UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K


(Mark
One)


x
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934For
      the fiscal year ended December 31,
2009


or


o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934For
      the transition period from _______________________ to
      ___________________





Commission
File Number 001-12345





MANGOSOFT,
INC.


(Exact
name of registrant as specified in its charter)





Nevada
              
              87-0543565(State
      of incorporation)
              
              (I.R.S.
      Employer Identification No.)108
      Village Square, Suite 315
                Somers,
      NY
              
              10589(Address
      of principal executive offices)
              
              (Zip
      Code)





29
Riverside Street, Suite A, MS A-8


Nashua, New
Hampshire  03062


(Prior
Address if Changed From Last Report)





Registrant’s
telephone number, including area code: (914) 669-5333





Securities registered pursuant to
Section 12(b) of the Act:   None


Securities registered pursuant to
Section 12(g) of the Act:   Common stock, $.001 par
value





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  o Yes  x No





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  o Yes  x No





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.  x Yes  o No





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  x





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





Large
accelerated filer   o  Accelerated
filer  o
 Non-accelerated filer    o  Smaller reporting
company   x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule12b-2
of the Act).  o Yes  x No





The
aggregate market value of the voting stock held by persons other than officers,
directors and more than 5% stockholders of the registrant as of June 30, 2009
was $1.59 million, based on the most recent sales price of the common stock of
Company ($0.25 per share) in private transactions at such date (when the common
stock of the Company was not publicly quoted or listed for
trading).  As of March 25, 2010, there were 5,443,157 shares of common
stock outstanding.








MANGOSOFT,
INC.





INDEX
TO FORM 10-K




PagePART
      IITEM
      1 —
                    Description
      of Business
                    3ITEM
      1A
                    Risk
      Factors
                    5ITEM
      1B
                    Unresolved
      Staff Comments
                    7ITEM
      2—
                    Description
      of Property
                    7ITEM
      3—
                    Legal
      Proceedings
                    7ITEM
      4—
                    Submission
      of Matters to a Vote of the Security Holders
                    7PART
      IIITEM
      5—
                    Market
      for Common Equity and Related Stockholder Matters
                    8ITEM
      7—
                    Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                    9ITEM
      7A
                    Quantitative
      and Qualitative Discussion about Market RiskITEM
      8—
                    Financial
      Statements
                    13ITEM
      9—
                    Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
                    13ITEM
      9A—
                    Controls
      and Procedures
                    14ITEM
      9B—
                    Other
      Information
                    14PART
      IIIITEM
      10—
                    Directors
      and Executive Officers of the Registrant
                    15ITEM
      11—
                    Executive
      Compensation
                    16ITEM
      12—
                    Security
      Ownership of Certain Beneficial Owners and Management And Related
      Stockholder Matters
                    19ITEM
      13—
                    Certain
      Relationships and Related Transactions
                    20ITEM
      14—
                    Principal
      Accountant Fees and Services
                    20ITEM
      15—
                    Exhibits
      and Reports on Form 8-K
                    21Signature
                    23




FACTORS
THAT MAY AFFECT FUTURE RESULTS





The
Company’s prospects are subject to certain uncertainties and risks. This Annual
Report on Form 10-K 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





PART
I





ITEM
1. DESCRIPTION OF BUSINESS





GENERAL





Through
December 31, 2009, Mangosoft (the “Company”) marketed, sold
and supported 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’s proprietary software applications help businesses gain a competitive
advantage by improving collaboration with customers, partners and colleagues
through smarter, faster Internet communications.





As of
January 1, 2010, we entered into a Hosting Licensing Agreement with Built Right
Networks (“Built Right”) under which Built Right  provides our
software and services to existing Mangosoft customers and new Built Right
customers for their own account. Built Right will provide services, maintain the
software offering and manage the existing Mangosoft website for the benefit of
their customers. Mangosoft retains all intellectual property rights for its
software including MangomindTM and fileTrustTM. The Hosting Licensing Agreement
grants a non-exclusive license to Built Right and is cancelable under certain
conditions. We are evaluating alternate applications for our intellectual
property. We believe that the current offerings did not provide sufficient
growth opportunity for the Company and were more suited to companies such as
Built Right with active technology service business models.





BUSINESS
STRATEGY





We no
longer develop new software products or services. We discontinued the direct
marketing, sale and support of our software services as of January 1, 2010. Our
strategy includes seeking strategic business partnerships and distribution
channels to leverage our patented technology as well as seeking profitable
businesses in which our intellectual property will provide opportunity for
profitability. We will also seek business opportunities in which third party
technology solutions will provide opportunities for revenue diversification and
growth and improved operations and profits. All of our business operations are
overseen by our sole officer and our Board of Directors, who utilizes third
party contractors, as required, to implement the Company’s business
strategy.





COMPETITION





We
previously competed 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. With the
execution of our Hosting Licensing Agreement with Built Right Networks, we do
not anticipate that we will encounter competition from these companies as well
as others entering the Internet storage and collaboration markets. The Company
is unable to determine the competition it will encounter going forward. There
are no assurances that its business will not be faced with considerable
competitive pressures.





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 former
customers, now customers of Built Right under the terms of our Hosting Licensing
Agreement, 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 was 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.





3




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





·
            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.·
            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.·
            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.·
            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.·
            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.·
            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.·
            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.




·
            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. 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


4





MARKETING
AND SALES





We
previously marketed 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. Under the terms of the Outsourced Services Agreement, Built Right
Networks provided reseller channel management in addition to information systems
and technical end-user support for our products and services. With the execution
of the Hosting Licensing Agreement, our Outsourced Services Agreement with Built
Right Networks was terminated as of December 31, 2009. Under the terms of the
Hosting Licensing Agreement, Built Right Networks assumed all existing customers
accounts. We are not actively marketing or selling our software products at this
time. The Company will consider different applications of its intellectual
property and retains all rights to these assets under the new agreement with
Built Right Networks.





PRODUCT
SUPPORT





Built
Right Networks provided end-users and reselling channel with product support
under the terms of the Outsourced Services Agreement. Under the terms of the
Hosting Licensing Agreement, the Outsourced Services Agreement has been
terminated. All technical support is provided directly by Built Right Networks.
Built Right Networks will maintain the Mangosoft web site for purposes of
providing maintenance and support to end-users and resellers..





CONCENTRATIONS





We
generated the majority of our revenues from the sale of our products and
services in North America. All of our 2009 and 2008 revenues were generated from
sales to North American customers.




Excluding
the $2,300,000 one time license fee revenue in 2008 as discussed under legal
proceedings, one customer in 2009 and two customers in 2008  accounted
for approximately 13% and  37% of our 2009 and 2008 net revenues,
respectively.




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. We have taken actions to secure our proprietary
technology in the form of patent protection.





See Item
3. Legal Proceedings, included in this annual report, for a complete description
of legal proceedings related to our intellectual property.





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. Built Right Networks will be required to make royalty payments to
the software provider based on the volume of their sales going
forward.





EMPLOYEES





At
December  31, 2009, we had one employee and outsourced all
functions





ITEM
1A. RISK FACORS





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





We have a
history of substantial operating losses and an accumulated deficit of
$89,222,212 as of December 31, 2009. For the years ended December 31, 2009 and
2008, our income (loss) from operations was $(293,073), and $547,660,
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.,


5





Our
Success Depends onAbility
to Develop Alternative Uses for our Software and/or New Business
Opportunities.





The
Company’s success going forward depends on our ability to find alternative uses
for our software and/or new business opportunities that generate revenues and
profits. The Company is diligently evaluating  new opportunities but
has made no decisions or commitments to date. There is no assurance that we will
be successful in developing or finding alternative business opportunities or
that we will be successful in building or managing a business in an y
alternate  area of interest at this time.





