**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-KSB/A**





**Amendment
      No. 3**





**x**  **Annual
      Report Under Section 13 or 15(**  **d**  **)
      of the Securities Exchange Act of 1934.**




**For
      the Fiscal Year Ended December 31, 2006**




**or**




**o**  **Transition
      Report Under Section 13 or 15(d) of the Securities Exchange Act of
      1934.**




**For
      the Transition Period From ____________ To
      ____________**




**Commission
      File Number: 000-30781**




**MANGOSOFT,
      INC.**


(Exact
      name of small business issuer as specified in its charter)




**Nevada**
            **87-0543565**(State
                or other jurisdiction
            (IRS
                Employer Identification No.)of
                incorporation or organization)**29
                Riverside Street, Suite A, MS A-8****Nashua,
                NH**
            **03062**(Address
                of principal executive offices)
            (Zip
                code)


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


**Securities
      registered under Section 12(b) of the Exchange Act: None**


**Securities
      registered under Section 12(g) of the Exchange Act:**


**Common
      Stock, $0.001 par value**





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





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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 or the Exchange Act).   Yes o No x





State
      issuer’s revenues for the most recent fiscal year: $275,100





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and ask price of such common equity, as of a specified
      date within the past 60 days: $2,320,866. This amount reflects the average
      bid
      and ask price of the Company’s common stock on the OTCBB on March 29,
      2007.





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




**Common
                Stock**
            **3,413,038
                Shares**$0.001
                Par Value
            (Outstanding
                on March 30, 2007)




Transitional
      Small Business Disclosure Format (check one):




Yes: o No: x








**MANGOSOFT,
      INC.**





**INDEX
      TO FORM 10-KSB**




**Page****PART
                I**ITEM
                1—
            Description
                of Business
            3ITEM
                2—
            Description
                of Property
            10ITEM
                3—
            Legal
                Proceedings
            10ITEM
                4—
            Submission
                of Matters to a Vote of the Security Holders
            11**PART
                II**ITEM
                5—
            Market
                for Common Equity and Related Stockholder Matters
            12ITEM
                6—
            Management’s
                Discussion and Analysis of Financial Condition and Results
                ofOperations
            13ITEM
                7—
            Financial
                Statements
            17ITEM
                8—
            Changes
                in and Disagreements With Accountants on Accounting and
                FinancialDisclosure
            17ITEM
                8A—
            Controls
                and Procedures
            17ITEM
                8B—
            Other
                Information
            18**PART
                III**ITEM
                9—
            Directors
                and Executive Officers of the Registrant
            19ITEM
                10—
            Executive
                Compensation
            20ITEM
                11—
            Security
                Ownership of Certain Beneficial Owners and ManagementAnd
                Related Stockholder Matters
            23ITEM
                12—
            Certain
                Relationships and Related Transactions
            24ITEM
                13—
            Exhibits
                and Reports on Form 8-K
            25ITEM
                14—
            Principal
                Accountant Fees and Services
            27Signature
            28




**FACTORS
      THAT MAY AFFECT FUTURE RESULTS**





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





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





2


**PART
      I**




**ITEM
      1. DESCRIPTION OF BUSINESS**





**(A)
      BUSINESS DEVELOPMENT**





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





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





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





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





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





On
      January 10, 2007, the Company announced the sale of 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, and which the bridge financing 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




3


**(B)
      BUSINESS OF MANGOSOFT**





**GENERAL**





We
      market, sell and support Internet business software and services that improve
      the utility and effectiveness of Internet-based business applications. Our
      software solutions address the networking needs of small businesses, workgroups
      and large enterprises. We have leveraged our patented technology known as
“Pooling” to develop our suite of software solutions. Pooling is a peer-to-peer
      clustering technology that utilizes the network and resources of client personal
      computers (“PCs”) and workstations to deliver easy-to-use advanced software
      services. MangoSoft helps businesses gain a competitive advantage by improving
      collaboration with customers, partners and colleagues through smarter, faster
      Internet communications.





**BUSINESS
      STRATEGY**





We
      no
      longer develop new software products or services. We continue to market, sell
      and support our software services. Our strategy also includes seeking strategic
      business partnerships and distribution channels to leverage our patented
      technology. All of our business operations are overseen by our sole officer
      and
      director, who utilizes third party contractors, as required, to implement the
      Company’s business strategy.





**COMPETITION**





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




**PRODUCTS**





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





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





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




4


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





5


**MARKETING
      AND SALES**





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




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




***Mangomind***





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





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




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





***fileTRUST***





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





6


**PRODUCT
      SUPPORT**





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





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





**CONCENTRATIONS**





We
      generate the majority of our revenues from the sale of our products and services
      in North America. All of our 2006 and 2005 revenues were generated from sales
      to
      North American customers.




Two
      customers accounted for approximately 10% of our 2006 net revenues. One customer
      accounted for approximately 12% of our 2005 net revenues.





**INTELLECTUAL
      PROPERTY**





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




We
      consider elements of our software and peer-to-peer clustering technology to
      be
      proprietary. We rely on a combination of trade secrets, copyright and trademark
      law, contractual provisions, confidentiality agreements, and certain technology
      and security measures to protect our intellectual property, proprietary
      technology and know-how. Our future results of operations are highly dependent
      on the proprietary technology that we have developed internally. Consequently,
      we have taken actions to secure our proprietary technology in the form of patent
      protection. If we are denied our patent requests, either individually or as
      a
      group, we believe that there would be a material adverse impact on our
      business.





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




7


On
      March
      14, 2006, the U,S., District Court in New Hampshire ruled in favor of Oracle’s
      motion for summary judgment that it did not infringe U.S. Patent No. 6,148,377
      held by Mangosoft, Inc. Mangosoft had sued Oracle in 2002, claiming infringement
      of its patent on shared memory technology as described above.





On
      September 22, 2006, the Company through its subsidiary Mangosoft Intellectual
      Property, Inc., filed a civil action in the United States District Court for
      the
      Eastern District of Texas alleging patent infringement against eBay, Inc. of
      San
      Jose and its subsidiaries Skype Technologies SA and Skype Software Sarl of
      Luxembourg. The Complaint alleges that each of the defendants have infringed,
      and continue to infringe, U.S. Patent No. 6,647,393 entitled "Dynamic Directory
      Service" in violation of one or more provisions of 35 U.S.C. section 271. The
      complaint seeks damages for willful infringement as well as injunctive
      relief.





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




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





**EMPLOYEES**





As
      of
      December 31, 2006 we had 1 full-time employee. Our success is highly dependent
      on our ability to attract and retain qualified resellers and to retain qualified
      outsourced information system management. To date, we believe we have been
      successful in our efforts, but there is no assurance that we will continue
      to be
      as successful in the future. Our employee is not subject to a collective
      bargaining agreement.





