**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549





**FORM
      10-QSB**





(MARK
      ONE)





x QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE


SECURITIES
      EXCHANGE ACT OF 1934





For
      the
      quarterly period ended September 30, 2006





o TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF


THE
      EXCHANGE ACT





For
      the
      transition period from ___ to ___





Commission
      file number: 333-5278-NY





MIGO
      SOFTWARE, INC.


(Exact
      Name of small business issuer as Specified in Its Charter)





**Delaware**
            **94-3334052**(State
                or other jurisdiction of
            (I.R.S.
                Employerincorporation
                or organization)
            Identification
                No.)





**555
                Twin Dolphin Drive, Suite 650****Redwood
                City, California 94065**(Address
                of principal executive offices)





Issuer's
      telephone number: (650) 232-2600





(Former
      name, former address and former fiscal year if changed since last
      report)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities 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





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





As
      of
      November 1, 2006, there were 71,085,632 shares of the issuer's common stock,
      $0.0001 par value per share ("Common Stock"), outstanding.





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











1





QUARTERLY
      REPORT





TABLE
      OF
      CONTENTS





PART
                I. FINANCIAL INFORMATION
            3Item
                1. Financial Statements
            3Consolidated
                Balance Sheets - September 30, 2006(Unaudited) and December 31,
                2005
            3Consolidated
                Statements of Operations -Three and nine months endedSeptember
                30, 2006 and 2005 Unaudited
            4Consolidated
                Statements of Cash Flows -Nine months endedSeptember
                30, 2006 and 2005 - Unaudited
            5Notes
                to Consolidated Financial Statements - Unaudited
            6Item
                2. Management's Discussion and Analysis or Plan of
                Operations
            14Item
                3. Controls and Procedures
            18PART
                II. OTHER INFORMATION
            19Item
                1. Legal Proceedings
            19Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            19Item
                3. Defaults Upon Senior Securities
            19Item
                4. Submission of Matters to a Vote of Security Holders
            19Item
                5. Other Information
            19Item
                6. Exhibits
            19SIGNATURES
            20







2




PART
      I.
      FINANCIAL INFORMATION





Item
      1.
      Financial Statements


**MIGO
      SOFTWARE, INC.**


**CONSOLIDATED
      BALANCE SHEET****S**





As
                of September 30,
            
            As
                of December 31,2006
            
            2005**ASSETS**
            
            (Unaudited)
            
            **Current
                Assets:*Cash
                and cash equivalents
            
            $
            647,179
            
            $
            2,510,704Short-term
                investments
            
            
            4,582,334
            
            
            2,875,000Accounts
                receivable
            
            
            57,532
            
            
            25,368Inventory
            
            
            —
            
            
            15,755Other
                current assets
            
            
            57,527
            
            
            82,983Total
                current assets
            
            
            5,344,572
            
            
            5,509,810Property
                and equipment, net
            
            
            8,002
            
            
            7,923OTHER
                ASSETS:Software
                technology, net
            
            
            1,542,733
            
            
            1,965,101Other
                assets
            
            
            38,000
            
            
            39,475**TOTAL
                ASSETS**
            
            $
            6,933,307
            
            $
            7,522,309**LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIT)*****Current
                Liabilities:***Accounts
                payable
            
            $
            125,421
            
            $
            1,104,157Deferred
                Revenue
            
            
            850,000
            
            
            —Accrued
                compensation
            
            
            85,990
            
            
            78,084Settlement
                Payable
            
            
            424,000
            
            
            —Accrued
                liabilities
            
            
            571,500
            
            
            1,271,640Total
                current liabilities
            
            
            2,056,911
            
            
            2,453,881***Non-current
                liabilities:***Warrant
                liability, at fair value
            
            
            —
            
            
            3,882,672Total
                Liabilities
            
            
            2,056,911
            
            
            6,336,553Commitments
                and contingencies (Note 8)Temporary
                Equity
            
            
            —
            
            
            5,908,036**Stockholders'
                Equity (Deficit):**Junior
                A Preferred stock, $.0001 par value; 5,000,000 shares authorized,
                790,250
                shares issued
              and
                outstanding; preference upon liquidation of $2,600,000
            
            
            79
            
            
            79Common
                stock, $.0001 par value; 100,000,000 shares authorized; 71,085,632
                and
                26,598,180 shares
              issued
                and outstanding at September 30, 2006 and December 31, 2005,
                respectively
            
            
            7,122
            
            
            2,660Additional
                paid in capital in excess of par value
            
            
            45,742,138
            
            
            29,344,416Deferred
                Compensation Expense
            
            
            (163,502
            )
            
            (462,694
            )Treasury
                Stock
            
            
            (386,400
            )
            
            (386,400
            )Accumulated
                Deficit
            
            
            (40,323,041
            )
            
            (33,220,341
            )**Total
                stockholders' equity (deficit )**
            
            
            4,876,396
            
            
            (4,722,280
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**
            
            $
            6,933,307
            
            $
            7,522,309*
                Derived from the December 31, 2005 audited financial
                statements





The
      accompanying notes are an integral part of these consolidated financial
      statements.






3





**MIGO
      SOFTWARE, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS (UNAUDITED)**





Three
                Months ended September 30, 2006
            
            Three
                Months ended September 30, 2005
            
            Nine
                Months ended September 30, 2006
            
            Nine
                Months ended September 30, 2005Unaudited
            
            Unaudited
            
            Unaudited
            
            Unaudited**Revenues**
            
            $
            68,609
            
            $
            85,835
            
            $
            136,225
            
            $
            216,522Cost
                of Sales
            
            
            151,117
            
            
            162,405
            
            
            455,918
            
            
            902,386Gross
                Profit
            
            
            (82,508
            )
            
            (76,570
            )
            
            (319,693
            )
            
            (685,864
            )**Operating
                Expenses**Research
                and development
            
            
            505,703
            
            
            197,134
            
            
            1,291,244
            
            
            560,635Sales
                and marketing
            
            
            278,026
            
            
            168,972
            
            
            819,447
            
            
            794,182General
                and administrative
            
            
            1,271,824
            
            
            801,107
            
            
            3,829,692
            
            
            2,938,699Total
                operating expenses
            
            
            2,055,553
            
            
            1,167,213
            
            
            5,940,383
            
            
            4,293,516**Loss
                from operations**
            
            
            (2,138,061
            )
            
            (1,243,783
            )
            
            (6,260,076
            )
            
            (4,979,380
            )**Other
                Expense (income)**Interest
                (net)
            
            
            (62,487
            )
            
            25,725
            
            
            (181,667
            )
            
            29,194Beneficial
                Conversion Interest
            
            
            —
            
            
            294,444
            
            
            —
            
            
            294,444Decrease
                in warrant liability
            
            
            —
            
            
            —
            
            
            (166,538
            )
            
            —Other
            
            
            1,018,025
            
            
            238,618
            
            
            1,190,829
            
            
            (43,618
            )Total
                other expense
            
            
            955,538
            
            
            558,787
            
            
            842,624
            
            
            280,020Loss
                Before Income Taxes
            
            
            (3,093,599
            )
            
            (1,802,570
            )
            
            (7,102,700
            )
            
            (5,259,400
            )Provision
                for Income Taxes
            
            
            —
            
            
            —
            
            
            —
            
            
            2,658**Net
                Loss**
            
            
            (3,093,599
            )
            
            (1,802,570
            )
            
            (7,102,700
            )
            
            (5,262,058
            )Deemed
                and Regular Preferred Stock Dividend
            
            
            —
            
            
            171,726
            
            
            —
            
            
            568,292Net
                Loss Attributable to Holders of common shares
            
            $
            (3,093,599
            )
            $
            (1,974,296
            )
            $
            (7,102,700
            )
            $
            (5,830,350
            )Basic
                and Diluted net loss per share
            
            $
            (0.05
            )
            $
            (0.35
            )
            $
            (0.11
            )
            $
            (1.31
            )Weighted
                Average Shares Outstanding Basic and Diluted
            
            
            67,189,128
            
            
            5,717,968
            
            
            63,199,504
            
            
            4,451,705







The
      accompanying notes are an integral part of these consolidated financial
      statements.