Our
Performance Dependson
Market Acceptance of Our Productor
Servicess.





In
connection with our efforts to develop or find alternative business
opportunities, we can give no assurance that we will not be dependent on market
acceptance of future products or services. There is the risk that the Company
will not find alternate business opportunities to develop or acquire. The
Company will be subject to the risks related to the development or acquisition
of any business including those risks related to performing in new markets and
/or industries with which the Company is not familiar.





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.





We
may not be successful in identifying new markets, adapting our intellectual
property to other products or developing and marketing new products
..




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 are evaluating the strategic value of our
intellectual property and are actively seeking alternative applications for
these software assets. We can provide no assurances that we will be successful
in identifying new markets, adapting our intellectual property to products that
address such markets and/or developing and marketing new products in such a
manner as to be effective against our competition. If our technology is rendered
obsolete or we are unable to develop new products to compete effectively, our
business, operating results and financial condition may be materially and
adversely affected.


6





Litigation
Concerning Intellectual Property Could Adversely Affect Our
Business.




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





Defects
in Our Software Products May Adversely Affect Our Business.




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





We
Have Limitations On The Effectiveness Of Our Internal Controls.





We have
one full-time employee. This employee is engaged in general and administrative
capacities. A complete set of internal controls is not possible in an
organization of this size. Management does not expect that its disclosure
controls or its internal controls will prevent all errors and intentional
misrepresentations. A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must reflect the
fact that there are resource constraints and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues, if any, within the organization have been
detected.





ITEM
1B. UNRESOLVED STAFF COMMENTS





As of
December 31, 2009 the Company does not have any unresolved Staff
Comments.





ITEM
2. DESCRIPTION OF PROPERTY





As of
December 31, 2009 the Company does not own or lease any property.





ITEM
3. LEGAL PROCEEDINGS




There are
no material pending legal proceedings





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,
2009 to a vote of our security holders, through the solicitation of proxies or
otherwise.


7




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,. Such
quotations reflect interdealer prices, without retail markup, markdown or
commission, and may not represent actual transactions:





2009
                    
                    High
                    
                    
                    LowFirst
      Quarter
                    
                    $
                    0.25
                    
                    
                    $
                    0.05Second
      Quarter
                    
                    
                    0.27
                    
                    
                    
                    0.10Third
      Quarter
                    
                    
                    0.23
                    
                    
                    
                    0.11Fourth
      Quarter
                    
                    
                    0.20
                    
                    
                    
                    0.11




2008
                    
                    High
                    
                    
                    LowFirst
      Quarter
                    
                    $
                    1.45
                    
                    
                    $
                    0.37Second
      Quarter
                    
                    
                    0.55
                    
                    
                    
                    0.29Third
      Quarter
                    
                    
                    0.29
                    
                    
                    
                    0.10Fourth
      Quarter
                    
                    
                    0.24
                    
                    
                    
                    0.01




(B)
Holders





As of
December 31, 2009, there were approximately 266 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 State 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.


8




(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:





Number of
                              securities to be
                              issued upon
                              exercise of
                              outstanding
                              options, warrants
                              and rights
                            
                            Weighted-average
                              exercise price of
                              outstanding options,
                              warrants and rights
                            
                            Number of
                              securities
                              remaining
                              available for future
                              issuance under
                              equity
                              compensation
                              plans (excluding
                              securities reflected
                              in column (a))(a)
                            
                            (b)
                            
                            (c)Equity
      compensation plans approved by security holders
                            
                            272,150
                            
                            $
                            $0.12
                            
                            17,987





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





This
Annual Report on Form 10-K 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-K, 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-K for the
period ended December 31, 2009 filed with the Securities and Exchange
Commission.





OVERVIEW





We
marketed, sold and supported 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. As of January
1, 2010, we entered into a hosting Licensing Agreement with Built Right Networks
which transferred all existing customer accounts to Built Right Networks for
their own account. The agreement grants a non-exclusive license to Built Right
Networks for our Mangomind and fileTrustTM products. We are no longer actively
marketing, selling or supporting these products on a direct basis. However, we
have retained all intellectual property rights and intend to evaluate
alternative business opportunities for our intellectual property.




Mangomind
SM
  is a multi-user, business-oriented, peer-to-peer file sharing system,
allowing individual users to collaborate over the Internet across organizational
boundaries in a safe and secure manner. The architecture is a blend of the
manageability of client/server with the autonomy, clustering, and caching
optimizations of peer-to-peer. The user experience is one of easy file sharing
with colleagues through what looks like an ordinary LAN shared drive. Mangomind
SM
provides the secure file sharing benefits of a VPN without additional hardware
and configuration complexities. Mangomind SM is sold
as both a service and a standalone software product





fileTRUST
SM
is an online data storage service. fileTRUST SM users
can access their stored files from any Internet-connected system. The fileTRUST
SM
service compliments our Mangomind SM service
by providing customers with a lower cost online storage system.


9





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
recognized revenue generated from product sales when persuasive evidence of an
arrangement existed, the price was fixed and determinable, delivery had occurred
and collection was probable. We recognized revenue generated from the sale of
the Mangomind SM and
fileTRUST SM
services as the service was provided. We recognized 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 existed, the price was fixed and determinable,
delivery and any required installation had been completed and collection is
probable. These revenues will be recognized for the account of Built Right
Networks going forward under the terms of our Hosting Licensing
Agreement.





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. The Company accounts for
stock-based employee compensation arrangements based on estimated fair
value.  Stock based compensation expense for the year ended December
31, 2009 was $1,132.  There was no stock based compensation expense
recorded in 2008.




Costs
and Expenses




Cost of services - Cost of
services consist solely of the expenses we incurred to administer and service
the Mangomind SM and
fileTRUST SM
services. These expenses consisted 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 paid to Built Right Networks to manage our billable services
infrastructure. These costs will be recognized for the account of Built Right
Networks or eliminated going forward under the terms of our Hosting Licensing
Agreement.


10





Other Operating Expenses -
General and administrative expenses consisted 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, 2009, there
were no full time employees performing selling and marketing
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, 2009, we
had one employee and outsourced almost functions.





RESULTS
OF OPERATIONS - YEARS ENDED DECEMBER 31, 2009 AND 2008





Service
revenues for the year ended December 31, 2009 decreased $119,686 or 45% to
$149,097 compared with $268,783 for 2008.  In 2008, there was a
one-time license fee in the amount of $2,300,000 as a result of the settlement
of litigation with Skype. Excluding the Skype license fee revenue, two customers
accounted for 37% and 25% of our revenues in 2009 and 2008 respectively. We
recognized $138,506 from the sale of our Mangomind SM service
and $10,591 from the sale of our fileTRUST SM service
during the year ended December 31, 2009. During the year 2008, we recognized
$256,381 from the sale of the Mangomind SM service
and $12,402 from the sale of our fileTRUST SM
service.




Cost of
services for year ended December 31, 2009 decreased $84,446  or 32.5%
to $175,029 compared to $259,475 for the comparable year in 2008. Cost of
services consists primarily of outsourced data center charges with Built Right
Networks.





There was
no engineering and development expense for the years ended December 31, 2009 and
2008. During the years ended December 31, 2009 and 2008, we had no employees
performing engineering or development activities





For the
year ended December 31, 2009, other operating expenses including selling and
marketing and general and administrative expenses decreased $731,507 or 73% to
$267,141 compared with $998,648 for the comparable period in 2008. The decrease
in other operating expenses primarily relates to an additional $763,000 in legal
fees, in 2008, as a result of the Skype litigation settlement. These legal fees
include $690,000 that was contingent on a favorable outcome for the
Company.





