried at amortized cost. Investments and
maturities of less than one year are classified as short-term investments.
     Concentration of Credit Risk - The Company maintains deposits in financial
institutions, which occasionally exceed federally insured limits. Senior
management continually reviews the financial stability of these institutions.

     Property and Equipment - Property and equipment consists primarily of
computer equipment and is recorded at cost. Depreciation and amortization are
provided using the straight-line method over the estimated useful lives
(generally three to five years) of the related assets. The Company periodically
evaluates the recoverability of its long-lived assets based on the expected
undiscounted cash flows and recognizes impairments, if any, based on discounted
cash flows.

     Intangible Assets - Intangible assets consist of acquired technology,
customer relationships and service marks (see Note 3). Amortization expense for
the years ended December 31, 2004 and 2003 was approximately $110,000 and
$120,000, respectively. As of December 31, 2004 these intangibles were
determined by management to be permanently impaired and to have no future value.
As a result they have been written off at December 31, 2004. The Company
evaluates the carrying value of its intangible assets using anticipated cash
flows to be generated by these assets over their useful lives. The Company
assesses the carrying value of its intangible assets for impairment each year.
Based on its assessments, the Company did not incur any impairment charges for
the year ended December 31, 2003.

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

     Software Development Costs - Costs incurred prior to technological
feasibility of the Company's software products are expensed as research and
development costs. Certain costs incurred after technological feasibility has
been established are capitalized. To date, the time period between the
establishment of technological feasibility and completion of software
development has been short and no significant development costs have been
incurred during that period. Accordingly, the Company has not capitalized any
software development costs to date.


                                       35
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Stock-Based Compensation - The Company accounts for stock-based employee
compensation arrangements using the intrinsic value method in accordance with
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued
to Employees," and complies with the disclosure provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation."

     Equity instruments issued to non-employees are accounted for in accordance
with the provisions of SFAS No. 123 and Emerging Issues Task Force ("EITF")
Abstract No. 96-18, "Accounting for Equity Instruments That Are Issued To Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services."

     The Company's 1999 Incentive Compensation Plan, as amended, 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 and other stock-based awards, including stock
appreciation rights. Employee options typically vest over three or four year
periods. An option's maximum term is ten years.

     In December 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 148, "Accounting for Stock-Based Compensation -Transition and
Disclosure." This Statement amends the transition and disclosure requirements of
SFAS No. 123 with respect to the implementation of the fair value method of
accounting for options. See Note 8 for additional information regarding the
Company's stock options.

     Pursuant to the disclosure requirements of SFAS No. 148, the following
table provides an expanded reconciliation for all periods presented that adds
back to reported net loss the recorded expense under APB No. 25, deduct the
total fair value expense under SFAS No. 123 and shows the reported and pro forma
earnings per share amounts:

<TABLE>
<CAPTION>
                                                                 2004           2003           2002
                                                             -----------    -----------    -----------
<S>                                                             <C>         <C>            <C>
Net loss applicable to common stockholders, as reported ..      (297,124)   $  (926,644)   $(6,384,402)
Add back: stock-based compensation costs included
  in the determination of net loss applicable to common
  shareholders, as reported ..............................         1,032         32,107        482,030
Less: Stock-based compensation had all options
  been recorded at fair value ............................      (157,111)      (127,826)    (1,845,633)
                                                             -----------    -----------    -----------

Adjusted net loss ........................................   $  (453,203)   $(1,022,363)   $(7,748,005)
                                                             ===========    ===========    ===========

Weighted average shares outstanding, basic and diluted ...     1,013,038      1,013,038      1,011,547

Net loss per share, basic and diluted, as reported .......   $     (0.29)   $     (0.91)   $     (6.31)
                                                             ===========    ===========    ===========
Adjusted net loss per share, basic and diluted ...........   $     (0.45)   $     (1.01)   $     (7.66)
                                                             ===========    ===========    ===========
</TABLE>

     Income Taxes - Deferred tax liabilities and assets are determined based on
the difference between the financial statement carrying amounts and tax bases of
existing assets and liabilities, using enacted tax rates. Valuation allowances
are established when necessary to reduce the deferred tax assets to those
amounts expected to be realized.


                                       36
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Comprehensive Loss - Comprehensive loss was equal to net loss for each year
presented.

     Net Loss Per Common Share - Basic net loss per common share is computed by
dividing net loss applicable to common stockholders by the weighted average
number of common shares outstanding during the period. Diluted net loss per
common share reflects, in addition to the weighted average number of common
shares, the potential dilution if common stock options were exercised into
common stock, unless the effects of such exercises would have been antidilitive.

