U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

--------------

FORM 10-QSB

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

For the Quarterly Period Ended June 30, 2000

[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the Transition Period From To
----- -----

Commission File Number: 33-93994

MANGOSOFT, INC.
(Exact name of small business issuer as specified in its charter)

Nevada 87-0543565
(State or other jurisdiction of (IRS Employer ID. No.)
incorporation or organization)

1500 West Park Drive, Suite 190
Westborough, MA 01581
(Address of principal executive offices)

Registrant's telephone number, including area code: (508) 871-7397

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

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

Common Stock 26,869,142 Shares
$.001 Par Value (Outstanding on August 8, 2000)

MANGOSOFT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)

INDEX TO FORM 10-QSB

PART I. FINANCIAL INFORMATION

ITEM 1--Financial Statements:

Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2000 and 1999................. 3
Condensed Consolidated Statements of Operations for the Six Months Ended June 30, 2000 and 1999
and Cumulative For The Period From June 15, 1995 (Inception) to June 30, 2000............................... 4
Condensed Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999................................... 5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2000 and 1999
and Cumulative For The Period From June 15, 1995 (Inception) to June 30, 2000............................. 6
Notes to Condensed Consolidated Financial Statements.............................................................. 7

ITEM 2--Management's Discussion and Analysis of Financial Condition and Results of Operations............................. 11

PART II. OTHER INFORMATION

ITEM 1--Legal Proceedings................................................................................................. 17

ITEM 2--Changes in Securities ............................................................................................ 17

ITEM 3--Defaults Upon Senior Securities................................................................................... 17

ITEM 4--Submission of Matters to a Vote of Security Holders............................................................... 18

ITEM 5--Other Information................................................................................................. 18

ITEM 6--Exhibits and Reports on Form 8-K.................................................................................. 18

Signatures................................................................................................................ 19

Exhibit Index............................................................................................................. 20

PART I. FINANCIAL INFORMATION

MANGOSOFT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

THREE MONTHS ENDED JUNE 30,
---------------------------
2000 1999
---------- --------

Revenues............................................................. $ 2,234 $ 7,991
Cost of revenues..................................................... -- 88
---------- ------------
Gross margin............................................... 2,234 7,903
Costs and expenses:
Research and development (excluding a stock-based
compensation benefit of $6,161,463, net in 2000)................ 1,347,442 920,479
Selling and marketing (excluding a stock-based compensation
benefit of $578,789, net in 2000)................................ 431,927 41,621
General and administrative (excluding a stock-based
compensation benefit of $2,921,508, net in 2000).................. 1,181,282 708,451
Consulting fees to related parties................................. 19,000 12,021
Stock-based compensation benefit, net.............................. (9,661,760) --
---------- ------------
Total operating costs and expenses......................... (6,682,109) 1,682,572
---------- ------------
Income (loss) from operations........................................ 6,684,343 (1,674,669)

Interest income...................................................... 385,710 522

Interest expense - related parties -- (97,718)
Other interest expense (171) (59,133)
---------- ------------
Total interest expense..................................... (171) (156,851)

Other income (expense), net.......................................... (2,500) (1,496)
---------- ------------

Net income (loss).................................................... 7,067,382 (1,832,494)
Accretion of preferred stock......................................... -- (706,846)
---------- ------------
Net income (loss) applicable to common stockholders.................. $7,067,382 $(2,539,340)
========== ============
Net income (loss) loss per common share:
Basic $ 0.27 $ (18.54)
==== =======
Diluted $ 0.24 $ (18.54)
==== =======
Shares used in computing net income (loss) per share:
Basic 26,142,501 136,949
========== =======
Diluted 29,479,898 136,949
========== =======

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

MANGOSOFT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

CUMULATIVE FROM
SIX MONTHS ENDED JUNE 30, JUNE 15, 1995
--------------------------- (INCEPTION) TO
2000 1999 JUNE 30, 2000
------ ------ ----------------

Revenues................................................................. $ 3,569 $ 7,991 $ 286,182
Cost of revenues......................................................... -- 363 91,892
-------------- ------------- -------------
Gross margin................................................... 3,569 7,628 194,290
Costs and expenses:
Research and development (excluding stock-based compen-
sation expense of $4,957,803 in 2000 and $15,043,725
cumulative from June 15, 1995 (Inception) to June 30, 2000).......... 2,489,223 2,097,751 25,474,694
Selling and marketing (excluding stock-based compensation
expense of $902,070 in 2000 and $2,205,403 cumulative
from June 15, 1995 (Inception) to June 30, 2000)..................... 711,710 59,625 10,224,414
General and administrative (excluding stock-based compen-
sation expense of $6,644,376 in 2000 and $15,989,816
cumulative from June 15, 1995 (Inception) to June 30, 2000)........... 1,850,347 1,319,479 12,415,308
Consulting fees to related parties..................................... 19,000 19,603 731,683
Stock-based compensation expense....................................... 12,504,249 -- 33,238,944
-------------- ------------- -------------
Total operating costs and expenses............................. 17,574,529 3,496,458 82,085,043
-------------- ------------- -------------
Loss from operations..................................................... (17,570,960) (3,488,830) (81,890,753)