4




**MIGO
      SOFTWARE, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS (UNAUDITED)**





Nine
                Months
            
            Nine
                MonthsEnded
                September 30,
            
            Ended
                September 30,2006
            
            2005(Unaudited)
            
            (Unaudited)Cash
                Flows from Operating Activities:Net
                loss
            
            $
            (7,102,700
            )
            $
            (5,262,058
            )Adjustments
                to reconcile net loss to net cashused
                in operating activities:Common
                stock and options issued for services
            
            
            —
            
            
            660,700Inventory
                write-downs
            
            
            15,442
            
            
            70,914Accounts
                payable settlement
            
            
            (683,971
            )
            
            —Depreciation
                and amortization
            
            
            427,802
            
            
            418,446Amortization
                of deferred compensation
            
            
            364,192
            
            
            —Interest
                expense relating to amortization of debt issuance costs
            
            
            —
            
            
            29,200Interest
                expense relating to amortization of debt discountand
                beneficial conversion
            
            
            —
            
            
            300,263Remeasurement
                of warrants to fair value
            
            
            (166,538
            )
            
            —Stock
                based compensation
            
            
            1,620,315
            
            
            329,039Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (32,164
            )
            
            44,014Inventory
            
            
            313
            
            
            75,646Other
                current assets
            
            
            25,456
            
            
            110,172Other
                assets
            
            
            1,475
            
            
            12,050Accounts
                payable
            
            
            (294,765
            )
            
            59,318Accrued
                compensation
            
            
            7,906
            
            
            (33,457
            )Settlements
                payable
            
            
            274,000
            
            
            —Deferred
                revenue
            
            
            850,000
            
            
            —Accrued
                liabilities
            
            
            833,127
            
            
            (205,627
            )Net
                cash used in operating activities
            
            
            (3,860,110
            )
            
            (3,391,380
            )Cash
                Flows from Investing Activities:Purchases
                of investments
            
            
            (2,495,650
            )
            
            (3,725,640
            )Proceeds
                from investments
            
            
            788,316
            
            
            —Acquisition
                of First Person Software
            
            
            —
            
            
            6,761Purchase
                of equipment
            
            
            (5,513
            )
            
            —Net
                cash used in investing activities
            
            
            (1,712,847
            )
            
            (3,718,879
            )Cash
                Flows from Financing Activities:Payment
                of debt issuance costs
            
            
            —
            
            
            (1,355,438
            )Proceeds
                from convertible notes
            
            
            —
            
            
            1,000,000Repayment
                of convertible notes
            
            
            —
            
            
            (116,667
            )Payments
                upon rescission of common stock
            
            
            —
            
            
            (12,500
            )Payment
                of equity financing costs
            
            
            (415,568
            )
            
            (413,234
            )Proceeds
                from sale of common stock
            
            
            4,125,000
            
            
            5,162,000Proceeds
                from sale of preferred stock
            
            
            —
            
            
            1,308,805Net
                cash provided by financing activities
            
            
            3,709,432
            
            
            5,572,966NET
                DECREASE IN CASH AND CASH EQUIVALENTS
            
            
            (1,863,525
            )
            
            (1,537,293
            )CASH
                AND CASH EQUIVALANTS, Beginning of period
            
            
            2,510,704
            
            
            1,893,280CASH
                AND CASH EQUIVALENTS, End of period
            
            $
            647,179
            
            $
            355,987**Non-cash
                investing and financing activities:**Issuance
                of shares for dividends
            
            
            —
            
            $
            630,274Issuance
                of shares for penalties
            
            $
            1,136,300
            
            
            —Restricted
                stock issued
            
            
            65,000
            
            
            585,000Common
                Stock Purchase Warrant Issued to Placement Agent
            
            
            246,971
            
            
            —Reclassification
                from temporary to permanent equity
            
            
            8,715,214
            
            
            —Reclassification
                from warrant liability to permanent equity
            
            
            5,130,926
            
            
            —**Supplemental
                Disclosure of cash paid for :**Interest
            
            
            —
            
            
            —Income
                Taxes
            
            
            800
            
            
            1,000






The
      accompanying notes are an integral part of these consolidated financial
      statements.





5


MIGO
      SOFTWARE, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





1.
            Interim
                Financial Data and Basis of
                Presentation





The
      accompanying unaudited consolidated financial statements have been prepared
      by Migo Software, Inc. ("Migo" or "the Company") in accordance with accounting
      principles generally accepted in the United States of America ("US GAAP").
      In
      the opinion of management, the accompanying unaudited
      consolidated financial statements contain all adjustments, consisting only
      of those of a normal recurring nature, necessary for a fair presentation of
      the
      Company's financial position, results of operations and cash flows at the dates
      and for the periods indicated. These consolidated financial statements
      should be read in conjunction with the consolidated financial statements
      and notes related thereto, included in the Annual Report on Form 10-KSB\T for
      the nine months ended December 31, 2005. The Company was a development stage
      enterprise from May 16, 2002 (inception) through June 30, 2005. On January
      9,
      2006, the Board of Directors of the Company determined to change the Company’s
      fiscal year end to December 31 from March 31, effective for the year ended
      December 31, 2005. As of August 10, 2006, the Company's name was changed to
      "Migo Software, Inc."





The
      results for the three and nine month periods ended September 30, 2006 are
      not necessarily indicative of the results to be expected for the full fiscal
      year. The preparation of the financial statements in conformity with US GAAP
      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 date of the financial statements and the reported amounts
      of
      revenues and expenses during the reporting period. Actual results could differ
      from those estimates.





Forward-Looking
      Statements





This
      Quarterly Report on Form 10-QSB contains forward-looking statements including,
      without limitation, statements concerning the future of the industry in which
      the Company operates, its product development plans, business strategy,
      financial estimates, continued acceptance of its products and dependence on
      significant distributors and customers. In some cases, you can identify
      forward-looking statements by terminology such as "may", "will", "should",
      "expects", "plans", "anticipates", "believes", "estimates", "predicts",
      "potential", "continue" or the negative of such terms or other comparable
      terminology. You should not place undue reliance on the forward-looking
      statements contained in this document. When considering forward-looking
      statements, you should keep in mind the risk factors and other cautionary
      statements made in this Quarterly Report on Form 10-QSB and in the Company’s
      other SEC filings. Forward-looking statements, particularly those concerning
      anticipated events relating to the development and marketing of the Company's
      products and the timing or magnitude of those events, are inherently uncertain.
      The risk factors and other considerations noted in the Company’s SEC filings
      could cause the Company’s actual results to differ significantly from those
      contained in any forward-looking statements.





2.
            Summary
                of Significant Accounting Policies





*Basis
      of Presentation* - The
      accompanying financial statements have been prepared in conformity with
      accounting principles generally accepted in the United States (“US GAAP”), which
      contemplate continuation of the Company as a going concern. However, the Company
      is subject to the risks and uncertainties associated with a new business and
      has
      incurred significant losses from operations. From inception, the Company has
      never been profitable and has sustained substantial net losses from operations.
      There can be no assurance that it will ever generate sufficient revenues from
      its operating activities, or that it will achieve and sustain a profit during
      any future period, particularly if operations remain at current levels.
      Management estimates that the current funds available and on-hand will be
      adequate to fund operations for the next 12 months based upon the Company’s
      current rate of spending.