**RISK
      FACTORS**





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





We
      have a
      history of substantial operating losses and an accumulated deficit of
      $88,944,248 as of December 31, 2006. For the years ended December 31, 2006
      and
      2005, our losses from operations, excluding the net effects of stock-based
      compensation, were $555,806, and $363,961, 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.,





8


*Our
      Success Depends on Our Outsourced Services Agreement.*





Effective
      September 30, 2002, we outsourced the management of our internal information
      systems, billable services infrastructure, software code base, customer support
      and reseller channel management to Built Right Networks under our September
      30,
      2002 Information Management Services Agreement (the “Outsourced Services
      Agreement”). The principals of Built Right Networks are all former MangoSoft
      employees. We can provide no assurance that Built Right Networks will remain
      solvent or can retain their key personnel. Built Right Network’s inability to
      retain key personnel or to remain solvent would have a material and adverse
      effect on our business, financial condition and results of
      operations.





*Our
      Performance Depends on Market Acceptance of Our Products.*




We
      expect
      to derive a substantial portion of our future revenues from the sales of
      Mangomind SM and
      fileTRUST SM . Due to
      our small size and need to conserve capital, our selling and marketing
      activities for these products and services is limited. If markets for our
      products fail to develop, develop more slowly than expected, are subject to
      substantial competition or react negatively to Bank of America’s (formerly
      FleetBoston) termination of its February 2002 enterprise license agreement
      with
      us, our business, financial condition and results of operations may be adversely
      affected.





*We
      Depend on Strategic Marketing Relationships.*  **




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





*There
      May Be Limited Liquidity in Our Common Stock and Its Price May Be Subject to
      Fluctuation.*




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





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




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





*Rapidly
      Changing Technology and Substantial Competition May Adversely Affect Our
      Business.*




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




9


*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
      2. DESCRIPTION OF PROPERTY**





In
      2006
      and 2005, the Company did not have any rent commitments or expense.




**ITEM
      3. LEGAL PROCEEDINGS**





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





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




10


**ITEM
      3. LEGAL PROCEEDINGS (continued)**





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




On
      March
      14, 2006, the U,S., District Court in New Hampshire ruled in favor of Oracle’s
      motion for summary judgment that did it did not infringe U.S. Patent No.
      6,148,377 held by Mangosoft, Inc. Mangosoft had sued Oracle in 2002, claiming
      infringement of its patent on shared memory technology as described
      above.





On
      September 22, 2006, the Company through its subsidiary Mangosoft Intellectual
      Property, Inc., filed a civil action in the United States District Court for
      the
      Eastern District of Texas alleging patent infringement against eBay, Inc. of
      San
      Jose and its subsidiaries Skype Technologies SA and Skype Software Sarl of
      Luxembourg. The Complaint alleges that each of the defendants have infringed,
      and continue to infringe, U.S. Patent No. 6,647,393 entitled "Dynamic Directory
      Service" in violation of one or more provisions of 35 U.S.C. section 271. The
      complaint seeks damages for willful infringement as well as injunctive
      relief.





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





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





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




**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,
      2006 to a vote of our security holders, through the solicitation of proxies
      or
      otherwise.





11


**PART
      II**




**ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS**





**(A)
      Market Information**





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





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


**2006**
            
            **High**
            
            **Low**First
                Quarter
            
            $
            7.70
            
            $
            0.60Second
                Quarter
            
            
            1.01
            
            
            0.35Third
                Quarter
            
            
            1.00
            
            
            0.47Fourth
                Quarter
            
            
            1.76
            
            
            0.56




**2005**
            
            **High**
            
            **Low**First
                Quarter
            
            $
            10.00
            
            $
            4.25Second
                Quarter
            
            
            11.35
            
            
            4.25Third
                Quarter
            
            
            6.40
            
            
            3.00Fourth
                Quarter
            
            
            4.75
            
            
            3.30





On
      January 18, 2007, the last reported sale price of our common stock on the OTCBB
      was $.70 per share.





**(B)
      Holders**





As
      of
      December 31, 2006, there were approximately 385 holders of record of our common
      stock. This number does not include stockholders for whom shares were held
      in a
“nominee” or “street name.”





**(C)
      Dividends**





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





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




12


**(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
            
            
            75,000
            
            
            
            
            $
            1.73
            
            
            179,652





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





This
      Annual Report on Form 10-KSB contains forward-looking statements within the
      safe
      harbor provisions of the Private Securities Litigation Reform Act of 1995.
      Any
      statements in this Annual Report that are not statements of historical facts
      are
      forward-looking statements, which involve risks and uncertainties. Without
      limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,”
and similar expressions are intended to identify forward-looking statements.
      Our
      actual results may differ materially from those indicated in the forward-looking
      statements as a result of the factors set forth elsewhere in this Annual Report
      on Form 10-KSB, including under “Risk Factors.” You should read the following
      discussion and analysis together with our condensed consolidated financial
      statements for the periods specified and the related notes included herein.
      Further reference should be made to our Annual Report on Form 10-KSB for the
      period ended December 31, 2006 filed with the Securities and Exchange
      Commission.





**OVERVIEW**





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




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





fileTRUST SM is an
      online data storage service we purchased from Bank of America (formerly
      FleetBoston) in February 2002 for approximately $427,000, of which $175,000
      was
      paid in cash and the balance in our common stock and warrants to purchase our
      common stock at $14.31 per share. fileTRUST SM users
      can access their stored files from any Internet-connected system. The
      fileTRUST SM service
      compliments our Mangomind SM service
      by providing customers with a lower cost online storage system. In conjunction
      with our purchase of fileTRUST SM , we
      executed a two-year enterprise license agreement with Bank of America (formerly
      FleetBoston) for the internal use of fileTRUST SM by Bank
      of America (formerly FleetBoston), which expired in February 2004. The terms
      and
      conditions of this agreement provided for automatic renewals on a month-to-month
      basis.




13


**CRITICAL
      ACCOUNTING POLICIES**





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





*Going
      Concern Assumption* - The
      consolidated financial statements do not include any adjustments relating to
      the
      recoverability and classification of assets or the amounts and classification
      of
      liabilities that might be necessary should we be unable to continue as a going
      concern. If the consolidated financial statements were prepared on liquidation
      basis, the carrying value of our assets and liabilities would be adjusted to
      net
      realizable amounts. In addition, the classification of the assets and
      liabilities would be adjusted to reflect the liquidation basis of
      accounting.





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





*Investments* - At
      December 31, 2006, the Company did not have any investments.