During
the year ended December 31, 2009, our one (1) full-time employee was working in
a general and administrative capacity. As of December 31, 2008, we had one
employee working in a general and administrative capacity and
outsourced  other functions.


11




There was
stock based compensation of $1,132 included in general and administrative
expenses  for the year ended December 31, 2009 and no stock-based
compensation recorded for the year ended December 31, 2008.





Our
results of operations deteriorated by $840,733 to a loss of $293,073 for the
year ended December 31, 2009 compared with net income from operations of
$547,660 for 2008 This is primarily a result of the one-time license fee in 2008
from Skype offset by the related legal fees as discussed above.





Interest
income increased $69,728 to $89,128 for the year ended December 31, 2009
compared to $19,400 for the year ended December 31, 2008. This interest is
related to our investment in Law Cash, as described in Note 10 to our
consolidated financial statements.





FINANCIAL
CONDITION, LIQUIDITY AND CAPITAL RESOURCES





We were
formed in June 1995 and, since our formation, have raised approximately
$75,450,000 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, 2009, approximately $79,000 in
additional financing was provided through accounts payable, accrued expenses and
other trade credit, a significant portion of which is past due.




At
December 31, 2009, we had a cash balance of approximately $677,000 and a working
capital balance of approximately $1,711,000. We do not have any commercial
commitments or off balance sheet financing. Our commitments under our operating
leases are described in Note 8 to our consolidated financial
statements.





We did
not make any capital expenditures during the fiscal year 2009.





We have
significantly modified our operations and reduced our work force on four
separate occasions since April 2001. We outsourced the management of our
billable services infrastructure, software code base, customer support and
reseller channel management to Built Right Networks through December 31, 2009.
Built Right Networks received a fee based on the percentage of monthly income
earned plus an administration fee. The outsourcing arrangement with Built Right
Networks was terminated as of December 31, 2009 under the terms of our Hosting
Licensing Agreement with Built Right under which Built Right Networks will
maintain product and customer support for their own account. With the transition
of all our existing accounts to Built Right Networks under this new agreement as
of January 1, 2010, our billable infrastructure services are no longer
necessary.




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.


12




As shown
in the audited consolidated financial statements, during the years ended
December 31, 2009 and 2008, we recognized net income (loss) of $(55,791) and
$567,060, respectively. Cash provided by (used in) operations during the years
ended December 31, 2009 and 2008 was $(335,412) and $640,580 respectively. These
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.





PLAN
OF OPERATION





We
believe that we may be required to raise additional funds in order to meet our
cash requirements. In the event that our revenues from the current marketing,
sales and support of our business software and services are insufficient, we may
need to seek alternative sources of capital over the next twelve (12) months.
While we do not anticipate any capital expenditures, product research and
development or significant increase in employees over the next twelve (12)
months, we continue to have additional cash needs related to our ongoing
operations. In the event that cash flow from operations is insufficient for us
to meet our obligations on a timely basis, we will be required to raise
additional capital from stockholders, of which there can be no
assurances.





OFF-BALANCE
SHEET ARRANGEMENTS





We do not
have any commercial commitments or off balance sheet financing. Our commitments
under our operating leases are described in Note 8 to our consolidated financial
statements.





ITEM
8. FINANCIAL STATEMENTS





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





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





None.


13




ITEM
9A(T).  CONTROLS AND PROCEDURES




Evaluation
of disclosure controls and procedures.




We
carried out an evaluation, under the supervision and with our sole employee
Dennis Goett in his role as President, Chief Operating Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
of the Securities Exchange Act of 1934).  Based upon that evaluation,
the President, Chief Operating Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are not effective as of December 31,
2009.





Management’s
Annual Report on Internal Control over Financial Reporting.





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as such term is defined in Rules 13a-15(f) and
15d-15(f) of the Securities Exchange Act of 1934.  Under the
supervision and with the participation of our management, including our
President, Chief Operating Officer and Chief Financial Officer we conducted an
evaluation of the effectiveness of our internal control over financial reporting
based on the framework in Internal Control – Integrated Framework, issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO
Framework”).  Based on our evaluation , our management concluded that
our internal control over financial reporting was not effective based on
criteria set forth on the COSO Framework.




At
December 31, 2009, we had one employee and outsourced most functions. A complete
set of internal controls including segregation of duties is not possible in an
organization of this size. However, we have implemented control procedures
surrounding the maintenance of our accounting and financial systems and the
safeguarding of our assets. Further, all transactions entered into outside the
normal course of our day-to-day operations must be approved by Mr. Dennis Goett,
Chief Operating Officer.




Our Chief
Operating Officer, President and director, after evaluating the effectiveness of
our "disclosure controls and procedures" (as defined in the Securities Exchange
Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered
by this Quarterly Report on Form 10-Q (the "Evaluation Date"), has concluded
that as of the Evaluation Date, our disclosure controls and procedures were not
effective to provide reasonable assurance that information we are required to
disclose in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission rules and forms, and that such information is
accumulated and communicated to our management, including our Chief Operating
Officer, as appropriate, to allow timely decisions regarding required
disclosure.




We have
identified deficiencies in the design or operation of the Company’s internal
controls that we consider to be material weaknesses in the effectiveness of the
Company’s internal controls pursuant to standards established by the Public
Company Accounting Oversight Board. A “material weakness” is a deficiency, or
combination of significant deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected. Specifically, we found that the
Company has an overall lack of segregation of duties as well as a lack of
necessary corporate accounting resources related to the financial reporting
process and accounting functions as the Company does not have any full time
accounting personnel. The Company’s President serves as both Chief Operating
Officer and Chief Financial Officer of the Company. Accordingly, certain
functional and monitoring controls do not exist as of December 31,
2009.





This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.





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 year
ended December 31, 2009 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.




ITEM
9B. OTHER INFORMATION




None.




14




PART
III





ITEM
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT





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





Effective
November 18, 2010, Dennis M. Goett was appointed Chief Operating Officer and
Chief Financial Officer and elected to the Board of Directors of Mangosoft,
Inc.




Section
16 (a) Beneficial Ownership Reporting Compliance





Section
16(a) of the Exchange Act and the rules there under 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, 2009 were filed on time.





Audit
Committee




We do not
have an Audit Committee comprised of independent directors




Code
of Ethics




The
Company has adopted a Code of Ethics that applies to the Company’s employees who
may be hired from time to time, including 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., 108 Village Square,
Suite 315, Somers, New York 10589. The Company will post a copy of this Code of
Ethics on its corporate website - www.mangosoft.com.


15





ITEM
11. EXECUTIVE COMPENSATION




Executive
Compensation




Compensation
Discussion and Analysis




Overview




The Board
of Directors is responsible for establishing, implementing and continually
monitoring adherence with our compensation philosophy. The Board seeks to ensure
that the total compensation is fair and reasonable. As of December 31, 2009, we
have two (2) executive officers.




This
section describes our compensation program for our executive officers. The
discussion focuses on our executive compensation policies and decisions and the
most important factors relevant to an analysis of these policies and decisions.
We address why we believe our compensation program is appropriate for us and our
stockholders, and we explain how executive compensation is
determined.




Compensation
Philosophy and Design




Historically,
our compensation philosophy has been to preserve cash and minimize expenses
while rewarding the creation of long-term stockholder value. Our historical
compensation philosophy and design have more closely resembled that of a private
company than a public company. In addition, our Board of Directors has not
adopted any formal or informal policies or guidelines for allocating
compensation between cash and equity compensation or other forms of non-cash
compensation.




As a
result of our history of operating losses, our cash compensation plans have been
designed to balance our salary expenses against cash flows and available cash
and our need to retain key members of management. Our executive compensation
packages have not included a variable cash compensation element to
date.