Critical
      Accounting Policies





The
      Company makes estimates and assumptions in the preparation of its consolidated
      financial statements in conformity with US GAAP. These accounting principles
      require management to make certain estimates, judgments and assumptions. The
      Company believes that the estimates, judgments and assumptions upon which it
      relies are reasonable based upon information available at the time that these
      estimates, judgments and assumptions are made. These estimates, judgments and
      assumptions can affect the reported amounts of assets and liabilities as of
      the
      date of the financial statements, as well as the reported amounts of revenues
      and expenses during the periods presented. To the extent there are material
      differences between these estimates, judgments or assumptions and actual
      results, the Company's financial statements will be affected. The accounting
      policies that reflect more significant estimates, judgments and assumptions
      which management believes are the most critical to aid in fully understanding
      and evaluating the Company's reported financial results include the
      following:





6


*Principles
      of Consolidation* - The
      consolidated financial statements include the accounts of the Company and its
      subsidiaries, PowerHouse Acquisition LLC, and PowerHouse Studios, Inc. All
      significant inter-company accounts and transactions have been eliminated in
      consolidation.





*Use
      of Estimates* - The
      preparation of financial statements in conformity with US GAAP 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 date of the financial statements, and the reported amounts of revenues
      and
      expenses during the reported periods. Management bases its estimates and
      assumptions on historical experience and on various other assumptions that
      it
      believes are reasonable under the circumstances. Actual results could materially
      differ from those estimates. Significant estimates include the valuation of
      acquired software technology and revenue recognition.





*Cash,
      Cash Equivalents* - The
      Company considers temporary liquid investments with an original maturity of
      three months or less to be cash equivalents.





*Accounts
      Receivable* -
      Accounts receivable are stated at the amount management expects to collect
      from
      outstanding balances. An allowance for doubtful accounts is provided for those
      accounts receivable considered to be uncollectible, based upon historical
      experience and management's evaluation of outstanding accounts receivable at
      the
      end of the year. At September 30, 2006 management believed that all amounts
      were
      collectible.





*Inventory* ** -
      Historically, inventory was valued at the lower of cost or market with cost
      determined by the first-in, first-out method. Prior to March 31, 2006, inventory
      consisted of finished goods of which certain amounts were on consignment with
      third party distributors and resellers. Although the Company is principally
      in
      the business of developing software, to support sales of software licenses
      it
      has at times purchased hardware and resold it with its software pre-installed.
      As a result, the Company was exposed to a number of factors that could result
      in
      portions of its inventory becoming either obsolete or in excess of anticipated
      usage. These factors included, but were not limited to, technological changes
      in
      its markets, competitive pressures in products and prices, and the introduction
      of new product lines. The Company regularly evaluated its ability to realize
      the
      value of its inventory based on a combination of factors, including historical
      usage rates, forecasted sales, product life cycles, and market acceptance of
      new
      products. When inventory that was obsolete or in excess of anticipated usage
      is
      identified, it was written down to realizable salvage value or an inventory
      valuation reserve is established. As of September 30, 2006, the Company no
      longer sells items such as flash drives or watches with its Migo software
      pre-installed, and only sells software that is either downloaded or
      pre-installed by its partners.  As such, the Company no longer carries
      any physical inventory, nor does it anticipate doing so in the
      future.





*Property
      and Equipment* -
      Property and equipment are stated at cost. Depreciation is computed using the
      straight-line method over estimated useful lives of three to five years.
      Leasehold improvements are amortized over the shorter of the lease term or
      the
      estimated useful life. The Company capitalizes costs associated with acquiring
      and installing software to be used for internal purposes.





*Software
      Technology Assets* -
      Software technology assets acquired as part of the First Person Software
      acquisition are stated at cost. Amortization is computed using the revenue
      or
      straight-line method, whichever is greater, over an estimated useful life of
      five years.





*Impairment
      of Long-Lived Assets* -
      Property, equipment, intangible and certain other long-lived assets are
      amortized over their useful lives. Useful lives are based on management’s
      estimates of the period that the assets will generate revenues. Long-lived
      assets are written down to fair value whenever events or changes indicate that
      the carrying amount of an asset may not be recoverable. The Company’s policy is
      to review the recoverability of all long-lived assets at a minimum of once
      per
      year and record an impairment loss when the fair value of the assets does not
      exceed the carrying amount of the asset. The Company’s most significant
      long-lived asset is its software technology. Differences between the Company’s
      original forecasts and actual results have resulted primarily from the Company’s
      change in focus from selling directly to consumers primarily through advertising
      to selling through partners. While the change in focus resulted in lower than
      projected revenues being achieved, operating expenses have also declined
      significantly. In calculating the current value for the Company’s core software
      technology, the Company primarily relies upon its estimates of the future cash
      flows (net realizable value) derived from the sale of its software. Among the
      key assumptions used by management are projected sales via the Company’s
      partners, assumptions regarding the potential conversion percentages of users
      upgrading their version of Migo software, costs to develop additional features
      for the Migo software, as well as projected headcount, marketing and general
      and
      administrative expenses. The software remains the core component of the current
      version of the Migo software. As circumstances change, the actual life and/or
      usage pattern may vary in the future, which might result in either increases
      or
      decreases in future amortization expense. Also, if circumstances and/or
      assumptions regarding the utility and recoverability of the software technology
      change, future write-offs or write-downs might be required.





7


*Revenue
      Recognition* - The
      Company recognizes revenue in accordance with Statement of Accounting Position
      (“SOP”) 97-2, *Software
      Revenue Recognition* ,
      as
      amended, and Staff Accounting Bulletin (“SAB”) No. 104, *Revenue
      Recognition* .





The
      Company recognizes revenue from sales through the Company's website after the
      30
      day return period has lapsed. The Company’s software products are licensed on a
      perpetual basis. Revenue from the sale of software licenses is recognized only
      when persuasive evidence of an arrangement exists, the product has been
      delivered, the fee is fixed or determinable and collection of the resulting
      receivable is reasonably assured. For sales over the Internet, the Company
      uses
      a credit card authorization as evidence of an arrangement.





Revenue
      from direct sale contracts of the Company’s products to commercial users is
      recognized based on the terms of the agreement, after the product has been
      delivered, and collection of the resulting receivable is reasonably assured.
      Revenue from distributors is recognized when the product has been sold to third
      party customers.





On
      September 5, 2006, we entered into a License Agreement with Kingston Technology
      Corporation ("Kingston"). Under
      the
      License Agreement, Kingston is to pay us $1,850,000 for global marketing and
      distribution rights to load currently available and future product releases
      of
      Migo's software on Kingston's flash memory products through December 2007.
      The
      license fee is payable $850,000 upon signing the agreement and the receipt
      of
      the next $1,000,000 is contingent upon Migo meeting certain mutually agreed
      upon
      R&D milestones by April 1, 2007. The agreement is renewable by Kingston for
      one additional year at a license fee to be agreed upon. The initial payment
      of
      $850,000 was received in September, 2006 and has been recorded as deferred
      revenue at September 30, 2006, and will be amortized monthly, on an evenly
      basis, beginning October 2006 through December 2007.





*Basic
      and Diluted Loss Per Share* - In
      accordance with the Financial Accounting Standards Board’s (“FASB”) SFAS No.
      128, “Earnings Per Share,” the basic loss per common share, which excludes
      dilution, is computed by dividing the net loss available to common shareholders
      by the weighted average number of common shares outstanding. Diluted loss per
      common share reflects the potential dilution that could occur if all potential
      common shares had been issued and if the additional common shares were
      dilutive. Since the Company has incurred net losses for all periods
      presented, there is no difference between basic and diluted loss per share
      of
      common stock. Potential shares of common stock to be issued upon the exercise
      of
      all stock options and warrants amounted to 44,418,351 shares as of September
      30,
      2006 and 22,013,038 shares at September 30, 2005.