*Stock-based
      Compensation* - As
      part of our compensation programs offered to our employees, we grant stock
      options. In addition, we have engaged third-party consultants and advisors
      and
      have compensated them in the form of stock options. Compensation for stock
      options issued to employees is generally measured as the difference between
      the
      exercise price of the options granted and the fair value of our common stock
      on
      the date of grant. Compensation for stock options issued to third-party
      consultants and advisors is measured at the fair value on the date of grant,
      determined using the Black-Scholes valuation model. Because of the cashless
      exercise feature of the stock options granted in 1999 and the repricing of
      options granted in 2000 and 2003, we are required to remeasure the compensation
      related to these awards at each reporting date. As the quoted market price
      of
      our common stock fluctuates, our reported operating expenses will continue
      to
      fluctuate. These fluctuations can be significant.





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





**Costs
      and Expenses**





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




14


**Costs
      and Expenses**





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





*Engineering
      and Development Expenses* -
      Engineering and development expenses consist primarily of costs related to
      the
      design, development, testing, deployment and enhancement of our products and
      services. We have expensed our engineering and development costs as incurred.
      At
      December 31, 2006, there were no full time employees performing engineering
      or
      development on our products and services. We have outsourced the maintenance
      of
      our billable services infrastructure as well as product and customer support
      to
      Built Right Networks.





*Other
      Operating Expenses* -
      Selling and marketing expenses consist primarily of costs incurred to market
      our
      products and services such as the costs of attending and presenting at trade
      shows. General and administrative expenses consist primarily of salaries and
      related personnel costs and other general corporate costs such as facility
      costs, commercial and general liability insurance, accounting and legal expenses
      and other costs typical of a publicly held corporation. At December 31, 2006,
      there were no full time employees performing selling and marketing activities.
      Our remaining employee is performing general and administrative
      activities.





*Reduction
      in Force* - We
      have reduced our work force on four occasions since April 23, 2001 due to
      adverse economic conditions and our need to conserve capital. At December 31,
      2005, we had one employee, working in a general and administrative
      capacity.





**RESULTS
      OF OPERATIONS - YEARS ENDED DECEMBER 31, 2006 AND 2005**





Revenues
      for year ended December 31, 2006 decreased $61,424 or 18% to $275,100 from
      $336,524 for the comparable year in 2005. No customer accounted for more than
      10% of our revenues for either period.





We
      recognized $260,399 from the sale of our Mangomind SM service
      and $14,701 from the sale of our fileTRUST SM service
      during the year ended December 31, 2006. During the year 2005, we recognized
      $310,777 from the sale of the Mangomind SM service
      and $25,747 from the sale of our fileTRUST SM service.




Cost
      of
      services for year ended December 31, 2006 decreased $5,179 or 2% to $262,903
      compared to $268,082 for the comparable year in 2005. The decrease in the cost
      of delivering our services was primarily a result of our continued reductions
      and our switch to a lower cost data center. In response to our loss of Bank
      of
      America (formerly FleetBoston) as a customer, we have instituted cost reductions
      to lessen the adverse effects of the loss of the Bank of America (formerly
      FleetBoston) revenues, including restructuring our business relationships with
      key vendors such as Built Right Networks.





There
      was
      no engineering and development expense for the years ended December 31, 2006
      and
      2005. During the years ended December 31, 2006 and 2005, we had no employees
      performing engineering or development activities





For
      the
      year ended December 31, 2006, other operating expenses including selling and
      marketing and general and administrative expenses increased $135,600 or 31%
      to
      $568,003 compared with $432,403 for the comparable period in 2005. The increase
      in other operating expenses was due primarily to legal costs incurred in pursuit
      of patents and in defense of our patents combined with a reduction of public
      relations, legal and other corporate consultants and facility rent in addition
      to reductions in our marketing, selling and general and administrative personnel
      associated with our work force reductions. During the year ended December 31,
      2006 and 2005, our one (1) full-time employee was working in a general and
      administrative capacity.




15


There
      was
      no stock-based compensation recorded for the year ended December 31, 2006
      compared to $428 for the comparable year in 2005.The decrease in this expense
      was primarily attributable to the decrease in the number of outstanding employee
      stock options subject to compensation expense. The expense represents the
      ratable recognition of stock-based compensation for stock option awards granted
      in 2000 at exercise prices that were less than the fair value at the time of
      grant. See Note 8 to the consolidated financial statements.





Our
      loss
      from operations increased $191,417 to $555,806 for the year ended December
      31,
      2006 compared with a loss from operations of $364,389 for the comparable year
      in
      2005 as a result of the above factors.





Interest
      income decreased $7,261 to $10,243 for the year ended December 31, 2006 compared
      to $17,504 for the year ended December 31, 2005. Our cash balances available
      for
      investment have decreased period over period.





We
      settled an outstanding account payable to a law firm during 2006 that resulted
      in the recognition of other income in the amount of $677,777. No similar income
      items were recognized in 2005.




**FINANCIAL
      CONDITION, LIQUIDITY AND CAPITAL RESOURCES**





We
      were
      formed in June 1995 and, since our formation, have raised approximately
      $74,500,000 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, 2006, approximately $114,000 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, 2006, we had a cash balance of approximately $125,000 and a working
      capital deficit of approximately $218,000. We do not have any commercial
      commitments or off balance sheet financing. Our commitments under our operating
      leases are described in Note 10 to our consolidated financial
      statements.





During
      2006 two corporate notes receivable totaling approximately $3,000 matured from
      Unicrown Partners LLC, a privately held company in which Selig Zises and Jay
      Zises are members. Selig Zises and Jay Zises are stockholders of MangoSoft,
      Inc.
      Selig Zises was the former co-chairman of our Board of Directors. Investments
      in
      high-yield securities pose higher risks than investments in lower-yield
      securities, including the risk of total loss.





We
      did
      not make any capital expenditures during the fiscal year 2006.





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




16


Unless
      we
      can generate significant on-going revenue, we will need additional sources
      of
      equity or debt financing. Although we have been successful in raising past
      financing, there can be no assurances that additional financing will be
      available to us on commercially reasonable terms, or at all.





As
      shown
      in the audited consolidated financial statements, during the years ended
      December 31, 2006 and 2005, we incurred net income (loss) of $125,751 and
      ($347,088), respectively. Cash used in operations during the years ended
      December 31, 2006 and 2005 was $608,852 and $320,340, respectively. The factors,
      among others, raise significant doubt about our ability to continue as a going
      concern. Our continuation as a going concern is dependent upon our ability
      to
      generate sufficient cash flow and meet our obligations on a timely basis and
      ultimately attain profitability.





**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 general and our various ongoing intellectual property litigations
      in particular. 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.
      In
      July, 2007 the Company filed a registration statement on Form S-1 with the
      Securities and Exchange Commission (which was subsequently amended in September
      of 2007, and currently remains pending) with respect to a proposed rights
      offering pursuant to which the Company would propose to offer to its
      stockholders an aggregate of 2,400,000 shares of its common stock at a per
      share
      purchase price of $.50 per share, which, if effected in full, would result
      in
      gross proceeds to the Company of $1,200,000.