Objectives
of Our Compensation Program for Executive Officers




The
fundamental objective of our executive compensation and benefits program is to
maximize stockholder value over time.




As noted
above, our compensation decisions to date have been based largely on our budget
and operating results and on our need to preserve cash.




Elements
of Executive Compensation




Our
compensation program consists of a base salary and a long-term compensation
awarded in equity, consisting of equity-based incentives such as stock
options.




In recent
periods, there have been no discretionary bonuses for our Chief Executive
Officer or Chief Operating Officer. Our Chief Executive Officer or our Chief
Operating Officer is currently not entitled under the terms of his employment to
any cash severance or similar benefits in connection with a termination of
employment or change of control. However, there are provisions in the option
agreement of the Chief Operating Officer for the acceleration of option vesting
in the event of certain termination or change of control
events.


16




Currently
all of our cash compensation is paid out within one year. We do not have any
deferred compensation cash plans. Our equity-based incentives are long-term
incentives that are based on the parameters described below under "Equity-Based
Incentives."




Allocation
of Compensation Among Principal Elements




The
specifics of each element are as follows:




Base
Salary





Historically,
we have paid base salaries that we believe are below the market median for
officers performing comparable jobs at comparable public companies. The annual
salary for Dale Vincent, our President and Chief Executive Officer, remained the
same at $202,000 on an annualized basis for 2009 and 2008. Mr. Vincent passed
away in April 2009, terminating his compensation at the date of his
passing.





Equity-Based
Incentives




We grant
equity-based incentives to our Chief Operating Officer (“COO”), in order to
create a corporate culture that aligns employee interests with stockholder
interests. We have not adopted any specific stock ownership guidelines. At
present, our long-term compensation consists solely of stock options. Our Board
of Directors grants options to our executive officer to enable him to
participate in any long-term appreciation in our stockholder value.




During
the year ended December 31, 2009 the Board of Directors granted options to
purchase up to 272,150 shares of the Company’s common stock to its
COO.  As a result of this grant $1,132 of stock-based compensation
expense was recognized in the Company’s statement of operations for the year
ended December 31, 2009.




Discretionary
Bonuses




We have
not adopted any formal cash bonus plans.




Benefits




We
provide no benefits to our executive officer.





SUMMARY
COMPENSATION TABLE




The
following table presents information concerning the total compensation of our
Chief Executive Officer for services rendered to us in all capacities for the
fiscal years ended December 31, 2009, 2008 and 2007. Our Chief Executive Officer
received no other compensation required to be disclosed by law or in excess of
$10,000 annually.




Name and Principal Position
                                  
                                  Year
                                  
                                  Salary
                                    ($)
                                  
                                  
                                  Discretionary
                                    Non-Plan
                                    Based Bonus
                                    ($)
                                  
                                  
                                  Option
                                    Awards
                                    ($)
                                  
                                  
                                  Non-Equity
                                    Incentive
                                    Plan
                                    Compensation
                                    ($)
                                  
                                  
                                  All
                                    Other
                                    Compensation
                                    ($)
                                  
                                  
                                  Total
                                    ($)Dale
      Vincent
                                  
                                  2009
                                  
                                  $
                                  70,092
                                  
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  —
                                  
                                  
                                  $
                                  70,092President
      and Chief
                                  
                                  2008
                                  
                                  
                                  202,488
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  202,488Executive
      Officer
                                  
                                  2007
                                  
                                  
                                  202,488
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —
                                  
                                  
                                  
                                  202,488Dennis
      Goett
                                  
                                  2009
                                  
                                  
                                  15,000
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1,132
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  16,132Chief
      Financial Officer


17




GRANTS
OF PLAN-BASED AWARDS




Options
to purchase 272,150 common shares were issued to Dennis Goett during the fiscal
year ended December 31, 2009.





OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END




The
following table presents certain information concerning equity awards held by
our Chief Executive Officer at the end of the fiscal year ended
December 31, 2009.




Option AwardsNumber of
                                  Securities
                                  Underlying
                                  Unexercised
                                  Options (#)(1)
                                  Exercisable
                                
                                
                                Number of
                                  Securities
                                  Underlying
                                  Unexercised
                                  Options (#)(1)
                                  Unexercisable
                                
                                
                                Equity
                                  Incentive
                                  Plan
                                  Awards:
                                  Number of
                                  Securities
                                  Underlying
                                  Unexercised
                                  Unearned
                                  Options (#)
                                
                                
                                Option
                                  Exercise
                                  Price ($)
                                
                                Option
                                  Expiration
                                  DateMr.
      Dennis Goett
                                  Chief
      Operating Officer and Chief Financial Officer
                                
                                
                                —
                                
                                
                                
                                272,150
                                
                                
                                
                                —
                                
                                
                                $
                                0.12
                                
                                November 23, 2019




OPTION
EXERCISES AND STOCK VESTED AT FISCAL YEAR-END




There
were no options exercised during the fiscal year ended December 31, 2009,
and there were no stock awards that vested during the fiscal year. The options
granted to Dennis Goett, as Chief Operating Officer and Chief Financial Officer,
in November 2009 do not begin to vest until November 1, 2010.




Legal
Proceedings




We are
not aware of any legal proceedings which name our sole officer and director as a
defendant or co-defendant and therefore have no obligation to indemnify him for
legal costs related to such litigation.




Compensation
of Directors





There
were no outside directors in 2009. 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
2009.


18




Employment
Contracts





None.




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





The
following table sets forth certain information as of March 25, 2010 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 5,443,157
shares of common stock outstanding on March 25, 2010. 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.




Beneficial owners:
                      
                      Number of
                        Shares of
                        Common Stock
                        Owned
                      
                      
                      Percent of
                        Outstanding
                        Common Stock
                        OwnedSelig
      Zises (1)(5)
                      
                      
                      12,549
                      
                      
                      
                      .23
                      %Douglas
      Krugman (6)
                      
                      
                      1,656,999
                      
                      
                      
                      30.44
                      %Southpaw
      Asset Management LP (2)
                      
                      
                      1,482,128
                      
                      
                      
                      27.2
                      %Jay
      Zises (3)(5)
                      
                      
                      807,712
                      
                      
                      
                      15.0
                      %Directors
      and officers:Dennis
      Goett (4)
                      
                      
                      272,150
                      
                      
                      
                      4.8
                      %All
      Directors and officers as a group
                      
                      
                      272,150
                      
                      
                      
                      4.8
                      %




(1)
              Total
      shares of common stock beneficially owned by the Chairman of our Board of
      Directors, Selig Zises, include 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. Selig Zises ’ address is 988
      Fifth Avenue, New York, New York 10075.(2)
              This
      Information is based solely on Schedule 13D, as amended, filed with the
      Securities and Exchange Commission on February 20, 2009 by (i) Southpaw
      Credit Opportunity Master Fund LP (“Fund”), a Cayman Islands limited
      partnership, as the holder of the shares of Common Stock, (ii) Southpaw
      Asset Management LP (“Southpaw Management”), a Delaware limited
      partnership, as the investment manager to Fund, (iii) Southpaw Holdings
      LLC (“Southpaw Holdings”), a Delaware limited liability company, as the
      general partner of Southpaw Management, (iv) Kevin Wyman, a principal of
      Southpaw Holdings LLC, and (v) Howard Golden, a principal of Southpaw
      Holdings LLC (the persons mentioned in (i), (ii), (iii), (iv) and (v)
      immediately preceding are collectively referred to as “Southpaw”).
      Southpaw has the power to vote and dispose of all 1,482,128 shares of the
      Company’s Common Stock.(3)
              Total
      shares of common stock beneficially owned by Jay Zises, the brother of the
      Chairman of our Board of Directors, Selig Zises, include the following:
      591,930 shares owned by Jay Zises; 214,942 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. Jay Zises ’ address is 965 Fifth
      Avenue, Apt. 10B, New York, New York 10021.(4)
              Includes
      272,150 shares of common stock Mr. Goett has the right to acquire through
      the exercise of stock options. Mr. Goett’s address is c/o MangoSoft, Inc.,
      108 Village Square, Suite 315, Somers, New York 10589.(5)
              Beneficially
      owned shares for Jay Zises and Selig Zises exclude 10,000 shares of
      the Series B Convertible Preferred Stock owned by each Jay Zises and Selig
      Zises which were 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.(6)
              On
      December 12, 2008, Selig Zises sold an aggregate of 1,656,999 shares of
      Common Stock for $0.02 per share in a series of two open market
      transactions and one privately negotiated transaction to Douglas Krugman,
      his son-in-law. Mr. Krugman subsequent to December 31, 2009, gifted these
      shares into a trust for the benefit of his
  children.