*Comprehensive
      Loss* -
      Comprehensive loss is comprised of net loss and other comprehensive income
      (loss). Other comprehensive income (loss) includes certain changes in
      stockholders’ equity that are excluded from net loss, such as unrealized gains
      and losses on marketable securities and currency translation adjustments.
      Comprehensive income (loss) for all periods presented equals net
      loss.





*Stock-Based
      Compensation* - In
      December 2004, the FASB issued SFAS No. 123R, *Share
      Based Payment.* SFAS
      No.
      123R establishes the accounting for grants of stock options and other
      transactions in which an entity exchanges its equity instruments for goods
      or
      services. It also addresses transactions in which an entity incurs liabilities
      in exchange for goods or services that are based on the fair value of the
      entity’s equity instruments or that may be settled by the issuance of those
      equity instruments. SFAS No. 123R (1) revises SFAS No. 123, *Accounting
      for Stock-Based Compensation* ,
      (2)
      supersedes Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and (3)
      establishes fair value as the measurement objective for share-based payment
      transactions. The Company adopted SFAS 123R effective January 1, 2005 in
      accordance with the standard’s early adoption provisions. Prior to January 1,
      2005, the Company’s Board of Directors had not approved the granting of any
      stock options. As such, the Company decided to follow the provisions of SFAS
      No.
      123R on a prospective basis, and for the three months ended September 30, 2006
      the Company issued 5,500,000 stock options to employees and directors with
      a
      fair value of $1,100,000. For the nine months ended September 30, 2006 and
      2005,
      the Company recorded $1,620,315 and $329,039, respectively, in compensation
      expense related to the granting of stock options and restricted stock to
      employees. For the three months ended September 30, 2006 and 2005, the Company
      recorded $579,448 and $32,065, respectively, in compensation expense
      related to the granting of stock options and restricted stock to employees.
      Unrecognized compensation cost related to unvested stock options and restricted
      stock to employees totaled approximately $4,092,574 at September 30,
      2006.






8




*Research
      and Development* -
      Research and development costs are charged to operations as incurred. Some
      of
      the Company’s products include certain software applications that are integral
      to the operation of the core product. The costs to develop such software have
      not been capitalized, as the Company believes its current software development
      process is essentially completed concurrent with the establishment of
      technological feasibility of the software.





*Fair
      Value of Financial Instruments* - The
      estimated fair values for financial instruments under SFAS No. 107, *Disclosures
      about Fair Value of Financial Instruments* ,
      are
      determined at discrete points in time based on relevant market information.
      These estimates involve uncertainties and cannot be determined with precision.
      For certain of the Company’s financial instruments, including certain assets,
      accounts payable, accrued liabilities and debt, the carrying amounts approximate
      fair value due to their maturities.





*Concentrations
      of Credit Risk* - Credit
      risk represents the accounting loss that would be recognized at the reporting
      date if counter parties failed completely to perform as contracted. The
      Company’s product revenues are concentrated in the software industry, which is
      highly competitive and rapidly changing. Significant technological changes
      in
      the industry or customer requirements, or the emergence of competitive products
      with new capabilities or technologies, could adversely affect operating results.
      Concentrations of credit risk (whether on or off balance sheet) that arise
      from
      financial instruments exist for groups of customers or counter parties when
      they
      have similar economic characteristics that would cause their ability to meet
      contractual obligations to be similarly affected by changes in economic or
      other
      conditions described below. Financial instruments that subject the Company
      to
      credit risk consist of cash balances maintained in excess of federal depository
      insurance limits and accounts receivable, which have no collateral or security.
      The Company maintains its cash balances with high credit quality financial
      institutions. At times, cash deposits may be in excess of Federal Deposit
      Insurance Corporation’s limits. To date, the Company has not experienced any
      such losses and believes it is not exposed to any significant credit risk with
      respect to its cash balances.





*Financial
      Instruments-* The
      Company’s financial instruments consist primarily of cash and cash equivalents
      and auction rate securities. These balances, as presented in the consolidated
      financial statements at September 30, 2006, approximate their fair
      value.





*Short-term
      Investments-* The
      Company’s short-term investments consist primarily of Auction
      Rate Securities, or ARS, which represent funds available for current
      operations. In accordance with SFAS, No. 115, *“Accounting
      for Certain Investments in Debt and Equity Securities,”* these
      short-term investments are classified as available-for-sale and are carried
      at
      cost or par value, which approximates the fair market value. These securities
      have stated maturities beyond three months but are priced and traded as
      short-term instruments.





*Income
      Taxes* - The
      Company accounts for income taxes using the asset and liability method, as
      set
      forth in SFAS No. 109, *Accounting
      for Income Taxes* ,
      wherein
      deferred tax assets and liabilities are recognized for the future tax
      consequences attributable to differences between financial statement carrying
      amounts of existing assets and liabilities and their respective tax bases.
      Deferred tax assets and liabilities are measured using enacted tax rates
      expected to apply to taxable income in the years in which the temporary
      differences are expected to be recovered or settled. Reserves against deferred
      tax assets are provided when management cannot conclude that realization of
      such
      assets is probable.






9


*Recently
      Issued Accounting Pronouncements* *-*





In
      July 2006, the FASB issued Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes,* (“FIN
      No. 48”). FIN No. 48 prescribes a recognition threshold and
      measurement process for recording in the financial statements uncertain tax
      positions taken or expected to be taken in a tax return. Additionally, FIN
      No. 48 provides guidance on the derecognition, classification, accounting
      in interim periods and disclosure requirements for uncertain tax positions.
      The
      provisions of FIN No. 48 will become effective for the Company beginning
      January 1, 2007. The Company is currently evaluating the impact that FIN
      No. 48 will have on its results of operations and financial
      position.













3.
            Debt





The
      Company had no debt outstanding as of September 30, 2006.





4.
            Balance
                Sheet Components





The
      primary component of accrued liabilities of $571,500 at September 30, 2006
      was
      $238,500 related to the future issuance of penalty shares as a result of
      provisions in our registration rights agreements entered into in connection
      with
      the Company’s equity private placements in September 2005 and December 2005
      caused by delays in having declared effective a registration statement covering
      those shares.







5.
            Intangible
                assets




Intangible
      assets consist of the following at September 30, 2006:





Software
            
            $
            2,822,337Accumulated
                amortization
            
            
            (1,279,604
            )$
            1,542,733




The
      Company is currently amortizing its acquired intangible asset over five years.
      Amortization expense related to the software technology asset amounted to
      $142,312 and $139,516 for the three months ended September 30, 2006 and 2005,
      respectively, and $422,368 and $414,009 for the nine months ended September
      30,
      2006 and 2005, respectively.





6.
            Related
                Party Transactions





None.





7.
            Equity
                transactions





On
      September 5, 2006, the Company completed an equity investment from Kingston
      Technology Corporation, (Kingston). On that date, Kingston purchase $150,000
      of
      Common Stock totaling 468,750 shares and received warrants to purchase 950,000
      shares of Common Stock exercisable at $ .35 per share. The warrants contain
      a
      call provision in favor of the Company at a price of $.01 per share if the
      stock
      price should exceed $2.00 per share and permit cashless exercise at any time.
      No
      placement fee was paid in conjunction with the investment by Kingston. The
      Company simultaneously entered into a License Agreement with Kingston, under
      which, Kingston is to pay $1,850,000 for global marketing and distribution
      rights to load currently available and future product releases of Migo's
      software on Kingston's flash memory products through December 2007. The license
      fee is payable $850,000 upon signing the agreement and the payment of the next
      $1,000,000 is contingent upon Migo meeting certain mutually agreed upon R&D
      milestones by April 1, 2007. The agreement is renewable by Kingston for one
      additional year at a license fee to be agreed upon. The initial payment of
      $850,000 was received in September, 2006 and has been recorded as deferred
      revenue at September 30, 2006, and will be amortized monthly, on an even basis,
      beginning October 2006 through December 2007.