     Basic and diluted loss per common share are the same for 2004, 2003 and
2002 as potentially dilutive stock options totaling 117,652 in 2004, 79,689 in
2003 and 83,232 in 2002 have not been included in calculations of diluted net
loss per common share available to common stockholders, as their inclusion would
have been antidilutive.

     Supplemental Cash Flow Information - The following table sets forth certain
supplemental cash flow information for the years ended December 31, 2004, 2003
and 2002:

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                                2004     2003     2002
                                                               ------  ------   --------
<S>                                                            <C>     <C>      <C>
Cash paid for interest .....................................   $   --  $   --   $     --
Cash paid for income taxes .................................       --      --         --

NON CASH FINANCING ACTIVITIES:
  Fair value of common stock and warrants issued in
    connection with the purchase of the fileTRUST assets ...       --      --    252,000
</TABLE>



                                       37
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - In November 2002, the EITF
finalized its consensus on EITF Issue 00-21, "Revenue Arrangements with Multiple
Deliverables, " which provides guidance on the method of revenue recognition for
sales arrangements that include the delivery of more than one product or
service. EITF 00-21 is effective prospectively for arrangements entered into in
fiscal periods beginning after June 15, 2003. Under EITF 00-21, revenue must be
allocated to all deliverables regardless of whether an individual element is
incidental or perfunctory. The adoption of EITF 00-21 did not have a material
impact on the Company's results of operations or financial position.

     In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities," ("FIN 46") which clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements,"
relating to consolidation of certain entities. FIN 46 will require
identification of the Company's participation in variable interest entities
("VIEs"), which are defined as entities with a level of invested equity that is
not sufficient to fund future activities to permit it to operate on a standalone
basis. For entities identified as a VIE, FIN 46 sets forth a model to evaluate
potential consolidation based on an assessment of which party to the VIE (if
any) bears a majority of the exposure to its expected losses or stands to gain
from a majority of its expected returns. The interpretation is effective after
January 31, 2003 for any VIE created after that date and is effective July 1,
2003 for VIEs created before February 1, 2003. The adoption of the FIN 46 did
not have a material impact on the Company's results of operations or financial
position.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. " SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under SFAS No. 133, "Accounting for Derivative instruments
and Hedging Activities." SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003. The adoption of SFAS No. 149 did not have a
material impact on the Company's results of operations or financial position.

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability. SFAS No. 150 is effective for financial instruments entered into
or modifies after May 31, 2003, and otherwise is effective at the beginning of
the first interim period beginning after June 15, 2003. The adoption of SFAS No.
150 did not have a material impact on the Company's results of operations or
financial position.

     In December 2003, the SEC issued Staff Accounting Bulletin ("SAB") No. 104,
"Revenue Recognition," which supercedes SAB No. 101, "Revenue Recognition in
Financial Statements." SAB No. 104 rescinds accounting guidance in SAB No. 101
related to multiple element arrangements, which was previously superceded by
EITF 00-21 (see above). The adoption of SAB No. 104 did not have a material
impact on the Company's results of operations or financial position.

In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based
Payment (SFAS 123R) which will be effective in the fourth quarter of fiscal
2005. SFAS 123R will result in the recognition of substantial compensation
expense relating to our employee stock option plan. The Company currently uses
the intrinsic value method to measure compensation expense for stock-based
awards to its employees. Under this standard, the Company generally does not
recognize any compensation related to stock option grants the Company issues
under its stock option plans. Under the new rules, the Company is required to
adopt a fair-value-based method for measuring the compensation expense related
to employee stock options; this will lead to substantial additional compensation
expense and therefore will have a material adverse effect on the Company's
reported results of operations. The paragraph entitled Stock Based Compensation
above provides the pro forma net income and earnings per share as if the Company
had used a fair-value-based method similar to the methods required under SFAS
123R to measure the compensation expense for employee stock awards during fiscal
2004, 2003 and 2002.