19




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
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS




On
September 26, 2006, Selig Zises provided bridge financing to the Company in the
principal amount of $250,000. At the closing of the Company’s offer and sale of
2,400,000 shares of common stock on January 10, 2008, the bridge financing
provided by Selig Zises was automatically converted into a subscription of
common stock . of 500,000
shares . Furthermore, Selig Zises purchased an additional 300,000 shares for
$150,000 in cash during such sale of 2,400,000 shares of common stock
..





On
January 10, 2008, in connection with the sale of 2,400,000 of common stock, Jay
Zises purchased 300,000 shares for $150,000 in cash.




In
February 2008, in connection with the Company’s rights offering Jay Zises
purchased 400,000 shares and Selig Zises purchased 750,000 shares of common
stock for $ 200,000 and $375,000, respectively.





On
December 12, 2008, Selig Zises sold an aggregate of 1,656,999 shares of Common
Stock for $0.02 per share in a series of two open market transactions and one
privately negotiated transaction to Douglas Krugman, his
son-in-law.





On
January 29, 2009 the Company agreed to loan $600,000 to Plaintiff Holding XI LLC
a wholly owned subsidiary of Plaintiff Funding Holding, Inc. d/b/a LawCash, a
company controlled by Mr. Selig Zises and Mr. Jay Zises.  This loan is
evidenced by a secured promissory note having a one year term and bearing
interest at 14% per annum.





ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES





Audit
Fees





Fees
billed by Stowe & Degon, LLC for the audit of our annual financial
statements for the fiscal years ended December 31, 2009 and 2008 and the review
of our quarterly financial statements included in our quarterly reports on Form
10-Q were approximately $36,000 and $33,000, respectively.





Audit-Related
Fees





There
were no other fees billed by Stowe & Degon, LLC during the last three 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.




Audit
Committee Pre-Approval





We do not
have an Audit Committee of independent directors. The Board of Directors has the
authority to approve 100% of audit, accounting and tax
services.


20





ITEM
15. EXHIBITS AND REPORTS ON FORM 8-K





(a)  Exhibits:




Exhibit
                    Number
                  
                  Description of Exhibits2.1
                  
                  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)23.1
                  
                  Consent
      of Registered Public Accounting Firm*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.




21





(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 on Form 10-K filed on March 30, 2008
      for the year ended December 31, 2006 and hereby incorporated by reference
      thereto.*
            Filed
      herewith.





(b)
            Reports on Form
      8-K:





(1)
            On
      January 22, 2008, Form 8-K was filed indicating that its Board of
      Directors has extended the expiration date of its previously announced
      rights offering from January 29, 2009 to February 18,
  2009.





(2)
            On
      January 29, 2008, Form 8-K was filed indicating that its Board of
      Directors has extended the expiration date of its previously announced
      rights offering from February 18, 2009 to February 19,
    2009.





(3)
            On
      February 27, 2008, Form 8-K was filed indicating the closing and the
      results of its rights offering which ended as of the close of business on
      February 19, 2009. The Company received gross proceeds of approximately
      $1,023,672 and will issue approximately 2,047,344 shares of its common
      stock to its stockholders who properly exercised their rights in the
      rights offering. The Company expects to commence issuing the shares of
      common stock on or about February 27,
2009.





(4)
                On
      May 14 2008, Form 8-K was filed indicating that the United States Court of
      Appeals for the Federal Circuit issued an opinion in the case Mangosoft,
      Inc. et al. v. Oracle Corporation. The opinion affirmed the District
      Court’s claim construction order of September 21, 2004 and the District
      Court’s decision granting defendant’s motion for summary judgment on
      non-infringement entered by the District Court on March 28,
      2008.(5)
                On
      December 4, 2008, Form 8-K was filed indicating that Mangosoft, Inc.
      entered into an agreement to settle its patent litigation with Skype
      Technologies SA, Skype Software SARL and eBay Inc. titled Mangosoft
      Intellectual Property, Inc. V. Skype Technologies, S.A. et al., Civil
      Action No. 2:06CV-390 TJW, which was pending in the United States District
      Court for the Eastern District of Texas. Under the terms of the Agreement,
      eBay and its affiliates and subsidiaries will receive a non-exclusive
      license to all of the patents or patent applications now owned by the
      Company, or in which the Company has a controlling interest, for a one
      time fee in the amount of $2,300,000. The Agreement also provides for
      general releases and dismisses the existing litigation between the
      parties.(6)
                On
      January 29, 2009, Form 8-K was filed indicating that Mangosoft agreed to
      loan $600,000 to Plaintiff Holding XI LLC, a newly formed wholly owned
      subsidiary (the “Subsidiary”) of Plaintiff Funding Holding, Inc., d/b/a
      LawCash. Such loan is evidenced by a secured promissory note issued by the
      Subsidiary to Mangosoft having a term of one year and bearing interest at
      the rate of 14% per annum. Each of the Company and LawCash are directly or
      indirectly controlled by Mr. Selig Zises and Mr. Jay
  Zises.(7)
                On
      April 22, 2009, Dale Vincent, the Chief Executive Officer and President
      and sole Director and sole employee of MangoSoft, Inc. (the “Company”),
      passed away.  As a result of the vacancy created by the death of
      Mr. Vincent, on April 28, 2009, Selig Zises was elected as a Director of
      the Company by written consent of a majority of the stockholders of the
      Company in lieu of a stockholders’ meeting.  Thereafter, Mr.
      Zises appointed himself as Interim Chief Executive Officer and
      Interim Secretary of the Company.  Mr. Zises will not receive
      any compensation as an officer or director of the Company.  Mr.
      Zises is 67 years of age and has been a private investor for the past five
      (5) years.  There is no family relationship between Selig Zises
      and any other former executive officer or director of the Company, and
      there is no arrangement or understanding under which Selig Zises was
      appointed Director, Interim Chief Executive Officer
      or Interim Secretary.(8)
                On
      May 22, 2009, MangoSoft, Inc. (the “Company” or “MangoSoft”) agreed to
      purchase from Plaintiff Funding Holding, Inc., d/b/a LawCash
      (“LawCash”), for the sum of $400,000 (the “Purchase Price”), all of
      LawCash’s rights, title and interest in certain specified litigations that
      had been funded by LawCash (the “Cases”).  LawCash, through its
      various subsidiaries, is in the business of financing personal injury
      litigations, such as the Cases, and in connection therewith, receives a
      contingent interest in the proceeds of the potential recovery by a
      personal injury claimant or litigant.  In accordance with the
      bill of sale entered into on May 22, 2009 by the Company and LawCash
      pursuant to which the Company acquired the Cases (the “Bill of Sale”),
      LawCash will service the Cases pursuant to a master services agreement
      dated May 22, 2009 (the “Master Services Agreement”) and the Company is
      entitled to receive from the disposition of the Cases (i) the return of
      the Purchase Price, and (ii) a return on the Purchase Price of 14% per
      annum..