10





On
      March
      17, 2006, the Company completed a follow-on private placement to the September
      2005 Placement and the December 2005 Placement under which the investors
      purchased a total of 12,421,875 shares of the Company’s Common Stock and
      warrants to purchase 6,210,938 shares of Common Stock. The securities were
      sold
      at $.32 per unit, each unit consisting of one share of Common Stock and a
      warrant to purchase one-half of one share of Common Stock, exercisable at $.40
      per share. The aggregate offering price was $3,975,000. The investor warrants
      issued in connection with the March 2006 Placement expire on September 26,
      2008,
      unless theretofore exercised, contain a call provision in favor of the Company
      at a price of $.01 per share if the stock price should exceed $2.00 per share
      and permit cashless exercise at any time. C. E. Unterberg Towbin, LLC was paid
      a
      placement fee of $397,500 in connection with this transaction. The private
      placement was effected through Common Stock and Warrant Purchase Agreements
      by
      and among the Company and the private placement investors.





On
      September 26, 2005, the Company completed a private placement with certain
      investors of the Company's Common Stock for the issuance of a total of
      19,910,950 shares of Common Stock and warrants to purchase a total of 10,900,400
      shares of the Company's Common Stock. The securities were sold at $0.32 per
      unit, each unit consisting of one share of Common Stock and a warrant to
      purchase one-half of one share of Common Stock. The aggregate offering price
      was
      $6,045,000 and the aggregate placement fee was $191,360 and warrants to purchase
      1,278,490 shares of Common Stock. Fifty percent (50%) of all Warrants issued
      were exercisable at $0.40 per share, and the remaining fifty percent (50%)
      were
      exercisable at $0.48 per share. After taking into account an anti-dilution
      adjustment as a result of the December 2005 placement described below, all
      of
      the Warrants are exercisable at $.40 per share. All Warrants expire after three
      years, unless theretofore exercised, contain a call provision in favor of the
      Company at a price of $.01 if the stock price should exceed $2.00 per share,
      and
      permit cashless exercise only if there is no registration statement in effect
      after one year. The proceeds of the private placement included $883,333 of
      principal and $23,765 of accrued interest converted into Common Stock from
      short-term bridge financing obtained by the Company earlier in 2005. The
      conversion resulted in the issuance of a total of 3,779,700 shares of Common
      Stock at $0.24 per share.





The
      private placement was effected through Common Stock and Warrant Purchase
      Agreements, dated as of September 26, 2005, by and among the Company and the
      private placement investors who are named therein (the "Purchase Agreement").
      As
      a condition to the transaction, all of the Company's Series A Senior Preferred
      Convertible Stock (the "Senior A Stock") were converted into 20,632,952 shares
      of Common Stock at a conversion ratio of 5.3685 shares of Common Stock for
      each
      share of Senior A Stock, and a Warrant Exchange Agreement, dated as of September
      26, 2005, was entered into with Middlebury Capital LLC under which the holders
      of warrants to purchase 264,725 shares at $3.06 per share exchanged their
      warrants for new warrants for 700,000 shares at $.40 per share. In addition,
      the
      Company executed a Registration Rights Agreement, dated as of September 26,
      2005, with the private placement investors, wherein the Company agreed to
      register under the Securities Act of 1933, as amended (the "Securities Act")
      the
      shares of Common Stock acquired in the private placement and the shares issuable
      upon exercise of the Warrants issued in the private placement. In February
      2006,
      the Company paid a fee related to the Company’s September 2005 private equity
      placement, totaling $175,000 and issued to each of Hugh Deane and Richard Wells
      ("Deane and Wells") a warrant to purchase 250,000 of the Company’s Common
      Stock at $.32 per share. These warrants contain cashless exercise provisions
      and
      expire on March 10, 2010. For the 500,000 warrants issued to Deane and Wells,
      the Company recorded an initial warrant liability of $246,971, which was
      adjusted at March 31, 2006 to $232,955 as a result of which, the Company
      recorded $14,016 of other income.




On
      December 23, 2005, the Company completed a follow-on private placement (the
      “December 2005 Placement”) with certain investors of its Common Stock for the
      issuance of a total of 7,968,750 shares of the Company's Common Stock and
      warrants to purchase 3,984,375 shares of Common Stock. The securities were
      sold
      at $.32 per unit, each unit consisting of one share of Common Stock and warrants
      to purchase one-half of one share of Common Stock. The aggregate offering price
      was $2,550,000, and the placement fee was paid in the form of Placement Agent
      Warrants to purchase 796,875 shares of Common Stock. The investor warrants
      and
      placement agent warrants issued in connection with the December 2005 Placement
      are exercisable at $.40 per share, expire on September 26, 2008, unless
      theretofore exercised, contain a call provision in favor of the Company at
      a
      price of $.01 per share if the stock price should exceed $2.00 per share and
      permit cashless exercise at any time. The private placement was effected through
      Common Stock and Warrant Purchase Agreements, dated as December 23, 2005, with
      the private placement investors.





11


The
      holders of the common shares acquired in the September 2005, December 2005,
      and
      March 2006 private placements have registration rights that require the Company
      to file and have declared effective a registration statement with the SEC to
      register the resale of the Common Stock and the Common Stock issuable upon
      exercise of warrants. In the event the Company is unable to cause the
      registration to be effective within 90 to 120 days from the date of issuance
      for
      the common shares acquired in the private placements, the Company would be
      penalized. The penalty accrues at a rate of 3% per month of the original amount
      invested, up to a maximum of 30%, at which point the holders of the Common
      Shares acquired in the private placements have the right to put the stock and
      warrant back to the Company for full redemption. Pursuant to the terms of the
      registration rights agreements, during the first 90 days in which the penalty
      is
      earned, the penalty is payable either in cash or in shares of Common Stock,
      at
      the Company's election. After that 90-day period expires, the penalty must
      be
      paid in cash. Under EITF-00-19, the ability to register stock, or keep the
      registration effective, is deemed to be outside of the Company's control.
      Accordingly, the Company treated the issuance of the Common Stock as temporary
      equity and the warrant value as a liability as the registration statement was
      not declared effective by the SEC until September 1, 2006. The Company
      calculated the total fair market value of the warrants based on the
      Black-Scholes model, which was recorded as a discount to the Common Stock and
      an
      accrued warrant liability in the consolidated balance sheet, and the warrant
      liability is marked to market at the end of each quarter.





For
      the
      12,178,892 warrants issued in connection with the September 2005 transaction,
      the Company recorded temporary equity of $4,136,149 and an initial warrant
      liability of $2,773,553 which was adjusted at December 31, 2005 to $2,652,319,
      the market value at that date. The Company marked this warrant liability to
      market as of March 31, 2006 and as a result of which, the Company recorded
      $143,952 of other income, as the value of the warrants had decreased to
      $2,508,367 at that date.





For
      the
      4,781,250 warrants issued in connection with the December 2005 transaction,
      the
      Company recorded temporary equity of $1,771,887 and an initial warrant liability
      of $1,260,283, which was adjusted at December 31, 2005 to $1,230,353, the market
      value at that date. The Company marked this warrant liability to its $1,221,783
      market value as of March 31, 2006 and as as result of which, the Company
      recorded $8,570 of other income. For the 6,210,938 warrants issued in connection
      with the March 2006 transaction, the Company recorded temporary equity of
      $2,807,178 and an initial warrant liability of $1,167,822. Adjustment of
      this warrant liability to market at March 31, 2006 was not required, as the
      portion of the proceeds in the March 2006 transaction allocated to the warrants
      exceeded the potential penalty the Company could be required to
      pay.