**OFF-BALANCE
      SHEET ARRANGEMENTS**





We
      do not
      have any commercial commitments or off balance sheet financing. Our commitments
      under our operating leases are described in Note 10 to our consolidated
      financial statements.




**ITEM
      7. FINANCIAL STATEMENTS**





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




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





None.




**ITEM
      8A. CONTROLS AND PROCEDURES**





We
      have significantly reduced our work force on several occasions during 2001
      and
      2002. At December 31, 2006 and 2005, we had one (1) employee, Mr. Dale Vincent,
      our President, Chief Executive Officer and sole director. A complete set of
      internal controls including segregation of duties is not possible in an
      organization of this size. However, we have implemented control procedures
      surrounding the maintenance of our accounting and financial systems and the
      safeguarding of our assets. Further, all transactions entered into outside
      the
      normal course of our day-to-day operations must be approved by Mr.
      Vincent.





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





There
      was
      no change in our internal control over financial reporting (as defined in
      Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during
      the year ended December 31, 2006 that has materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting.





17


**ITEM
      8B. OTHER INFORMATION**





None.




18


**PART
      III**




**ITEM
      9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**





Dale
      Vincent, age 60, is our President, Chief Executive Officer and sole director.
      Mr. Vincent provides his services on a full-time basis. Mr. Vincent was
      appointed President, Chief Executive Officer and elected a Director in September
      1999. Previously, he served as the Chief Executive Officer of MangoSoft
      Corporation since May 1999, as its Chief Financial Officer from September 1998
      to May 1999, and as a Director of MangoSoft Corporation since July 1995. Mr.
      Vincent has over 25 years of senior financial and business management
      experience, with the last 16 years developing and funding companies in the
      software industry. Since April 1990, Mr. Vincent has served as a Managing
      Director of ACAP, a private investment company, the general partner of
      Associated Capital L.P., a private investment company, and consults with
      Associated Capital L.P with respect to its investment and marketing activities.
      He has also served as a Director of MaMaMedia, Inc. since 1996.




**Section
      16 (a) Beneficial Ownership Reporting Compliance**





Section
      16(a) of the Exchange Act and the rules thereunder require our directors and
      officers and persons who own more than 10% of our outstanding common stock
      to
      file reports of ownership and changes in ownership with the Securities and
      Exchange Commission (the “Commission”). Our personnel generally prepare these
      reports on the basis of information obtained from each director and officer,
      and
      greater than 10% stockholders are required by the Commission to furnish the
      Company with copies of all reports filed. To the best of our knowledge, all
      reports required by Section 16(a) of the Exchange Act to be filed by our
      directors, officers and 10% or greater stockholders during our fiscal year
      ended
      December 31, 2006 were filed on time.





**Audit
      Committee**





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





**Code
      of Ethics**





The
      Company has adopted a Code of Ethics that applies to the Company’s 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., 12 Technology Way,
      Nashua, New Hampshire. A copy of this code of ethics is attached to this Annual
      Report on Form 10-KSB as exhibit 14. The Company will post a copy of this code
      of ethics on its corporate website - www.mangosoft.com.





19


**ITEM
      10. EXECUTIVE COMPENSATION**




**Executive
          Compensation**
  *Compensation
          Discussion and Analysis*
  ***Overview***
  The
          sole
          director is responsible for establishing, implementing and continually
          monitoring adherence with our compensation philosophy. The director seeks
          to
          ensure that the total compensation is fair and reasonable. Currently, we
          have
          one (1) executive officer.
  This
          section describes our compensation program for our executive officer. 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 director 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 (currently our chief executive
          officer). Our executive compensation packages have not included a variable
          cash
          compensation element.
  ***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. Our chief executive
          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.
  20
 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, decreased by 3% from  $209,000 in
            2005 to $202,000 in 2006.
   *Equity-Based
          Incentives*
  We
          grant equity-based incentives to our chief executive officer, 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.
  No
          equity
          based compensation was granted in 2006.
  *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, 2006, 2005 and 2004. Our 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
                  President
                    and Chief
                  Executive
                    Officer
                
                
                2006
                  2005
                    2004
                
                $
                202,488
                  208,667
                    204,046
                $
                
                
                
                $
                —
                
                $
                —
                
                $
                —
                
                $
                202,488
                  208,667
                    204,046
  21
 **GRANTS
          OF PLAN-BASED AWARDS**
  The
          following table presents information concerning grants of plan-based awards
          to
          each of the Named Executive Officer during the fiscal year ended
          December 31, 2006.
  **Grant**
                        **Date**
                        **Fair**
                        **Value
                          of**
                        **Stock**
                        **and**
                        **Option**
                        **Awards********Estimated
                          Future**
                        **Payouts
                          Under Non-Equity**
                        **Incentive
                          Plan Awards**
                      
                      **All
                          Other**
                        **Option**
                        **Awards:**
                        **Number
                          of**
                        **Securities**
                        **Underlying**
                        **Options
                          (#)**
                      
                      **Exercise**
                        **or
                          Base**
                        **Price
                          of**
                        **Option**
                        **Awards**
                        **($/Sh)****Name**
                      
                      **Grant**
                        **Date**
                      
                      **Threshold**
                        **($)**
                      
                      **Target**
                        **($)**
                      
                      **Maximum**
                        **($)**Mr.
                          Dale Vincent
                      
                      
                      
                      
                      —
                      
                      
                      —
                      
                      
                      —
                      
                      —
                      
                      
                      —
                      
                      
                      —
  **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, 2006.
  **Option
                    Awards****Name**
                
                **Number 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**
                  **Date**Mr.
                    Dale Vincent
                  President
                    and Chief
                  Executive
                    Officer
                
                75,000
                
                —
                
                —
                
                
                1.73
                
                —
  **OPTION
          EXERCISES AND STOCK VESTED AT FISCAL YEAR-END**
  The
          following table presents certain information concerning the exercise of
          options
          by chief executive officer during the fiscal year ended December 31, 2006,
          as well as information regarding stock awards that vested during the fiscal
          year.
  **Option
                    Awards**
                
                **Stock
                    Awards****Name
                    of Executive Officer**
                
                **Number
                    of**
                  **Shares**
                  **Acquired on**
                  **Exercise (#)**
                
                **Value Realized**
                  **on
                    Exercise**
                  **($)**
                
                **Number
                    of**
                  **Shares**
                  **Acquired on**
                  **Vesting
                    (#)**
                
                **Value Realized**
                  **on
                    Vesting ($)**Mr.
                    Dale Vincent
                
                —
                
                —
                
                —
                
                —


**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 2006. 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
      2006.


22
 **Employment
          Contracts**





None.