22





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.




MANGOSOFT,
      INC.March
      31, 2010
                By:
                /s/    Dennis
      GoettDennis
      Goett
                  Chief
      Executive Officer




23




MANGOSOFT,
INC. AND SUBSIDIARIES





INDEX
TO FINANCIAL STATEMENTS





PageReport
      of Independent Registered Public Accounting Firm
                    28Consolidated
      Balance Sheet as of December 31, 2009
                    29Consolidated
      Statements of Operations For The Years Ended December 31, 2009 and
      2008
                    30Consolidated
      Statements of Stockholders’ Equity For The Years Ended December 31, 2009
      and 2008
                    31Consolidated
      Statements of Cash Flows For The Years Ended December 31, 2009 and
      2008
                    32Notes
      to Consolidated Financial Statements
                    33




24





REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





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




We have
audited the accompanying consolidated balance sheet of MangoSoft, Inc. and
subsidiaries (the “Company”) as of December 31, 2009 and  2008 and the
related consolidated statements of operations, stockholders’ equity, and cash
flows for the years ended December 31, 2009 and 2008. 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
audits.




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
subsidiaries as of December 31, 2009 and 2008, and the results of their
operations and their cash flows for the years ended December 31, 2009 and 2008,
in conformity with accounting principles generally accepted in the United States
of America.





/s/ Stowe
& Degon, LLC





Westborough,
MA


March 31,
2010




25





MANGOSOFT,
INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED BALANCE SHEETS





December 31,
                            
                            
                            December 31,2009
                            
                            
                            2008ASSETSCurrent
      Assets:Cash
      and cash equivalents
                            
                            $
                            677,581
                            
                            
                            $
                            1,982,192Accounts
      receivable
                            
                            
                            2,677
                            
                            
                            
                            23,356Note
      receivable - related party
                            
                            
                            600,000
                            
                            
                            
                            -Investments
                            
                            
                            502,312
                            
                            
                            
                            -Interest
      receivable
                            
                            
                            7,233
                            
                            
                            
                            -Total
      assets
                            
                            $
                            1,789,803
                            
                            
                            $
                            2,005,548LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      Liabilities:Accounts
      payable
                            
                            $
                            33,931
                            
                            
                            $
                            153,177Accrued
      compensation
                            
                            
                            -
                            
                            
                            
                            3,076Other
      accrued expenses
                            
                            
                            45,215
                            
                            
                            
                            83,979Total
      current liabilities
                            
                            
                            79,146
                            
                            
                            
                            240,232Stockholders’
      Equity:Preferred
      stock - $.001 par value; authorized, 5,000,000 shares; issued and
      outstanding, 20,000
                            
                            
                            20
                            
                            
                            
                            20Common
      stock - $.001 par value, authorized 15,000,000 shares; issued and
      outstanding, 5,443,157 shares.
                            
                            
                            5,443
                            
                            
                            
                            5,443Additional
      paid-in capital
                            
                            
                            90,927,406
                            
                            
                            
                            90,926,274Accumulated
      deficit
                            
                            
                            (89,222,212
                            )
                            
                            
                            (89,166,421)Total
      stockholders' equity
                            
                            
                            1,710,657
                            
                            
                            
                            1,765,316Total
      liabilities and stockholders' equity
                            
                            $
                            1,789,803
                            
                            
                            $
                            2,005,548





See notes
to the consolidated financial statements.




26





MANGOSOFT,
INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF OPERATIONS





Year Ended December 31,2009
                            
                            
                            2008Service
      revenues
                            
                            $
                            149,097
                            
                            
                            $
                            268,783License
      revenues related to litigation settlement
                            
                            
                            
                            
                            
                            
                            2,300,000149,097
                            
                            
                            
                            2,568,783Costs
      and expenses:Cost
      of services
                            
                            
                            175,029
                            
                            
                            
                            259,475Legal
      fees related to litigation settlement
                            
                            
                            -
                            
                            
                            
                            763,000General
      and administrative
                            
                            
                            267,141
                            
                            
                            
                            998,648Loss
      from operations
                            
                            
                            (293,073)
                            
                            
                            
                            547,660Dividend
      income
                            
                            
                            7,807
                            
                            
                            
                            -Interest
      income
                            
                            
                            89,128
                            
                            
                            
                            19,400Gain
      on sale of investments
                            
                            
                            84,253
                            
                            
                            
                            -Unrealized
      investment gain
                            
                            
                            56,094
                            
                            
                            
                            -Net
      income (loss)
                            
                            $
                            (55,791)
                            
                            
                            $
                            567,060Net
      income (loss) per share – basic
                            
                            $
                            (0.01
                            )
                            
                            $
                            0.11
                            )Net
      income (loss) per share – diluted
                            
                            $
                            (0.01
                            )
                            
                            $
                            0.11
                            )Weighted
      average shares outstanding – basic
                            
                            
                            5,443,157
                            
                            
                            
                            5,121,444Weighted
      average shares outstanding – diluted
                            
                            
                            5,443,157
                            
                            
                            
                            5,196,444




See notes
to the consolidated financial statements.




27





MANGOSOFT,
INC. AND SUBSIDIARY




CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)





AdditionalConvertible Preferred Stock
                                
                                
                                Common Stock
                                
                                
                                Paid-in
                                
                                
                                AccumulatedShares
                                
                                
                                Amount
                                
                                
                                Shares
                                
                                
                                Amount
                                
                                
                                Capital
                                
                                
                                Deficit
                                
                                
                                TotalBalance,
      January 1, 2008
                                
                                
                                20,000
                                
                                
                                $
                                20
                                
                                
                                
                                3,413,038
                                
                                
                                $
                                3,413
                                
                                
                                $
                                89.904,757
                                
                                
                                $
                                (89,733,481
                                )
                                
                                $
                                174,709Shares
      issued
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                2,030,119
                                
                                
                                
                                2,030
                                
                                
                                
                                1,021,517
                                
                                
                                
                                
                                
                                
                                
                                1,023,547Net
      Income
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                567,060
                                
                                
                                
                                567,060Balance,
      December 31, 2008
                                
                                
                                20,000
                                
                                
                                
                                20
                                
                                
                                
                                5,413,157
                                
                                
                                
                                5,443
                                
                                
                                
                                90,926,274
                                
                                
                                
                                (89,166,421
                                )
                                
                                
                                1,765,316Shares
      issued
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                1,132
                                
                                
                                
                                
                                
                                
                                
                                1,132Net
      loss
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                (55,791)
                                
                                
                                
                                (55,791)Balance,
      December 31, 2009
                                
                                
                                20,000
                                
                                
                                $
                                20
                                
                                
                                
                                5,443,157
                                
                                
                                $
                                5,443
                                
                                
                                $
                                90,927,406
                                
                                
                                $
                                (89,222,212)
                                
                                
                                $
                                1,710,657




See notes
to the consolidated financial statements.