The
      Company accounts for all its outstanding warrants under EITF 00-19, *Accounting
      for Derivative Financial Instruments Indexed to, and Potentially Settled in,
      a
      Company’s Own Stock* (“EITF
      00-19”). Under EITF 00-19, the Company recorded the value of the Common Stock
      issued in connection with the private placement transactions as temporary equity
      and the initial fair value of the related warrants as a liability, with the
      corresponding offset amount recorded as a discount to the Common Stock.
      Subsequently, the warrant liability is marked to fair value with the
      corresponding offset amount recorded as other income (expense) on the
      Consolidated Statement of Operations at each reporting period. The reason for
      this treatment is because settlement of the warrant contracts was deemed out
      of
      the Company’s control as defined by EITF 00-19. Any contract, where settlement
      is not in the Company’s control, is required to be reported as a liability.





Accordingly,
      at the time of issuance, the Company treated the March 2006 Placement Common
      Stock, $3,975,000, as temporary equity and the fair value of the warrants,
      $1,167,822, as a liability. The corresponding offset to the liability was
      recorded as a discount to Temporary Equity - Common Stock.





On
      April
      7, 2006, the purchasers of equity purchased in association with the three
      private placement transactions, agreed in writing, to allow the Company to
      settle the registration penalties, if any, in either shares of common stock
      or
      cash, at the Company’s sole discretion. Additionally, the purchasers agreed to
      waive any and all full redemption rights associated with the equity. Upon
      modification to the purchase agreements associated with the private placements,
      settlement of the warrant contract is deemed to be under the Company’s control
      as defined by EITF 00-19. As such, the Company reclassified the total warrant
      liability, $5,130,926, and total common stock temporary equity, $8,715,214
      to
      permanent equity on the Consolidated Balance Sheet as of June 30, 2006. There
      was no impact to the Company’s Consolidated Statement of Operations as a result
      of this reclassification.





12


The
      investment by Kingston in September 2006 resulted in an anti-dilution adjustment
      in the exercise price of the warrants issued to the investors in the September
      2005, December 2005 and March 2006 equity placements. As a result, the warrant
      exercise price has been reduced to $.35 from $.40 for all investors in those
      three equity placements.





The
      decrease in the fair value of the total private placement transactions warrants
      from December 31, 2005 to March 31, 2006 was $166,538 and is recorded as other
      income on the Company’s Consolidated Statement of Operations for the nine months
      ended September 30, 2006. As the warrant liability was reclassified at the
      beginning of April 2006, there was no other income (expense) during the three
      months ended September 30, 2006 as a result of marking the warrants to fair
      value.




8.
            Commitments
                and Contingencies





Litigation





On
      December 20, 2005, two former employees made a demand for arbitration with
      JAMS, San Francisco alleging that each claimant is entitled to severance pay
      following their resignations in February 2005. In October 2006,
      the arbitrator ruled in favor of the plaintiffs and we have accrued a $424,000
      liability as a result of this matter for the quarter ended September 30, 2006.





In
      the
      normal course of business, the Company is subject to various claims and
      litigation matters none of which in management's opinion will have a material
      effect on financial results.





The
      Company is not aware of any additional pending litigation as of November 10,
      2006.







13


Item
      2.
      Management's Discussion and Analysis or Plan of Operations.





The
      following discussion should be read in conjunction with the selected
      consolidated financial information and the consolidated financial statements
      and
      notes appearing elsewhere in this Form 10-QSB. The following discussion
      contains forward-looking statements, such as statements of expected revenues
      and
      expenses that involve many risks and uncertainties. We assume no obligation
      to
      update any such forward-looking statements. Our actual results could differ
      materially from those anticipated in these forward-looking statements. Factors
      that could cause or contribute to such differences include, but are not limited
      to, those detailed from time to time in our filings with the Securities and
      Exchange Commission and those discussed in this Form 10-QSB, particularly
      in this Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.





In
      January 2006, we changed our fiscal year-end from March 31 to December 31.
      As a
      result, references in this Form 10-QSB to the third quarter of 2006 are
      references to the three-month period ended September 30, 2006 and references
      to
      the third quarter of 2005 are references to the three-month period ended
      September 30, 2005. Unless expressly stated or the context otherwise requires,
      the terms “we”, “our”, “us”, “the Company”, and “Migo” refer to Migo Software,
      Inc., formerly known as Powerhouse Technologies Group, Inc. and its subsidiaries
      as a whole.  Our name change became official on August 10,
      2006.








**General**





We
      are in
      the business of developing, acquiring and marketing software designed to improve
      the way mobile information is personalized, secured, carried and accessed.




*Our
      Technology: The Migo®*





We
      have
      developed Migo® (“Migo”), a software computing system that performs advanced
      synchronization, personalization and data management functions when installed
      on
      portable memory-storage devices that use USB ports on Windows-based computers.
      We believe that Migo has the potential to change the way people work with
      personal computers, whether in the office, at home, or from other remote
      locations while traveling.





Migo
      seeks to significantly improve the mobile computing experience. Migo is designed
      to make it very easy for users to take their unique, personal data with them,
      without the need to bring along their laptop or link back to their office
      machine. Migo allows users to temporarily load their entire personalized desktop
      environment onto any other Microsoft® Windows®-based “guest” computer, to enable
      easy access to their personal data including email, Internet favorites,
      presentations, photos, music and other files and folders. Migo is designed
      so
      that once it has been disconnected from a “guest” computer, no trace of the
      user’s personal computer environment or data will be left behind on the “guest”
machine. Migo includes a security application based on AES 128-bit encryption
      that protects personal data while it is stored on the Migo-enabled portable
      storage device.





Migo
      software currently supports the Microsoft Windows operating system from 98SE
      to
      XP. Email applications supported by Migo include Microsoft Outlook®, Exchange®
and Outlook Express®, and Mozilla® Thunderbird®. Internet browsers supported
      include Microsoft Internet Explorer® and Mozilla Firefox®. We are developing
      Migo software to function with other popular email applications such as IBM®
Lotus Notes®, and other frequently used tools and applications. Migo is in the
      process of researching and developing a range of Migo software for use on an
      expanded array of hardware devices, including larger capacity SIM Card storage
      devices, mp3 music players, portable disc drives, cellular phones, digital
      cameras, PDAs and other mobile data communication platforms. We believe these
      products will have the potential for customized use across a broad range of
      industries, including healthcare, insurance, banking and financial services
      and
      education. There can be no assurance we will be able to successfully develop
      and
      market these products.








AGREEMENT
      WITH M SYSTEMS FLASH DISK PIONEERS LTD.





On
      March
      30, 2005, we entered into a three-year Development Agreement with M Systems
      Flash Disk Pioneers Ltd. ("M-Systems"). Pursuant to the Development Agreement,
      we granted to M-Systems and its affiliates
      a worldwide, transferable license to use and distribute our Migo products,
      and
      to use related trademarks, as an integrated part of M-Systems' USB flash drive
      product lines. Migo products are offered to M-Systems customers with either
      (i)
      limited functionality or (ii) full functionality for a period of 45 days, after
      which the end-user may purchase a license directly from us to continue full
      functionality or otherwise retain limited functionality.





14


We
      are
      obligated to develop software applications to bundle our Migo products with
      M-Systems USB Drives, and we agreed to provide first level support for Migo
      products to M-Systems and M-Systems' customers and end-users, if
      desired.





KINGSTON
      TECHNOLOGY





On
      September 5, 2006, we entered into a License Agreement and a Common Stock and
      Warrant Purchase Agreement with Kingston Technology Corporation ("Kingston").
      Under the License Agreement, Kingston is to pay us $1,850,000 for global
      marketing and distribution rights to load currently available and future product
      releases of Migo's software on Kingston's flash memory products through December
      2007. The license fee is payable $850,000 upon signing the agreement and the
      receipt of the next $1,000,000 is contingent upon Migo meeting certain mutually
      agreed upon R&D milestones by April 1, 2007. The agreement is renewable by
      Kingston for one additional year at a license fee to be agreed upon. The initial
      payment of $850,000 was received in September, 2006 and has been recorded as
      deferred revenue at September 30, 2006.