                                       38
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.   BUSINESS COMBINATION

     On February 11, 2002, the Company acquired the fileTRUST online data
storage service and related assets from Bank of America (formerly FleetBoston)
Financial Corporation ("Bank of America (formerly FleetBoston)"). Under the
terms of the purchase, the Company paid $175,000 in cash, issued 12,963 shares
(as restated for the 1-for-27 reverse stock split on March 7, 2003) of the
Company's common stock and warrants to purchase 5,556 shares (as restated for
the 1-for-27 reverse stock split on March 7, 2003) of the Company's common stock
at an exercise price of $14.31 per share (as restated for the 1-for-27 reverse
stock split on March 7, 2003). The aggregate fair value of the common stock was
$182,000, which was based on the closing price of the Company's common stock on
February 11, 2002. The aggregate fair value of the warrants was $70,000, which
was determined using the Black-Scholes valuation model using the following
assumptions: expected life of the warrants, 5 years; volatility, 127%; and the
risk free interest rate, 4.25%.

     As part of the transaction, Bank of America (formerly FleetBoston) and the
Company entered into a two-year enterprise license agreement for the internal
use of fileTRUST by Bank of America (formerly FleetBoston). In addition, the two
companies will continue to market fileTRUST under a cooperative marketing
agreement. Under the terms of this cooperative marketing agreement, the Company
is required to issue warrants to purchase its common stock to Bank of America
(formerly FleetBoston) based on certain revenue targets, not to exceed 31,481
warrants over this two-year period. The 31,481 warrants have been accounted for
as contingent consideration and will be recognized as additional purchase price
as the revenue targets are achieved. No warrants were issued in 2004 or 2003
under the terms of the cooperative marketing agreement.

      The total aggregate consideration rendered for this transaction totaled
approximately $427,000. The following presents the preliminary allocation of the
purchase price:

Cash paid ......................................   $175,000
Fair value of common stock issued ..............    182,000
Fair value of warrants issued ..................     70,000
                                                   --------

Purchase price .................................   $427,000
                                                   ========

Software and acquired technology ...............   $329,000
Computer equipment .............................     54,000
Other identifiable intangible assets ...........     44,000
                                                   --------
                                                   $427,000
                                                   ========

     The software and acquired technology represents the fileTRUST operating
software that has reached technological feasibility and has future economic
value. The other identifiable intangible assets are comprised of customer
relationships and the fileTRUST service mark. The computer equipment was being
depreciated over its estimated useful lives, generally not to exceed three
years. The software and acquired technology was being amortized over three
years. The computer equipment and software were transferred to Builtright
Networks, Inc. in September 2004. The net book value of these assets was $21,911
on the date of transfer. This amount has been reported in the 2004 statement of
operations as loss on disposal of equipment. The other identifiable intangible
assets have indefinite lives and were not being amortized but were subject to an
impairment analysis in accordance with SFAS No. 142, "Goodwill and Other
Intangible Assets." These intangible assets were determined by management to be
permanently impaired and were written off at December 31, 2004.

     The operations of the fileTRUST assets prior to the acquisition were not
material to the Company's financial statements.


                                       39
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.  INVESTMENTS

     Investments in held-to-maturity debt securities are carried at amortized
costs and are as follows at December 31, 2004 and 2003:

<TABLE>
<CAPTION>
                                                                          INTEREST    TOTAL
                           2004                                  COST    RECEIVABLE   VALUE
                           ----                                --------   --------   --------
<S>                                                            <C>        <C>        <C>
Corporate notes, 12.0%, issued October 31, 2002,
  maturity date, April 15, 2005 ............................   $142,139   $    702   $142,841
Corporate notes, 12.0%, issued December 15, 2002,
  maturity date, April 15, 2005 ............................     81,222        400     81,622
Corporate notes, 12%, issued at various dates in 2002,
maturity dates vary in 2004 (collected in 2005).............    100,489     21,556    122,045
                                                               --------   --------   --------
     Total short-term held-to-maturity investments .........   $323,850   $ 22,658   $346,508
                                                               ========   ========   ========

<CAPTION>
                                                                          INTEREST    TOTAL
                           2003                                  COST    RECEIVABLE   VALUE
                           ----                                --------   --------   --------
<S>                                                            <C>        <C>        <C>
Corporate notes, 12.0%, issued October 31, 2002,
  maturity date, April 15, 2005 (current portion) ..........   $150,000   $    454   $150,454
Corporate notes, 12.0%, issued December 15, 2002,
  maturity date, April 15, 2005 (current portion) ..........    120,000        363    120,363
Corporate notes, 15.0%, issued December 26, 2002,
  maturity date, December 25, 2004 .........................     64,826        426     65,252
Corporate notes, 12.0%, issued at various dates in 2002,
  maturity dates vary in 2004 ..............................    255,430         --    255,430
Corporate notes, 12.0%, issued December 26, 2002,
  maturity date, December 25, 2004 .........................     15,857         83     15,940
                                                               --------   --------   --------
     Total short-term held-to-maturity investments .........   $606,113   $  1,326   $607,439
                                                               ========   ========   ========