Interest income.......................................................... 398,935 3,271 977,553

Interest expense - related parties (including $3,027,375 related
to a beneficial conversion feature in cumulative from June 15,
1995 (Inception) to June 30, 2000).................................... (9,783) (166,109) (3,295,377)
Other interest expense (including $1,832,625 related to a beneficial
conversion feature in cumulative from June 15, 1995
(Inception) to June 30, 2000)......................................... (171) (76,833) (2,012,467)
-------------- ------------- -------------
Total interest expense......................................... (9,954) (242,942) (5,307,844)

Other income (expense), net.............................................. 6,278 (715) (66,469)
-------------- ------------- -------------
Net loss................................................................. (17,175,701) (3,729,216) (86,287,513)
Accretion of preferred stock............................................. (9,627,147) (1,413,692) (16,231,171)
-------------- ------------- -------------
Net loss applicable to common stockholders............................... $ (26,802,848) $ (5,142,908) $(102,518,684)
============== ============= =============

Net loss per common share - basic and diluted............................ $ (1.16) $ (37.55)
========== =======
Shares used in computing basic and diluted net loss per
common share......................................................... 23,153,033 136,949
========== =======

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

MANGOSOFT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
ASSETS

CURRENT ASSETS:

Cash and cash equivalents........................................... $ 25,653,198 $ 29,959
Accounts receivable................................................. 1,185 --
Prepaid insurance................................................... 42,342 120,968
Other prepaid expenses and current assets........................... 53,636 7,187
------------- ------------
Total current assets........................................... 25,750,361 158,114

Property and Equipment, at cost.......................................... 2,970,411 2,078 631
Accumulated depreciation................................................. (2,160,977) (1,930,742)
------------- ------------
Property and equipment, net...................................... 809,434 147,889

DEPOSITS AND OTHER ASSETS................................................ 5,943 5,943
------------- ------------
TOTAL............................................................... $ 26,565,738 $ 311,946
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES:
Demand notes payable to related parties............................. $ -- $ 232,500
Other short-term debt............................................... -- 92,904
Accounts payable, including past due amounts........................ 1,629,923 1,558,988
Accrued payroll.................................................. 257,833 242,191
Other accrued expenses........................................... 55,000 364,734
Accrued expenses to related parties.............................. 19,000 712,683
Accrued merger costs............................................. -- 77,893
------------- ------------
Total current liabilities...................................... 1,961,756 3,281,893

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock........................................................ 26,869 19,924
Additional paid-in capital.......................................... 118,489,801 72,185,728
Deferred compensation............................................... (4,541,731) (2,980,343)
Deficit accumulated during the development stage.................... (89,370,957) (72,195,256)
------------- ------------
Total stockholders' equity (deficiency)....................... 24,603,982 (2,969,947)
------------- ------------
TOTAL.................................................................... $ 26,565,738 $ 311,946
============= ============

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

MANGOSOFT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

CUMULATIVE FROM
SIX MONTHS ENDED JUNE 30, JUNE 15, 1995
--------------------------- (INCEPTION) TO
2000 1999 JUNE 30, 2000
------ ------ ----------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................................................. $(17,175,701) $ (3,729,216) $(86,287,513)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ......................................... 230,235 49,566 2,281,801
Stock-based compensation .............................................. 12,504,249 -- 33,238,944
Beneficial conversion feature of 12% convertible notes ................ -- -- 4,860,000
Accrued interest converted into paid-in capital in connection
with the conversion of the 12% convertible notes ................. -- -- 377,409
Loss on disposal of equipment ......................................... -- -- 71,942
(Decrease) increase in cash from:
Accounts receivable .................................................. (1,185) 9,458 (1,185)
Prepaid insurance and other current assets ........................... 32,177 (10,425) 40,110
Deposits and other assets............................................. -- -- (5,943)
Accounts payable ..................................................... 170,951 15,044 1,729,939
Accrued payroll ...................................................... 15,642 160,133 257,833
Other accrued expenses ............................................... (309,750) 443,904 55,000
Accrued expenses to related parties .................................. (693,683) 19,603 19,000
Deferred revenue ..................................................... -- (19,160) --
------------ ------------ ------------
Net cash used in operating activities ...................... (5,227,065) (3,061,093) (43,362,663)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment ................................ (891,780) (8,185) (3,175,926)
Payment of merger costs ................................................ (77,893) -- (276,173)
Proceeds from sale of fixed assets ..................................... -- -- 12,749
------------ ------------ ------------
Net cash used in investing activities ...................... (969,673) (8,185) (3,439,350)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common and preferred stock .............. 32,145,381 -- 66,691,299
Proceeds from issuance of notes to related parties .................... -- 1,752,500 4,232,500
Repayments of notes to related parties ................................ (232,500) -- (232,500)
Proceeds from other debt financings ................................... -- 2,000,000 2,750,000
Repayments of other debt financings ................................... (92,904) (750,000) (886,088)
Purchase of common stock from related party ........................... -- -- (100,000)
------------ ------------ ------------
Net cash provided by financing activities .................. 31,819,977 3,002,500 72,455,211
------------ ------------ ------------