Under
      the
      Common Stock and Warrant Purchase Agreement, Kingston has paid $150,000 for
      the
      purchase of 468,750 shares of our common stock and warrants to purchase up
      to
      950,000 shares of our common stock. The warrants are exercisable at $0.35 per
      share, expire in September 2011, unless theretofore exercised and permit
      cashless exercise.








POTENTIAL
      ACQUISITION OF STOMPSOFT, INC.





On
      October 19, 2006, we signed a Letter of Intent to acquire substantially all
      of
      the assets of StompSoft, Inc., including its entire line of software titles
      and
      its retail web store located at www.stompsoft.com .
      StompSoft is a privately owned manufacturer of backup, system utility and online
      security/privacy software located in Irvine, California. We expect to pay
      consideration of up to $6.35 million for the acquisition, including $500,000
      in
      cash, $2.5 million in the form of a convertible subordinated note, up to
      $350,000 in debt assumption to also be converted into a convertible subordinated
      note, and up to a maximum of $3.0 million in royalties for the sale of StompSoft
      products during the 18-month period following closing.


Although
      the transaction is expected to close as early as fourth quarter 2006, the
      transaction remains subject to negotiation of a mutually agreeable definitive
      acquisition agreement, the satisfactory completion


of
      an
      audit of StompSoft's financial statements for the years ended December 31,
      2004
      and 2005, the satisfactory completion of our due diligence review of the
      StompSoft business, approval by StompSoft's


stockholders,
      consents of customers, partners and other third parties contracting with
      StompSoft and other customary closing conditions.





**Financial
      Results, Liquidity and Management's Discussion and Analysis**





*Three
      months ended September 30, 2006 and 2005*





We
      reported revenues of $68,609 for the three months ended September 30, 2006
      compared to revenues of $85,835 for the corresponding period ended September
      30,
      2005. During the three months ended September 30, 2006, we sold only software
      packaged through M-Systems or via online download, while during the quarter
      ended September 30, 2005 we primarily sold hardware items, such as flash disks,
      pre-loaded with Migo software. We are working to expand our OEM relationships
      to
      promote sales.





Our
      costs
      associated with the sale of products for the three month period ended September
      30, 2006 were $151,117 and consisted almost entirely of the amortization of
      software technology of $142,312, as well as expenses related to fees for
      customer downloads of our software and packaging and shipping costs. For the
      three month period ended September 30, 2005, we incurred costs associated with
      the sale of our products of $162,405, most of which also consisted of
      amortization of software technology.





15


Research
      and development expenses totaled $505,703 for the three months ended September
      30, 2006, up from $197,134 in the corresponding period in 2005, due primarily
      to
      the increase of staff dedicated to the development of new products, and the
      completion of products. Sales and marketing expenses were $278,026 for the
      three
      months ended September 30, 2006 compared to $168,972 in the period ended
      September 30, 2005. General and administrative costs increased to $1,271,824
      for
      the period ended September 30, 2006 from $801,107 in the year earlier quarter
      due primarily to the expensing of stock options of $459,613 for the quarter
      ended September 30, 2006.





Non-operating
      expense totaled $955,538 for the three months ended September 30, 2006, compared
      with non-operating expense of $558,787 for the three months ended September
      30,
      2005. Interest earned was $62,487 for the three months ended September 30,
      2006
      compared to interest expense of $ 25,725 in the period ended September 30,
      2005
      as a result of the increased investment income earned from the monies raised
      from the September 2005, December 2005, and March 2006 equity placements. During
      the three months ended September 30, 2006, we recorded an expense of $
      614,025 due to provisions in our registration rights agreements which resulted
      in the issuance of additional common shares to investors in our September 2005,
      December 2005 and March 2006 equity placements caused by delays in having a
      registration statement covering those shares declared effective by the SEC.





*Nine
      months ended September 30, 2006 and 2005*





We
      reported revenues of $136,225 for the nine months ended September 30, 2006
      and
      revenues of $216,522 for the corresponding period ended September 30, 2005.
      During the nine months ended September 30, 2006, we sold only software packaged
      through M-Systems or via online download, while during the nine months ended
      September 30, 2005 we primarily sold hardware items, such as flash disks,
      pre-loaded with Migo software.





Our
      costs
      associated with the sale of products for the nine month period ended September
      30, 2006 were $455,918 and consisted primarily of the amortization of software
      technology of $422,368, as well as expenses related to fees for customer
      downloads of our software, and packaging and shipping costs. For the period
      ended September 30, 2005, we incurred costs associated with the sale of our
      products of $902,386, primarily related to the amortization of software
      technology.





Research
      and development expenses totaled $1,291,244 for the nine months ended September
      30, 2006, up from $560,635 in the corresponding period in 2005, due primarily
      to
      the increase of staff dedicated to the development of new products. Sales and
      marketing expenses increased slightly to $819,447 for the nine months ended
      September 30, 2006 compared with $794,182 for the period ended September 30,
      2005. For the nine months ended September 30, 2006, general and administrative
      expenses increased to $3,829,692 compared with $2,938,699 for the nine
      months ended September 30, 2005 due primarily to the requirement to expense
      stock options.





Non-operating
      expenses totaled $842,624 for the nine months ended September 30, 2006 compared
      with $280,020 for the nine months ended September 30, 2005. Interest (net)
      increased for the nine months ended September 30, 2006 to $181,667 due to
      the increased investment income earned from the monies raised from the September
      2005, December 2005, and March 2006 equity placements. We recorded an expense
      of
      $1,374,800 during the nine months ended September 30, 2006 due to provisions
      in
      our registration rights agreements which resulted in the issuance of
      additional shares to investors caused by delays in having a registration
      statement covering these shares declared effective.





*Liquidity
      and Capital Resources*





At
      September 30, 2006, we had working capital of $3,287,661 compared to a working
      capital of $3,055,929 at December 31, 2005. The increase in working capital
      is
      mainly due to raising approximately $3.5 million net of fees in the March 2006
      private placement and the reduction in accounts payable that resulted from
      a
      negotiated settlement of an outstanding invoice that was reduced from
      approximately $983,000 to $300,000. For the nine months ended September 30,
      2006, net cash used in operating activities was $3,860,110. We believe we will
      require approximately $5.0 million to fund our operations for the next 12 months
      based on our current rate of spending. We expect this to be funded from revenues
      generated by the business and our current cash resources of approximately $5.2
      million as of September 30, 2006. Thereafter, we will depend on cash from
      operations, and additional financing, if available.





16


*Recent
      and Expected Losses*




From
      inception, we have never been profitable and have sustained substantial net
      losses from operations. There can be no assurance that we will ever generate
      positive revenues from our operating activities, or that we will achieve and
      sustain a profit during any future period, particularly if operations remain
      at
      current levels. Failure to achieve significant revenues or profitability would
      materially and adversely affect our business, financial condition, and results
      of operations. For the nine months ended September 30, 2006 and 2005, we
      incurred net pre-tax losses of $7,102,100 and $5,259,400 respectively.





*Satisfaction
      of Current and Future Capital Requirements*





No
      assurance can be given that we will be able to obtain the additional financing
      we require to continue normal operations. We cannot provide assurances that
      we
      will be able to develop our business to the point of generating net operating
      profits and positive cash flows from operations. If funds from these sources
      are
      not sufficient to offset operating expenses, we would seek to institute
      cost-saving measures that would not only reduce overhead, but also curtail
      operations. We cannot assure that such measures, if implemented, would be
      sufficient to offset all of our operating expenses. If any capital subsequently
      raised from the sale of securities is not sufficient to fund the balance of
      our
      operating expenses after implementing certain cost-cutting measures, we could
      be
      forced to discontinue certain operations or may be unable to continue as a
      going
      concern.