Corporate notes, 12.0%, issued December 15, 2002,
  maturity date, April 15, 2005 (long-term portion) ........   $100,000   $    303    100,303
Corporate notes, 12.0%, issued October 31, 2002,
  maturity date, April 15, 2005 (long-term portion) ........     80,000        244     80,244
                                                               --------   --------   --------
Total long-term held-to-maturity investments ...............   $180,000   $    547   $180,547
                                                               ========   ========   ========
</TABLE>

     The secured corporate notes have been executed between the Company and
several privately-held companies, each of which are related parties (see Note
11). The notes are secured by certain collateral pursuant to each note agreement
and certain guarantees by the respective corporations. The 12.0% corporate notes
with varying maturity dates in 2004 are carried at cost due to the uncertainty
of their interest payment. The principal on these notes is collateralized by the
debtor's receivables. These notes were fully collected in January 2005.


                                       40
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.  PROPERTY AND EQUIPMENT

     Property and equipment at December 31, 2003 consists of the following:

                                                                  2003

            Computer equipment .............................   $ 878,295
            Furniture and fixtures .........................      96,319
            Leasehold improvements .........................          --
                                                               ---------
                 Total .....................................     974,614

            Accumulated depreciation and loss on disposal of
              equipment ....................................    (915,849)
                                                               ---------
                 Property and equipment - net ..............   $  58,765
                                                               =========


     During the year ended December 31, 2004, the Company relocated its
outsourced data centers and changed its billable service's infrastructure
configuration. Certain computer hardware, related equipment and leasehold
requirements used to operate these services were no longer necessary and were
disposed of. The loss of $21,910 was charged to operations during the year ended
December 31, 2004. Depreciation expense charged to operations was $36,853 in
2004.

6.  INCOME TAXES

     The Company has federal and state tax net operating loss carryforwards
available for future periods of approximately $72,500,000. The federal tax net
operating loss carryforwards expire beginning in 2010, and state tax net
operating loss carryforwards began expiring in 2000. As a result of the changes
in the ownership of the Company, there may be limitations on the amounts of net
operating loss carryforwards that may be utilized in any one year. The Company
also has research and development credits for federal and state tax purposes of
approximately $1,548,000 and $1,118,000, respectively, which expire beginning in
2011.

     The tax effect of significant items comprising the Company's deferred tax
assets at December 31, 2004 and 2003 are as follows:

                                                       2004             2003
                                                   ------------    ------------
          Deferred tax assets:
            Net operating loss carryforwards ...   $ 28,854,000    $ 28,402,000
            Stock-based compensation ...........      1,339,000       2,212,000
            Research and development credits ...      2,664,000       2,664,000
            Depreciation and amortization ......             --         295,000
            Organization costs and software ....             --          18,000
            Accrued vacation ...................             --           1,000
                                                   ------------    ------------
                                                     32,857,000      33,592,000
          Valuation allowance ..................    (32,857,000)    (33,592,000)
                                                   ------------    ------------
             Net deferred tax assets ...........   $         --    $         --
                                                   ============    ============


                                       41
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.  INCOME TAXES (CONTINUED)

     The Company believes that uncertainty exists with respect to future
realization of the deferred tax assets and has established a valuation allowance
for the full amount as of December 31, 2004 and 2003.

     A reconciliation between the amount of income tax determined by applying
the applicable U.S. statutory tax rate to the pre-tax loss is as follows:

                                                        2004     2003     2002

Federal statutory rate..............................     34%      34 %     34 %
State tax, net of federal impact....................      6        6        6
Provision for valuation allowance on deferred
  tax assets........................................    (40)     (40)     (40)
                                                        ----     ----     ----
Effective tax rate..................................     -- %     -- %     -- %
                                                        ====     ====     ====

7.   STOCKHOLDERS' EQUITY

     Preferred stock - At December 31, 2004 the Company had 5,000,000 authorized
shares of preferred stock, $0.001 par value, of which 20,000 were issued and
outstanding. On July 24, 2003, the Company issued 20,000 shares of Series B
Convertible Preferred Stock (the "Preferred Stock") to two significant
shareholders for $50,000, one of which is the Company's former co-chairman of
the board. The Preferred Stock has no stated dividend rate. Each share of
Preferred Stock is convertible into one share of common stock at the option of
the holder. In addition to the convertible features of this private placement,
the holders of the Preferred Stock are entitled to twenty-five votes per share
of Preferred Stock on any matter brought to a vote of shareholders.