**Report
      on Repricing of Options/SARs**





On
      July
      24, 2003, the Company amended its outstanding and vested stock options granted
      to its Chief Executive Officer. Vested and outstanding options to purchase
      22,222 and 14,815 shares of the Company’s common stock at $27.81 and $33.75 per
      share, respectively, were cancelled. The Company granted its Chief Executive
      Officer options to purchase 37,037 shares of its common stock at an exercise
      price of $1.00 per share. The newly granted options are completely
      vested.




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





The
      following table sets forth certain information as of March 1, 2007 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 3,413,038
      shares of common stock outstanding on March 1, 2007. 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 Owned**Selig
                Zises (1)(6)
            
            
            909,548
            
            
            
            
            
            26.6
            %Southpaw
                Asset Management LP (2)
            
            
            870,202
            
            
            
            
            
            25.5
            %Jay
                Zises (3)(4)
            
            
            407,011
            
            
            
            
            
            11.9
            %Knoll
                Capital Fund II Master Fund (4)
            
            
            250,000
            
            
            
            
            
            7.3
            %Europa
                International Inc. (4)
            
            
            250,000
            
            
            
            
            
            7.3
            %Directors
                and officers:Dale
                Vincent (5)
            
            
            76,116
            
            
            
            
            
            2.2
            %All
                Directors and officers as a group
            
            
            76,116
            
            
            
            
            
            2.2
            %




(1)
                Total
                    shares of common stock beneficially owned by the former co-chairman
                    of our
                    Board of Directors Selig Zises include the following: 902,803 shares
                    owned by Selig Zises; 4,196 shares owned by Guarantee & Trust Co. TEE
                    FBO Selig Zises R-IRA DTD 5-20-96 (a self-directed IRA); and
                    2,549 shares
                    owned by his daughter Lynn Zises. Selig Zises is the brother
                    of Jay Zises,
                    both of whom are principal stockholders of the MangoSoft. Other
                    than the
                    Zises family relationships references in this table and the related
                    footnotes, there are no affiliations between Selig Zises and
                    any other
                    persons or entities identified in such table or footnotes. Selig
                    Zises’
                    address is 988 Fifth Avenue, New York, New York
                    10021.
  (2)
                This
                    Information is based solely on Schedule 13D filed with the Securities
                    and
                    Exchange Commission on January 12, 2007 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 870,202 shares of the Company’s Common
                    Stock.
  (3)
              Total
                  shares of common stock beneficially owned by Jay Zises, the brother
                  of the
                  former co-chairman of our Board of Directors Selig Zises, include
                  the
                  following: 2,481 shares owned by Jay Zises; 301,641 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)
              This
                  information is based solely on the Company’s stock transfer records. The
                  address of each of Knoll Capital Fund II Master Fund and Europa
                  International Inc. is 666 Fifth Avenue, Suite 3702, New York, NY
                  10103
  (5)
              Includes
                  75,000 shares of common stock Mr. Vincent has the right to acquire
                  through
                  the exercise of stock options. Mr. Vincent’s address is c/o MangoSoft,
                  Inc., 29 Riverside Street, Suite A, MS A-8, Nashua, New Hampshire
                  03062.
  (6)
              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.


23


Securities
      Authorized for Issuance Under Equity Compensation Plans





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




**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**




**(A)**
            **TRANSACTIONS
                WITH DIRECTORS AND
                OFFICERS**


****


At
      December 31, 2006, two corporate notes receivable totaling approximately $3,000
      matured from Unicrown Partners LLC, a privately held company in which Selig
      Zises and Jay Zises are members. Selig Zises and Jay Zises are stockholders
      of
      MangoSoft, Inc. Selig Zises was the former co-chairman of our Board of
      Directors. Investments in high-yield securities pose higher risks than
      investments in lower-yield securities, including the risk of total
      loss.





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





On
      September 26, 2006, Selig Zises provided bridge financing to Mangosoft
      Corporation in the principal amount of $250,000. At the closing of the Mangosoft
      Corporation offer and sale of 2,400,000 shares of common stock on January 10,
      2007, the bridge financing shall automatically be converted into a subscription
      of common stock. of 500,000 shares.





On
      January 10, 2007, in connection with the sale of 2,400,000 of common stock,
      Jay
      Zises purchased 300,000 shares for $150,000 in cash.




24


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





**(a)**
            **Exhibits:****Exhibit**
              **Number**
            
            **Description
                of Exhibit**2.1
            
            Agreement
                and Plan of Merger by and among First American Clock Co., MangoSoft
                Corporation and MangoMerger Corp., dated as of August 27, 1999.
                (1)3.1
            
            Articles
                of Incorporation, as amended. (2)3.2
            
            By-laws.
                (2)4.1
            
            Rights
                Plan. (6)10
            
            Lease
                of Westborough Office Park, Building Five, dated November 10, 1995.
                (3)14
            
            Code
                of Ethics. (7)21
            
            Subsidiary
                of the Registrant. (2)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.




25




(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-KSB  filed on March 30,
                2007 for the years ended December 31, 2006 and hereby incorporated
                by
                reference thereto.*
            Filed
                herewith.





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





There
      were no notifications filed on Form 8-K during the year ended December 31,
      2006.
      There was a Form 8-K filed January 17, 2007 indicating the private placement
      of
      its common stock, par value $.001 per share, raising aggregate gross proceeds
      of
      $1,200,000 through the sale of 2,400,000 shares of Common Stock.




26


**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





***Audit
      Fees***





Fees
      billed by Stowe & Degon for the audit of our annual financial statements for
      the fiscal years ended December 31, 2006 and 2005 and the review of our
      quarterly financial statements included in our quarterly reports on Form 10-QSB
      were approximately $31,000 and $35,000, respectively.





***Audit-Related
      Fees***





There
      were no other fees billed by Stowe & Degon 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***





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





27


**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.




February
                1, 2008**MANGOSOFT,
                INC.**February
                    1, 2008
            By:
            */s/* *Dale
              Vincent*Dale
                VincentPresident,
              Chief
              Executive Officer andChairman of the Board of Directors(Principal
                Financial and Accounting Officer)




28


**MANGOSOFT,
      INC. AND SUBSIDIARIES**





**INDEX
      TO FINANCIAL STATEMENTS**





PageReport
                of Independent Registered Public Accounting Firm
            27Consolidated
                Balance Sheet as of December 31, 2006
            28Consolidated
                Statements of Operations For The Years Ended December 31, 2006 and
                2005
            29Consolidated
                Statements of Stockholders’ Equity For The Years EndedDecember
                31, 2006 and 2005
            30Consolidated
                Statements of Cash Flows For The Years Ended December 31, 2006 and
                2005
            31Notes
                to Consolidated Financial Statements
            32




29


**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, 2006 and the related
      consolidated statements of operations, stockholders’ equity, and cash flows for
      the years ended December 31, 2006 and 2005. 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, 2006 and 2005, and the results of their
      operations and their cash flows for the years ended December 31, 2006 and 2005,
      in conformity with accounting principles generally accepted in the United States
      of America.