Any
      further issuances of any additional equity securities to raise capital may
      be on
      terms that are detrimental to existing stockholders. In order to meet our
      capital requirements, we may continue to offer equity securities for sale,
      and
      existing stockholders would experience additional dilution. Any new equity
      securities issued may have rights, preferences or privileges senior to those
      of
      holders of existing equity securities.





*Off-Balance
      Sheet Arrangements*





At
      September 30, 2006, we did not have any relationship with unconsolidated
      entities or financial partnerships, which other companies have been established
      for the purpose of facilitating off-balance sheet arrangements or other
      contractually narrow or limited purposes as defined in Item 303(a)(4)(ii) of
      SEC
      Regulation S-K. Therefore, we are not materially exposed to any financing,
      liquidity, market or credit risk that could arise if we had engaged in such
      relationships.





*Trends*





As
      of
      September 30, 2006, to the best of our knowledge, no known trends or demands,
      commitments, events or uncertainties, except as described in this Management's
      Discussion and Analysis and in “Notes to Financial Statements Note 8 -
      Commitments and Contingencies” existed, which are likely to have a material
      effect on our liquidity.





**Item
      3. Controls and Procedures**





Evaluation
      of Disclosure Controls and Procedures





As
      of the
      end of the period covered by this report, under the supervision and with the
      participation of our management, including our chief executive officer ("CEO")
      and chief financial officer ("CFO"), we evaluated the design and operation
      of
      our disclosure controls and procedures (as defined in Rules 13a-15(e) and
      15d-15(e) of the Securities Exchange Act of 1934, as amended, or the "Exchange
      Act").  Based on this evaluation, our management, including our CEO
      and CFO, has concluded that our disclosure controls and procedures are
      designed, and are effective to give reasonable assurance that the
      information we are required to disclose is recorded, processed, summarized
      and
      reported within the time periods specified in the SEC’s rules and
      forms. Based upon this evaluation, the CEO and CFO concluded that our
      disclosure controls and procedures are effective in providing reasonable
      assurance that information required to be disclosed in our reports filed with
      or
      submitted to the SEC under the Exchange Act is accumulated and communicated
      to
      management, including the CEO and CFO, as appropriate to allow timely decisions
      regarding required disclosure.






17




Changes
      in Internal Control Over Financial Reporting




There
      were no changes in our internal control over financial reporting that occurred
      during our quarter ended September 30, 2006, that have materially affected,
      or
      are reasonably likely to materially affect, our internal control over financial
      reporting.






PART
      II.
      OTHER INFORMATION





Item
      1.
      Legal Proceedings





On
      December 20, 2005, two former employees made a demand for arbitration with
      JAMS, San Francisco alleging that each claimant is entitled to severance pay
      following their resignations in February 2005. In October 2006,
      the arbitrator ruled in favor of the plaintiffs and we have accrued a $424,000
      liability as a result of this matter for the quarter ended September 30, 2006.





We
      are
      not aware of any additional pending litigation as of November 10,
      2006.





Item
      2.
      Unregistered Sales of Equity Securities and Use of Proceeds





On
      September 5, 2006, the Company entered into a Common Stock and Warrant Purchase
      Agreement with Kingston Technology Corporation ("Kingston"). Under the Common
      Stock and Warrant Purchase Agreement, Kingston paid $150,000 for the purchase of
      468,750 shares of the Company's common stock, and warrants to purchase up to
      950,000 shares of the Company's common stock. The warrants are exercisable
      at
      $0.35 per share, expire in September 2011, unless theretofore exercised and
      permit cashless exercise. The proceeds of the sale of securities will be used
      for working capital and general corporate purposes. The Company relied on
      Section 4(2) of the Securities Act, as the basis for an exemption from
      registering the sale of these shares of common stock and warrants under the
      Securities Act.





Item
      3.
      Defaults Upon Senior Securities





None.





Item
      4.
      Submission of Matters to a Vote of Security Holders




None





Item
      5.
      Other Information





None.




Item
      6.
      Exhibits




EXHIBIT
      INDEX:





Exhibit


Number
              Description




3.1
              Amended
                  and Restated Certificate of Incorporation, hereby incorporated
                  by
                  reference to Exhibit 3.1 of the Company’s Quarterly Report of Form 10-QSB
                  for the quarter ended June 30, 2006, filed with the Commission
                  on August
                  10, 2006.


3.2
              Bylaws,
                  hereby incorporated by reference to Exhibit 3.2 of the Annual Report
                  on
                  Form 10-KSB filed with the Commission on July 14,
                  2004.




3.3
              Amended
                  and Restated Certificate of Incorporation, hereby incorporated
                  by
                  reference to Exhibit 3.1 of the Company’s Quarterly Report of Form 10-QSB
                  for the quarter ended June 30, 2006, filed with the Commission
                  on August
                  10, 2006.






18




10.1
            License
                Agreement dated September 5, 2006 between theCompany
                and Kingston Technology Corporation, herebyincorporated
                by reference to the Company's RegistrationStatement
                on Form SB-2 filed with the Commissionon
                October 27, 2006.





10.2
            Common
                Stock and Warrant Purchase Agreement dated September5,
                2006 between the Company and Kingston TechnologyCorporation,
                hereby incorporated by reference to theCompany's
                Registration Statement on Form SB-2 filed withthe
                Commission on October 27, 2006.




31.1
              Certification
                  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002.




31.2
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.




32.1
              Certification
                  of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002, 18 U.S.C. 1350.




32.2
              Certification
                  of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002, 18 U.S.C. 1350.




**SIGNATURES**





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




**MIGO
                SOFTWARE, INC.**Date:
                November 14, 2006
            By:
            /s/
                Kent HeymanKent
                HeymanChief
                Executive Officer (Principal Executive Officer)





Date:
                November 14, 2006
            By:
            /s/
                Richard LiebmanRichard
                LiebmanChief
                Financial Officer
              (Principal
                Financial and Accounting Officer)







19





EXHIBIT
        INDEX:
 
 Exhibit
 Number
                Description
  3.1
                Amended
                    and Restated Certificate of Incorporation, hereby incorporated
                    by
                    reference to Exhibit 3.1 of the Company’s Quarterly Report of Form 10-QSB
                    for the quarter ended June 30, 2006, filed with the Commission
                    on August
                    10, 2006.
 3.2
                Bylaws,
                    hereby incorporated by reference to Exhibit 3.2 of the Annual
                    Report on
                    Form 10-KSB filed with the Commission on July 14,
                    2004.
  3.3
                Amended
                    and Restated Certificate of Incorporation, hereby incorporated
                    by
                    reference to Exhibit 3.1 of the Company’s Quarterly Report of Form 10-QSB
                    for the quarter ended June 30, 2006, filed with the Commission
                    on August
                    10, 2006.
  10.1
                License
                    Agreement dated September 5, 2006 between theCompany
                    and Kingston Technology Corporation, herebyincorporated
                    by reference to the Company's RegistrationStatement
                    on Form SB-2 filed with the Commissionon
                    October 27, 2006.
 
 10.2
                Common
                    Stock and Warrant Purchase Agreement dated September5,
                    2006 between the Company and Kingston TechnologyCorporation,
                    hereby incorporated by reference to theCompany's
                    Registration Statement on Form SB-2 filed withthe
                    Commission on October 27, 2006.
  31.1
                  Certification
                      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                      Act of 2002.
  31.2
                Certification
                    of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                    Act of 2002.
  32.1
                  Certification
                      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                      Act of 2002, 18 U.S.C. 1350.
  32.2
                  Certification
                      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                      Act of 2002, 18 U.S.C. 1350.






20