     Common Stock - On March 7, 2003, the Company completed its 1-for-27 reverse
stock split. As a result of this reverse stock split, the Company's authorized
shares of common stock decreased to 3,703,704, of which 1,013,038 were issued
and outstanding at December 31,2004. All common shares and price per share
described in this note have been restated to reflect the 1-for-27 reverse stock
split on March 7, 2003. At December 31, 2002, the Company had 100,000,000
authorized shares of common stock, $0.001 par value per share, of which
27,352,033 were issued and outstanding

         On March 11, 2003, the Board of Directors of MangoSoft, Inc. declared a
dividend distribution of one right (a "Right") to purchase one-tenth of a share
of common stock, $0.001 par value, of the Company for each share of common
stock, payable to stockholders of record on March 18, 2003. The Board of
Directors also authorized and directed the issuance of one Right with respect to
each common share issued thereafter until the distribution date (as defined in
the Rights Agreement) and, in certain circumstances, with respect to common
shares issued after the distribution date. Except as set forth in the Rights
Agreement, each Right, when it becomes exercisable, entitles the registered
holder to purchase from the Company one-tenth of a common share at a price of
$250 per whole common share, subject to adjustment, as amended. The description
and terms of the Rights are set forth in a Rights Agreement between the Company
and Interwest Transfer Co., Inc., as Rights Agent, dated as of March 14, 2003,
as amended.


                                       42
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.  STOCK OPTION PLAN

     In connection with the Merger, MangoSoft Corporation's 1995 Stock Option
Plan was terminated and the Company adopted the 1999 Incentive Compensation Plan
(the "Plan"). As amended, the 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 December 31, 2004, there were 186,052
remaining options available under the Plan.

     As discussed in Note 2, the Company accounts for stock options granted to
employees in accordance with APB No. 25. Options granted in 1999 included stock
appreciation rights ("SARs") that permit the employee to receive the
appreciation in shares of common stock in lieu of exercising the option. At
December 31, 2004, 2003 and 2002, there were 40,874, 42,086 and 99,393
outstanding options, respectively, to purchase the Company's common stock that
included SARs. Under APB No. 25, SARs are accounted for as variable awards.

     On April 3, 2001, the Company's Board of Directors resolved to reprice
options to purchase 95,710 shares of the Company's common stock. The options
were originally issued between October 1999 and December 2000 and had exercise
prices ranging from $50.76 to $135.00 per share. The exercise price for these
options was reduced to $27.81, the closing market value of the Company's common
stock as of the repricing date. The repriced options are now accounted for as
variable awards, similar to the SARs. At December 31, 2004, 2003 and 2002, there
were 26,222, 27,627 and 76,340 outstanding options, respectively, to purchase
the Company's common stock that were repriced and subject to variable plan
accounting.

     Under APB No. 25, stock-based compensation expense pertaining to variable
awards is measured at each reporting date based on the difference between the
exercise price and the market price of the common stock. For unvested options,
compensation expense is recognized over the vesting period; for vested options,
compensation expense is adjusted up or down at each reporting date based on
changes in the market price of the Company's common stock.

      On July 24, 2003, the Company amended its outstanding and vested stock
options granted to its Chief Executive Officer. Vested and outstanding options
to purchase 22,222 and 14,815 shares of the Company's common stock at $27.81 and
$33.75 per share, respectively, were cancelled. The Company granted its Chief
Executive Officer options to purchase 37,037 shares of its common stock at an
exercise price of $1.00 per share. The newly granted options are completely
vested. The Company recognized $29,253 in stock-based compensation expense
relating to this pricing in 2003.

     In 2000, the Company granted employees 94,930 options to purchase its
common stock at prices less than the current market price of its common stock on
the grant date. Stock-based compensation of $1,032, $2,854 and $482,030 is
included in the Company's 2004, 2003 and 2002 results of operations in
connection with these grants, respectively.

     There were no such grants made in 2004, 2003 or 2002. The fair value of
the stock options awarded to non-employees is calculated using the Black-Scholes
option-pricing model.