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





/s/
      Stowe
& Degon





Worcester,
      MA


March
      30,
      2007





30


**MANGOSOFT,
      INC. AND SUBSIDIARIES**





**CONSOLIDATED
      BALANCE SHEET**





**AS
      OF DECEMBER 31, 2006**





**ASSETS**Current
                Assets:Cash
                and cash equivalents
            
            $
            125,348Accounts
                receivable
            
            
            20,900Total
                current assets
            
            $
            146,248**LIABILITIES
                AND STOCKHOLDERS’ DEFICIT**Current
                Liabilities:Accounts
                payable
            
            $
            51,738Accrued
                compensation
            
            
            7,788Other
                accrued expenses and current liabilities
            
            
            54,243Total
                current liabilities
            
            
            113,769Long
                Term Liabilities:Note
                payable
            
            
            250,000Total
                Liabilities
            
            
            363,769Commitments
                and Contingencies (Note 11)Stockholders’
                Deficit:Preferred
                stock - $0.001 par value; authorized, 5,000,000  shares; issued and
                outstanding, 20,000 shares
            
            
            20Common
                stock - $0.001 par value, authorized, 3,703,704 shares, issued and
                outstanding 1,013,038 shares
            
            
            1,013Additional
                paid-in-capital
            
            
            88,725,694Accumulated
                deficit
            
            
            (88,944,248
            )Total
                stockholders’ deficit
            
            
            (217,521
            )Total
            
            $
            146,248





See
      notes
      to the consolidated financial statements.




31


**MANGOSOFT,
      INC. AND SUBSIDIARIES**





**CONSOLIDATED
      STATEMENTS OF OPERATIONS**





**Year
                Ended December 31,****2006**
            
            **2005**Service
                revenues
            
            $
            275,100
            
            $
            336,524Costs
                and expenses:Cost
                of services (1)
            
            
            262,903
            
            
            268,082General
                and administrative (1)
            
            
            568,003
            
            
            432,403Stock-based
                compensation expense
            
            
            -
            
            
            428Loss
                from operations
            
            
            (555,806
            )
            
            (364,389
            )Interest
                income
            
            
            10,243
            
            
            17,504Interest
                expense
            
            
            (6,463
            )
            
            -Income
                from settlement of accrued legal fees
            
            
            677,777
            
            
            -Other
                expense
            
            
            -
            
            
            (203
            )Net
                income (loss)
            
            $
            125,751
            
            $
            (347,088
            )Net
                income (loss) per share - basic
            
            $
            0.12
            
            $
            (0.34
            )Net
                income (loss) per share - diluted
            
            $
            0.12
            
            $
            (0.34
            )Weighted
                average shares outstanding - basic
            
            
            1,013,038
            
            
            1,013,038Weighted
                average shares outstanding - diluted
            
            
            1,088,038
            
            
            1,013,038





(1)
                Excludes stock-based compensation expense as
                follows:




General
                and administrative
            
            
            -
            
            
            428$
            -
            
            $
            428




See
      notes
      to the consolidated financial statements.





32


**MANGOSOFT,
      INC. AND SUBSIDIARY**




**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)**





**Convertible
                Preferred Stock**
            
            **Common
                Stock**
            
            **Additional
                Paid-in**
            
            **Deferred**
            
            **Accumulated****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Capital**
            
            **Compensation**
            
            **Deficit**
            
            **Total**Balance,
                January 1, 2005
            
            
            20,000
            
            $
            20
            
            
            1,013,038
            
            $
            1,013
            
            $
            88,725,694
            
            
            
            
            $
            (428
            )
            $
            (88,722,911
            )
            $
            3,388Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            
            
            
            428
            
            
            -
            
            
            428Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            (347,088
            )
            
            (347,088
            )Balance,
                December 31, 2005
            
            
            20,000
            
            
            20
            
            
            1,013,038
            
            
            1,013
            
            
            88,725,694
            
            
            
            
            
            -
            
            
            (89,069,999
            )
            
            (343,272
            )Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            125,751
            
            
            125,751Balance,
                December 31, 200620,000
            
            $
            20
            
            
            1,013,038
            
            $
            1,013
            
            $
            88,725,694
            
            
            
            
            $
            -
            
            $
            (88,944,248
            )
            $
            (217,521
            )





See
      notes
      to the consolidated financial statements.




33


**MANGOSOFT,
      INC. AND SUBSIDIARIES**





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





**Year
                Ended December 31,****2006**
            
            **2005**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income (loss)
            
            $
            125,751
            
            $
            (347,088
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Income
                from settlement of accrued legal expenses
            
            
            (677,777
            )
            
            -Stock-based
                compensation
            
            
            -
            
            
            428Increase
                (decrease) in cash from the change in:Accounts
                receivable
            
            
            (3,493
            )
            
            (4,895
            )Accounts
                payable
            
            
            (6,522
            )
            
            4,187Accrued
                compensation
            
            
            -
            
            
            (2,285
            )Other
                accrued expenses and current liabilities
            
            
            (46,811
            )
            
            49,780Deferred
                revenue
            
            
            -
            
            
            (20,467
            )Net
                cash used in operating activities
            
            
            (608,852
            )
            
            (320,340
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Investment
                maturities
            
            
            3,538
            
            
            321,446Interest
                receivable
            
            
            -
            
            
            21,524Net
                cash provided by investing activities
            
            
            3,538
            
            
            342,970CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from note payable
            
            
            250,000
            
            
            -Net
                cash provided by financing activities
            
            
            250,000
            
            
            -NET
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            (355,314
            )
            
            22,630CASH
                AND CASH EQUIVALENTS, BEGINNING OF YEAR
            
            
            480,662
            
            
            458,032CASH
                AND CASH EQUIVALENTS, END OF YEAR
            
            $
            125,348
            
            $
            480,662




See
      notes
      to the consolidated financial statements.




34


**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.




As
      shown
      in the consolidated financial statements, during each of the two years in the
      period ended December 31, 2006, the Company incurred losses from operations
      of
      $555,806 and $364,889 respectively. Cash used in operations during each of
      the
      two years in the period ended December 31, 2006 was $608,852 and $320,340,
      respectively. These factors, among others, raise significant doubt about the
      Company's ability to continue as a going concern. The consolidated financial
      statements do not include any adjustments relating to the recoverability and
      classification of assets or the amounts and classification of liabilities that
      might be necessary should the Company be unable to continue as a going concern.
      The Company's continuation as a going concern is dependent upon   its
      ability to generate   sufficient cash flow and meet its obligations on a
      timely basis and ultimately attain profitability.




The
      Company has reduced its work force on four separate occasions since April 23,
      2001 due to adverse economic conditions and the Company’s need to conserve
      capital. At December 31, 2006 and 2005, the Company had one (1) and two (2)
      employees, 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, 2006.