28




MANGOSOFT,
INC. AND SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS





Year Ended
                                      December 31,2009
                                    
                                    
                                    2008CASH
      FLOWS USED IN OPERATING ACTIVITIES:Net
      income (loss)
                                    
                                    $
                                    (55,791)
                                    
                                    
                                    $
                                    567,060Adjustments
      to reconcile net income (loss) to net cash used by operating
      activities:Unrealized
      gain in marketable securities
                                    
                                    
                                    (56,094)
                                    
                                    
                                    
                                    —Stock-based
      compensation
                                    
                                    
                                    1,132
                                    
                                    
                                    
                                    —Gain
      on sale of investments
                                    
                                    
                                    (84,252)
                                    
                                    
                                    
                                    —Increase
      (decrease) in cash from the change in:Accounts
      receivable
                                    
                                    
                                    20,679
                                    
                                    
                                    
                                    (2,749)Accounts
      payable
                                    
                                    
                                    (119,246
                                    )
                                    
                                    
                                    38,611Accrued
      expenses
                                    
                                    
                                    (41,840
                                    )
                                    
                                    
                                    37,658Net
      cash (used in) provided by operating activities
                                    
                                    
                                    (335,412
                                    )
                                    
                                    
                                    640,580CASH
      FLOWS USED IN INVESTING ACTIVITIES:Note  receivable
                                    
                                    
                                    (600,000
                                    )
                                    
                                    
                                    —Interest
      receivable
                                    
                                    
                                    (7,233
                                    )
                                    
                                    
                                    —Proceeds
      from sale of investments
                                    
                                    
                                    365,016Investments
      acquired
                                    
                                    
                                    (726,982
                                    )
                                    
                                    
                                    —Net
      cash used in investing activities
                                    
                                    
                                    (969,199
                                    )
                                    
                                    
                                    —CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      proceeds from private placement of common stock
                                    
                                    
                                    —
                                    
                                    
                                    
                                    1,023,547Net
      cash provided by financing activities
                                    
                                    
                                    —
                                    
                                    
                                    
                                    1,023,548NET
      INCREASE (DECREASE)  IN CASH AND CASH
EQUIVALENTS
                                    
                                    
                                    (1,304,611
                                    )
                                    
                                    
                                    1,664,127CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
                                    
                                    
                                    1,982,192
                                    
                                    
                                    
                                    318,065CASH
      AND CASH EQUIVALENTS, END OF PERIOD
                                    
                                    $
                                    677,581
                                    
                                    
                                    $
                                    1,982,192SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid for interest
                                    
                                    
                                    NONE
                                    
                                    
                                    
                                    NONECash
      paid for income taxes
                                    
                                    
                                    NONE
                                    
                                    
                                    
                                    NONE





See notes
to the consolidated financial statements.




29




MANGOSOFT, INC. AND
SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





1.
Nature of Business and Operations





The
Company




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





The
Company had one (1) employee respectively, working in a general and
administrative capacity.





On July
27, 2006, in order to optimize the Company's flexibility in undertaking new
business opportunities, the Company decided to manage its patent portfolio and
intellectual property assets through a new wholly-owned subsidiary Mangosoft
Intellectual Property, Inc. The new Company is authorized to issue up to 1,000
shares of $.01 par value common stock. Mangosoft Intellectual Property, Inc.
issued 100 of these shares of stock to Mangosoft Corp. None of the remaining 900
authorized shares have been issued at December 31, 2009.





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





Title
                    
                    Application No./Patent No.
                    
                    Filing Date/Issue DateSystem
      For Tracking Data
                    
                    08/848,970
                    
                    05/02/97Method
      For Scheduling Thread Execution On A
                      Limited
      Number Operating System
                    
                    09/069,352
                    
                    04/29/98Internet-Based
      Shared File Service With Native PC
                      Client
      Access And Semantics And Distributed
                      Access
      Control
                    
                    09/704,050
                    
                    11/01/00Internet-Based
      Shared File Service With Native PC
                      Client
      Access And Semantics
                    
                    09/704,262
                    
                    11/01/00





30




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




On April
25, 2008, the Company announced that its Mangomind Business Internet File
Service now supports Microsoft's Windows Vista. With the addition of Windows
Vista, Mangomind runs on all of the most commonly used Windows PC business
platforms, including Windows 97, 98, ME, NT, 2000, XP and Windows Server
2003.





On July
3, 2008, the Company filed a registration statement with the Securities and
Exchange Commission announcing the rights offering to purchase up to 2,400,000
shares of its common stock to current stockholders of the Company at an
unspecified date. Each full right will be exercisable for one share of common
stock at a subscription price of approximately $.50 per share. The Company has
reserved a total of 2,400,000 shares of common stock for the exercise of these
rights. The Company has agreed to pay the fees and expenses of the subscription
agent in the rights offering. The Company has also agreed to indemnify the
subscription agent from any liability which it may incur in connection with the
rights offering, including liabilities under the Securities Act of 1933. The
Company will not engage the services of any third party solicitation agent or
information agent with respect to the rights offering. The material conditions
required to consummate the above rights offering are subject to the approval of
the registration statement filed with the Securities and Exchange
Commission.





The
Company received gross proceeds of $1,023,547 through the issuance of common
stock pursuant to a rights offering and as a consequence issued, commencing on
or about February 27, 2008, approximately 2,030,119 shares of its common stock
to stockholders who properly exercised their rights in the rights offering.
Pursuant to the rights offering, which concluded as of the close of business on
February 19, 2008, stockholders of record at the close of business on December
21, 2008, received, at no charge, a 0.7032 non-transferable right for each share
of common stock owned by such stockholder on the record date. Each full right
entitled the holder to purchase one share of the Company's common stock at a
purchase price of $0.50 per share.




31





MANGOSOFT,
INC. AND SUBSIDIARIES


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 subsidiaries 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.





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.









The
Company purchases all of its outsourced data center services from one vendor.
Management believes an alternate vendor could be secured in the event the
current vendor discontinued services in its current capacity.




Intangible Assets -
Intangible assets consist of acquired technology, customer relationships and
service marks (see Note 3).





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.





Stock-Based Compensation -
The Company accounts for stock-based employee compensation arrangements based on
estimated fair value.  The Company estimates fair value using the
Black-Scholes option pricing model.  Significant assumptions used to
estimate fair value under this model are; expected term 6.25 years; expected
volatility 249%; dividend rate 0%; risk free rate 2.9%.  Stock based
compensation expense for the year ended December 31, 2009 was
$1,132.  There was no stock based compensation expense recorded in
2008.




32





MANGOSOFT,
INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




2.
Summary of Significant Accounting Policies (continued)




Equity
instruments issued to non-employees are accounted for in accordance with the
provisions of Financial Accounting Standards Boards Accounting
Standards Codification (ASC) 505-50, “Equity Payments to
Non-employees.”





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.





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.





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





Net Loss Per Common Share -
Basic net income (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 income (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 anti-dilutive. At
December 31, 2009, there were 272,150 stock options outstanding the effects
of which would be anti-dilutive.  At December 31, 2008, we had
75,000 stock options outstanding which have been included in diluted common
shares outstanding.





Recently Issued
Accounting Pronouncements




Effectively
July 1, 2009, the Company adopted the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 105-10. Generally Accepted
Accounting Principles - Overall (“ASC 105-10”). ASC 105-10 establishes the FASB
Accounting Standards Codification (the “Codification”) as the sources of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with U.S. GAAP. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative U.S. GAAP
for SEC registrants. All guidance continued in the Codification carries an equal
level of authority. The Codification superseded all existing non-SEC accounting
and reporting standards. All other non-grandfathered, non-SEC accounting
literature not included in the Codification is non-authoritative. The FASB will
not issue new standards in the form of Statements. FASB Position or Emerging
Issue Task Force Abstracts. Instead, it will issue Accounting Standards Updates
(“ASUs”).





The
Company adopted ASC 855, “Subsequent Events” (“ASC 855”).  ASC 855
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
available to be issued. The adoption of ASC Topic 855 did not have a material
impact on the Company’s consolidated results of operations or financial
condition.