                                       43
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.  STOCK OPTION PLAN (CONTINUED)

     Stock option activity, including options granted under the predecessor 1995
Stock Option Plan, was as follows:

                                                         WEIGHTED
                                           NUMBER OF     EXERCISE    AVERAGE
                                            OPTIONS        PRICE    FAIR VALUE
                                            --------    ---------   ----------
Outstanding at January 1, 2002 ..........    209,412    $   76.95
  Granted ...............................         --           --
  Exercised .............................         --           --
  Forfeited .............................   (126,180)       34.56
                                           ---------
Outstanding at December 31, 2002 ........     83,232        35.64
  Granted ...............................     37,037         1.00   $    1.58
  Exercised .............................         --           --
  Forfeited .............................    (40,580)       30.23
                                           ---------
Outstanding at December 31, 2003 ........     79,689        22.31
  Granted ...............................     37,963         4.05   $    4.04
  Exercised .............................         --           --
  Forfeited .............................     (7,407)       67.50
                                           ---------
Outstanding at December 31, 2004 ........    110,245    $   12.99
                                           =========

Exercisable at December 31, 2004 ........    110,245
Exercisable at December 31, 2003 ........     75,910
Exercisable at December 31, 2002 ........     76,245

<TABLE>
<CAPTION>
                           OPTIONS OUTSTANDING
                        ------------------------                                        OPTIONS EXERCISABLE
                                                      WEIGHTED AVERAGE        ----------------------------------------
  NUMBER OF OPTIONS     RANGE OF EXERCISE PRICES    REMAINING LIFE (IN        WEIGHTED AVERAGE        NUMBER CURRENTLY
                                                           YEARS)              EXERCISE PRICE           EXERCISABLE
  -----------------     ------------------------    -------------------       ----------------        ----------------
<S>                         <C>                             <C>                   <C>                      <C>
        38,518              $ 0.27 to $ 1.00                6.5                   $  0.97                  38,518
        30,060             $ 27.81 to $ 33.75               6.1                   $ 32.96                  30,060
         3,704                   $ 67.50                    6.2                   $ 67.50                   3,704
        37,963                   $ 4.05                     9.5                   $  4.04                  37,963
       -------                                                                                            -------
       110,245                                                                                            110,245
       =======                                                                                            =======
</TABLE>


                                       44
<PAGE>

                         MANGOSOFT, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.  STOCK OPTION PLAN (CONTINUED)

     The fair value of options on their grant date was measured using the
Black-Scholes option-pricing model. Key assumptions used to apply this pricing
model are as follows:

                                                     2004       2003      2002
                                                     ----       ----      ----
Risk-free interest rate...........................   4.47 %      3.0%    4.25 %
Expected life of option grants....................  10 years   2 years   5 years
Expected volatility of underlying stock...........    188 %     179 %     127 %


9.  RETIREMENT SAVINGS PLAN

     The Company adopted a savings plan for its employees pursuant to Section
401(k) of the Internal Revenue Code. All employees are eligible to participate
and the plan allows a deferral ranging from a minimum 1% to the maximum
percentage of compensation permitted by law. The Company may, at the discretion
of the Board of Directors, make contributions on behalf of its employees under
this plan. Such contributions, if any, become fully vested after five years of
continuous service. The Company did not make any contribution in 2004, 2003 or
2002.

10.  COMMITMENTS AND CONTINGENCIES

     The Company has cancelled its operating lease for office space in November
2004. Total rent expense was approximately $23,000, $101,000 and $453,000 for
the years ended December 31, 2004, 2003 and 2002, respectively.

     The Company has been, and expects to continue to be, subject to legal
proceedings and claims that arise in the ordinary course of business. Management
currently believes that resolving these matters will not have a material adverse
impact on the Company's financial position, results of operations or its cash
flows.

11.  RELATED PARTY TRANSACTIONS

     Investments - During 2003 and 2002, the Company issued approximately
$414,000 and $1,565,000, respectively in several secured corporate notes
receivable accruing interest at 12.0% to 15.0% per annum to companies who are
beneficially owned by two stockholders. Approximately $462,000, $743,000 and
$458,000 was repaid to the Company in 2004, 2003 and 2002 as some of the
corporate notes matured. See Note 4.

     Private Placement - In July 2003, the Company issued 20,000 shares of its
Class B Convertible Preferred Stock to two related parties for $50,000. See Note
7.

12.  GEOGRAPHIC SALES INFORMATION AND MAJOR CUSTOMERS

     The Company generates the majority of its revenues from the sale of its
products and services in North America. All of the Company's 2004, 2003 and 2002
revenues were generated from sales to North American customers.

     One customer accounted for approximately 35% of our 2004 net revenues. Two
customers accounted for approximately 52% of our 2003 net revenues. Three
customers accounted for approximately 76% of our 2002 revenues.


                                       45