On
      September 11, 2006, Mangosoft Corp. assigned the ownership and legal titles
      of
      twelve of its patents and applications with no recorded value to Mangosoft
      Intellectual Property, Inc., (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 Date**System
                For Tracking Data
            
            08/848,970
            
            05/02/97Method
                For Scheduling Thread Execution On ALimited Number Operating
                System
            
            09/069,352
            
            04/29/98Internet-Based
                Shared File Service With Native PCClient Access And Semantics And
                DistributedAccess Control
            
            09/704,050
            
            11/01/00Internet-Based
                Shared File Service With Native PCClient Access And
                Semantics
            
            09/704,262
            
            11/01/00




35





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




36


**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.





*Investments* -
      Investments in which the Company has the ability and positive intent to hold
      to
      maturity are carried at amortized cost. Investments and maturities of less
      than
      one year are classified as short-term investments.





*Concentration
      of Credit Risk* - The
      Company maintains deposits in financial institutions, which occasionally exceed
      federally insured limits. Senior management continually reviews the financial
      stability of these institutions.





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 according
      to
      Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based
      Payment” effective January 1, 2006. Prior to adopting SFAS No. 123R the Company
      accounted for stock-based compensation under the intrinsic value method in
      accordance with Accounting Principles Board Opinion (“APB”) No. 25, “Accounting
      for Stock Issued to Employees,” and complied with the disclosure provisions of
      Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based
      Compensation.




37


**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 SFAS No. 123R and Emerging Issues Task Force (“EITF”) Abstract No.
      96-18, “Accounting for Equity Instruments That Are Issued To Other Than
      Employees for Acquiring, or in Conjunction with Selling, Goods or
      Services.”





The
      Company’s 1999 Incentive Compensation Plan, as amended, provides for the
      issuance of up to 296,297 shares of common stock to employees, officers,
      directors and consultants in the form of nonqualified and incentive stock
      options, restricted stock grants and other stock-based awards, including stock
      appreciation rights. Employee options typically vest over three or four year
      periods. An option’s maximum term is ten years.





The
      following table provides the reported and pro forma net loss and loss per share
      amounts for the year ended December 31, 2005 had compensation expense for the
      Company’s stock-based compensation plans been determined based on the fair
      market value on the grant dates for awards under those plans consistent with
      the
      method of SFAS 123 :


**2005**Net
                loss applicable to common stockholders, as reported
            
            $
            (347,088
            )Add
                back: stock-based compensation costs included in the determination
                of net
                loss applicable to common shareholders, as reported
            
            
            428Less:
                Stock-based compensation had all options been recorded at fair
                value
            
            
            (428
            )Adjusted
                net loss
            
            $
            (347,088
            )Weighted
                average shares outstanding, basic and diluted
            
            
            1,013,038Net
                loss per share, basic and diluted, as reported
            
            $
            (0.
                34
            )Adjusted
                net loss per share, basic and diluted
            
            $
            (0.
                34
            )





*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 antidilitive.




38


**MANGOSOFT,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**2.
      Summary of Significant Accounting Policies (continued)**





Basic
      and
      diluted loss per common share are the same for 2005 as potentially dilutive
      stock options totaling 75,000 in 2006 and 2005 have not been included in the
      2005 calculation of diluted net loss per common share available to common
      stockholders, as their inclusion would have been antidilutive. **





*Supplemental
      Cash Flow Information* - The
      following table sets forth certain supplemental cash flow information for the
      years ended December 31, 2006, and 2005:




**Years
                Ended December 31,****2006**
            
            **2005**Cash
                paid for interest
            
            $
            -
            
            $
            -Cash
                paid for income taxes
            
            $
            -
            
            $
            -




***Recently
      Issued Accounting Pronouncements***




In February 2006, the FASB issued Statement No. 155, “ *Accounting
      for Certain Hybrid Financial Instruments - An amendment to FASB Statements
      No.
      133 and 140* ”
(“SFAS
      155”). SFAS 155 simplifies the accounting for certain hybrid financial
      instruments containing embedded derivatives. SFAS 155 allows fair value
      measurement for any hybrid financial instrument that contains an embedded
      derivative that otherwise would require bifurcation under SFAS 133. In addition,
      it amends SFAS 140 to eliminate the prohibition on a qualifying special-purpose
      entity from holding a derivative financial instrument that pertains to
      beneficial interest other than another derivative financial instrument. The
      new
      standard is effective to new or modified financial instruments in fiscal years
      beginning after September 15, 2006. The implementation of SFAS 155 is not
      expected to have material impact on the Company’s consolidated financial
      statements.





In
      March 2006, the FASB issued Statement No. 156, “ *Accounting
      for Servicing of Financial Assets - an amendment of FASB Statement No.
      140* ”
(“SFAS
      156”).  This statement amends FASB Statement No. 140, “Accounting for
      Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,”
with respect to the accounting for separately recognized servicing assets and
      servicing liabilities. This standard clarifies when servicing rights should
      be
      separately accounted for, requires companies to account for separately
      recognized servicing rights initially at fair value, and gives companies the
      option of subsequently accounting for those servicing rights at either fair
      value or under the amortization method. SFAS 156 is effective for fiscal years
      beginning after September 15, 2006. The implementation of SFAS 156 is not
      expected to have a material impact on the Company’s consolidated financial
      statements.





In
      July 2006, the FASB issued Interpretation No. 48 “ *Accounting
      for Uncertainty in Income Taxes - An Interpretation of FASB Statement No.
      109.* ”
(“FIN
      48”),   FIN 48 prescribes a recognition threshold and measurement
      attribute for how a company should recognize, measure, present, and disclose
      in
      its financial statements uncertain tax positions that the company has taken
      or
      expects to take on a tax return. FIN 48 will require that the financial
      statements reflect expected future tax consequences of such positions presuming
      the taxing authorities’ full knowledge of the position and all relevant facts,
      but without considering time values. FIN 48 is effective for annual periods
      beginning after December 15, 2006. The implementation of FIN 48 is not expected
      to have a material impact on the Company’s consolidated financial
      statements.





39


**MANGOSOFT,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**2.
      Summary of Significant Accounting Policies (continued)**





In
      September 2006, the FASB issued Statement No. 157, “ *Fair
      Value Measurements* ”
(“SFAS
      157”). This standard defines fair value, establishes a framework for measuring
      fair value, and expands disclosures about fair value measurements.  The new
      FASB rule does not supersede all applications of fair value in other
      pronouncements, but creates a fair value hierarchy and prioritizes the inputs
      to
      valuation techniques for use in most pronouncements.  It requires companies
      to assess the significance of an input to the fair value measurement in its
      entirety. SFAS 157 also requires companies to disclose information to enable
      users of financial statements to assess the inputs used to develop the fair
      value measurements.  SFAS 157 is effective for fiscal periods beginning
      after November 15, 2007.  The Company is currently evaluating the impact on
      its consolidated financial statements.