33




MANGOSOFT,
INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





3. Litigation settlement
income





On
December 4, 2008, Mangosoft, Inc. entered into an agreement to settle its patent
litigation with Skype Technologies SA, Skype Software SARL and eBay Inc. titled
Mangosoft Intellectual Property, Inc. V. Skype Technologies, S.A. et al., Civil
Action No. 2:06CV-390 TJW, which was pending in the United States District Court
for the Eastern District of Texas. Under the terms of the Agreement, eBay and
its affiliates and subsidiaries will receive a non-exclusive license to all of
the patents or patent applications now owned by the Company, or in which the
Company has a controlling interest, for a one time fee in the amount of
$2,300,000. The Agreement also provides for general releases and dismisses the
existing litigation between the parties.  There was $879,537
associated with the settlement, thus netting cash proceeds of
$1,420,463.





4.
Income Taxes




ASC
740-10, Income Taxes prescribes a more-likely-than-not threshold of financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. This interpretation also provides guidance on
de-recognition of income tax assets and liabilities, classification of current
and deferred tax assets and liabilities, accounting for interest and penalties
associated with tax positions, accounting for income taxes in interim periods
and income tax disclosures. The Company has not had any uncertain tax positions
requiring derecognition.


The
Company files its tax returns as prescribed by the tax laws of the jurisdictions
in which it operates. The Company, files income tax returns in the U.S. federal
jurisdiction and in the state of New Hampshire. The Company is no longer subject
to U.S. federal and state and local tax examinations by tax authorities for
years before 2006, although carry forward tax attributes that were generated
prior to 2005 may still be adjusted upon examination by tax authorities if they
either have been or will be utilized. It is the Company’s policy to recognize
interest and penalties related to income tax matters in penalty expense. For
both the years ended December 31, 2009 and 2008, there were no amounts of
interest and penalties,recognized.





The
Company has federal and state tax net operating loss carryforwards available for
future periods of approximately $72,200,000. 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 tax purposes of
approximately $518,000, which expire beginning in 2011.





The tax
effect of significant items comprising the Company’s deferred tax assets at
December 31, 2009 is as follows:





2009Deferred
      tax assets:Net
      operating loss carryforwards
                        
                        $
                        24,749,000Research
      and development credits
                        
                        
                        518,00025,267,000Valuation
      allowance
                        
                        
                        (25,267,000
                        )Net
      deferred tax assets
                        
                        $
                        -




34





MANGOSOFT,
INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





4.
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, 2009 and 2008.





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





2009
                    
                    
                    2008Federal
      statutory rate
                    
                    
                    34
                    %
                    
                    
                    34
                    %State
      tax, net of federal impact
                    
                    
                    6
                    
                    
                    
                    6Provision
      for valuation allowance on deferred tax assets
                    
                    
                    (40
                    )
                    
                    
                    (40
                    )Effective
      tax rate
                    
                    
                    -
                    %
                    
                    
                    -
                    %




5.
Stockholders’ Equity





Preferred stock -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 conversion feature, 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 stockholders.




On
January 10, 2007, the Company issued an aggregate of 2,400,000 shares of common
stock, par value $.001 per share to a group of investors led by current
stockholders. Through the private placement of its common stock, the Company
raised aggregate gross proceeds of $1,200,000. One of the investors in the
offering provided bridge financing to the Company on September 20, 2006 in the
principal amount of $250,000. This principal amount and accrued interest of $
6,463 was automatically converted into a subscription for common stock pursuant
to the offering. The Company intends to utilize the net proceeds of the private
placement to pay past due expenses and to fund its various patent
litigations.





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.





6.
Stock Option Plan





The
Company’s 1999 Incentive Compensation Plan (the “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 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, 2009, there were 17,987
remaining options available for grant under the Plan. The
plan was amended in February 2010 to increase the number of shares of common
stock that could be issued under the plan to
750,000.




35





MANGOSOFT,
INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




6.
Stock Option Plan (continued)





Stock-based
compensation in the amount of $1,132 is included in the Company’s 2009 results
of operations in connection with  grants issued during 2009 at
exercise prices equal to the fair value of the Company’s common stock at the
grant date.  No stock-baased compensation was included in the
Company’s 2008 results of operations




There was
no stock option activity in  2008. In November 2009 272,150 options
were issued to Dennis Goett, Chief Operating Officer.  These options
had a fair value at the date of grant of $0.12.





Stock
options granted and outstanding under the 1999 Stock Option Plan, are as
follows:





Number of
                          Options
                        
                        
                        Weighted
                          Exercise PriceOutstanding
      at December 31, 2008
                        
                        
                        75,000
                        
                        
                        $
                        2.54Expired
                        
                        
                        (75,000
                        )
                        
                        $
                        2.54Granted
                        
                        
                        272,150
                        
                        
                        $
                        0.12Outstanding
      at December 31, 2009
                        
                        
                        272,150
                        
                        
                        $
                        0.12Exercisable
      at December 31, 2009 and 2008
                        
                        
                        -




Options Outstanding
                                      
                                      
                                      Options ExercisableNumber of Options
                                      
                                      Range of
                                        Exercise Prices
                                      
                                      
                                      Weighted
                                        Average
                                        Remaining
                                        Life (in
                                        years)
                                      
                                      
                                      Weighted
                                        Average
                                        Exe rcise Price
                                      
                                      
                                      Number
                                        Currently
                                        Exercisable272,150
                                      
                                      $
                                      0.12
                                      
                                      
                                      
                                      9.9
                                      
                                      
                                      $
                                      0.12
                                      
                                      
                                      
                                      -


All of the option outstanding at December 31, 2009 are expected to vest within
three years and have an intrinsic value of $2,721 at December 31,
2009.  Total compensation cost related to nonvested awards expected to
be recognized in future periods is $32,600.  The weighted average
period over which this compensation is expected to be recognized is 1.96
years.





In
February 2010 Options to purchase a total of 75,000 shares of common stock were
issued to two of the Company’s directors.





7.
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 2009 or 2008.




36





MANGOSOFT,
INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




8.
Commitments and Contingencies





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 the resolution of these matters will not have a material adverse impact
on the Company’s financial position, results of operations or its cash
flows.





9.
Related Party Transactions




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




During
the year ended December 31, 2009 the Company paid consulting fees in the amount
of $45,000 to the widow of Dale Vincent, a stockholder and sole employee and
director of the Company until he passed away on April 22, 2009.





10  Investments




Investments
include certain marketable securities with a fair value of $167,280 at December
31, 2009, which are held in a brokerage account. Fair value is determined for
this investment using quoted prices in an active market. This pricing
methodology applies to Level 1 investments in the fair value
hierarchy.




On May
22, 2009, the Company purchased from Plaintiff Funding Holding, Inc., d/b/a
LawCash (“LawCash”), for the sum of $400,000 (the “Purchase Price”), all of
LawCash’s rights, title and interest in certain specified litigations that had
been funded by LawCash (the “Cases”).  LawCash, through its various
subsidiaries, is in the business of financing personal injury litigations, such
as the Cases, and in connection therewith, receives a contingent interest in the
proceeds of the potential recovery by a personal injury claimant or
litigant.  In accordance with the bill of sale entered into on May 22,
2009 by the Company and LawCash pursuant to which the Company acquired the Cases
(the “Bill of Sale”), LawCash will service the Cases pursuant to a master
services agreement dated May 22, 2009 (the “Master Services Agreement”) and the
Company is entitled to receive from the disposition of the Cases (i) the return
of the Purchase Price, and (ii) a return on the Purchase Price of 14% per
annum.  This investment, valued at $335,032 at December 31, 2009, is
recorded at fair value using significant observable inputs other than quoted
market prices and are considered to be level 2 investments in the fair
value hierarchy.





11.
Geographic Sales Information





The
Company generates the majority of its revenues from the sale of its products and
services in North America. All of the Company’s 2009 and 2008 revenues were
generated from sales to North American customers.




37