In
      September 2006, the FASB issued Statement No. 158, “ *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans - An
      amendment of FASB Statements No. 87, 88, 106, and 132(R)* ”
(“SFAS
      158”).  This standard enhances disclosure regarding the funded status of an
      employers’ defined benefit postretirement plan by (a) requiring companies to
      include the funding status in comprehensive income and (b) recognize
      transactions and events that affect the funded status in the financial
      statements in the year in which they occur (c) at a measurement date of the
      employer’s fiscal year-end.  SFAS 158 is not expected to apply to the
      Company.





In
      February 2007, the FASB issued Statement No. 159, “ *The
      Fair Value Option for Financial Assets and Financial Liabilities - Including
      an
      amendment of FASB Statement No. 115* ”
(“SFAS
      159”).  This standard amends FASB Statement No. 115, “ *Accounting
      for Certain Investment in Debt and Equity Securities* ,” with
      respect to accounting for a transfer to the trading category for all entities
      with available-for-sale and trading securities electing the fair value option.
       This standard allows companies to elect fair value accounting for many
      financial instruments and other items that currently are not required to be
      accounted as such, allows different applications for electing the option for
      a
      single item or groups of items, and requires disclosures to facilitate
      comparisons of similar assets and liabilities that are accounted for differently
      in relation to the fair value option.  SFAS 159 is effective for fiscal
      years beginning after November 15, 2007. If elected, the implementation of
      FAS
      159 is not expected to have a material impact on the Company’s consolidated
      financial statements.





40


**MANGOSOFT,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**3.
      Investments**





During
      2006, the Company collected its remaining corporate notes aggregating $3,538.
      The secured corporate notes had been executed between the Company and several
      privately-held companies, each of which are related parties (see Note 11).
      The
      notes were secured by certain collateral pursuant to each note agreement
      and certain guarantees by the respective corporations. The 12% corporate notes
      with varying maturity dates were carried at cost due to the uncertainty of
      their interest payment. The principal on these notes was collateralized by
      the debtor’s receivables.





**4.
      Note Payable**





On
      September 20, 2006, the Company borrowed $250,000 from one of its stockholders,
      Selig Zises, which was subsequently converted to 500,000 shares of common stock
      on January 10, 2007 when 2,400,000 shares of common stock were sold through
      a
      private placement for aggregate proceeds of $1,200,000, including the conversion
      of this note. The note calls for interest to be paid at maturity or conversion,
      whichever occurs first, at prime plus 1% (9.25% at December 31, 2006). Accrued
      liabilities at December 31, 2006 includes accrued and unpaid interest on this
      note in the amount of $6,463.




**5.
      Income Taxes**





The
      Company has federal and state tax net operating loss carryforwards available
      for
      future periods of approximately $71,901,000. 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, 2006 is as follows:




**2006**Deferred
                tax assets:Net
                operating loss carryforwards
            
            $
            24,446,000Research
                and development credits
            
            
            518,00024,964,000Valuation
                allowance
            
            
            (24,964,000
            )Net
                deferred tax assets
            
            $
            -




41


**MANGOSOFT,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**5.
      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, 2006 and 2005.





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


**2006**
            
            **2005**Federal
                statutory rate
            
            
            34
            %
            
            34
            %State
                tax, net of federal impact
            
            
            6
            
            
            6Provision
                for valuation allowance on deferred tax assets
            
            
            (40
            )
            
            (40
            )Effective
                tax rate
            
            
            -
            %
            
            -
            %




**6.
      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 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.





**7.
      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, 2006, there were 179,652 remaining options available for grant
      under the Plan.





42


**MANGOSOFT,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**7.
      Stock Option Plan (continued)**





Stock-based
      compensation of $428 is included in the Company’s 2005 results of operations in
      connection with these grants issued prior to 2005 at exercise prices below
      the
      fair value of the Company’s common stock at the grant date. No such compensation
      expense was recognized in 2006.




There
      were no option grants made in 2006 and 2005.





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





**Number
                of**
              **Options**
            
            **Weighted**
              **Exercise
                Price**Outstanding
                at December 31, 2004
            
            
            110,245
            
            
            12.99Granted
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -Forfeited
            
            
            (35,245
            )
            
            35.22Outstanding
                at December 31, 2005
            
            
            75,000
            
            
            1.73Granted
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -Forfeited
            
            
            -
            
            
            -Outstanding
                at December 31, 2006
            
            
            75,000
            
            $
            1.73Exercisable
                at December 31, 2006 and 2005
            
            
            75,000





**Options
                Outstanding**
            
            **Options
                Exercisable****Number
                of****Options**
            
            **Range
                of Exercise****Prices**
            
            **Weighted
                Average Remaining Life****(in
                years)**
            
            **Weighted
                Average****Exercise
                Price**
            
            **Number
                Currently****Exercisable**37,037
            
            $
            1.00
            
            
            5.5
            
            $
            1.00
            
            
            37,03737,963
            
            $
            4.05
            
            
            8.5
            
            $
            4.04
            
            
            37,96375,000
            
            
            
            
            
            
            
            
            
            
            
            75,000




**8.
      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 2006 or 2005.




43


**MANGOSOFT,
      INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**9.
      Commitments and Contingencies**





The
      Company has entered into contingency fee arrangements with three firms providing
      legal services on behalf of the Company. Unless the firms are dismissed, no
      payment is to be made to these firms unless the outcome of certain litigations
      are successful.





On
      November 22, 2006 the Company entered into an agreement with a law firm with
      which it had incurred approximately $727,000 in fees that were included in
      accounts payable. Under the agreement the Company settled this outstanding
      payable with a cash payment to the firm of $50,000. The Company also agreed
      to
      pay the firm 5% of the first $10,000,000 arising from certain patent litigation
      as defined in the agreement.





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.





**10.
      Related Party Transactions**





Investments
      - During 2003 the Company issued approximately $414,000 in several secured
      corporate notes receivable accruing interest at 12.0% to 15.0% per annum to
      companies who are beneficially owned by two stockholders. The notes were repaid
      in full to the Company in 2005.





**11.
      Geographic Sales Information and Major Customers**





The
      Company generates the majority of its revenues from the sale of its products
      and
      services in North America. All of the Company’s 2006 and 2005 revenues were
      generated from sales to North American customers.




**12.
      Subsequent Event**




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




On
      January 10, 2007, the Company issued 2,400,000 shares of $0.001 par value common
      stock to a group of investors including current stockholders, for aggregate
      gross proceeds of $1,200,000. Total proceeds include the conversion of a note
      payable to a stockholder issued in September 2006 in the principal amount of
      $250,000. The Company intends to utilize the net proceeds of the private
      placement to pay past due expenses and to fund its various patent
      litigations




44