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS .......................... 25,623,239 (66,778) 25,653,198

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ............................ 29,959 232,637 --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................... $ 25,653,198 $ 165,859 $ 25,653,198
============ ============ ============

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

MANGOSOFT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS

MangoSoft, Inc. and subsidiary (a development stage company) ("the
Company") develops advanced software technology to simplify, expand and
integrate networking and pooled use of computer resources. The Company
organizes itself as one segment reporting to the chief operating
decision-maker.

The Company is considered to be a development stage company since it
has not generated significant revenues from products that have been
developed-to-date. The Company is subject to a number of risks similar to
those of other companies in an early stage of development. Principal among
these risks are dependencies on key individuals, competition from other
substitute products and larger companies, the successful development and
marketing of its products and the need to obtain adequate additional
financing necessary to fund future operations.

The accompanying condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. As shown in the financial statements during the six months ended
June 30, 2000 and 1999, and cumulative for the period from June 15, 1995
(inception) to June 30, 2000, the Company incurred net losses of
$17,175,701, $3,729,216 and $86,287,513, respectively. These factors, among
others, raise substantial doubt about the Company's ability to continue as
a going concern. Based upon the raising of approximately $32.4 million in
proceeds from the sale of common stock and Convertible Preferred Stock,
Series A, subsequent to December 31, 1999 (see Note 4), management believes
that the Company will have sufficient capital to fund its existing
operations for the next twelve (12) months.

The financial statements do not include any adjustments relating to the
recoverability 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 to meet its obligations on a timely basis, to comply
with the terms of its financing agreements, to obtain additional financing
and ultimately to attain profitability.

2. PRESENTATION OF INTERIM FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements
have been prepared on the same basis as the audited financial statements.
In the opinion of management, all significant adjustments, which are
normal, recurring in nature and necessary for a fair presentation of the
financial position, cash flows and results of the operations of the
Company, have been consistently recorded. The operating results for the
interim periods presented are not necessarily indicative of expected
performance for the entire year. Certain previously reported amounts have
been reclassified to conform to the current presentation format.

The unaudited information should be read in conjunction with the audited
financial statements of the Company and the notes thereto for the year
ended December 31, 1999 included in the Company's Annual Report on Form
10-KSB filed with the Securities and Exchange Commission and updated in the
Company's Registration Statement on Form SB-2 filed on July 20, 2000.

Comprehensive Income - Comprehensive income (loss) was equal to net
income (loss) for each period.

Supplemental Cash Flow Information - The following table sets forth
certain supplemental cash flow information for the six months ended June
30, 2000 and 1999, and cumulative for the period from June 15, 1995
(inception) to June 30, 2000:

Six Months Ended June 30, Cumulative
------------------------------- Since
2000 1999 Inception
---- ---- ---------

Supplemental Cash Flow Information
Cash paid during the period for interest ..................... $ 9,954 $ 11,102 $ 97,881

Non Cash Activities
Accretion of preferred stock and warrants ................... $9,627,147 $1,413,692 $16,231,171
Fair value of warrants issued in connection with the sale of
the convertible preferred stock, Series A................. 711,229 -- 711,229
Conversion of accounts payable into common stock ............ 100,000 -- 190,000

3. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended in June 2000 and
effective for the fiscal years beginning after June 15, 2000. SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
for hedging activities. Management is currently evaluating the effect, if
any, SFAS No. 133 will have on the Company's consolidated financial
position and results of operations. The Company will adopt this accounting
standard on January 1, 2001, as required.

On December 3, 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
Financial Statements." SAB No. 101 provides guidance on the recognition,
presentation and disclosure of revenues in financial statements filed with
the Securities and Exchange Commission. Management is currently evaluating
the effect, if any, SAB No. 101 will have on the Company's financial
position and results of operations. The Company will adopt this accounting
standard during the fourth quarter of 2000, as required.

4. STOCKHOLDERS' EQUITY (DEFICIENCY)

In March 2000, the Company completed the sale of 2.5 million shares of
a new issuance of Convertible Preferred Stock, Series A, (the "Preferred
Stock") to accredited investors at $4.00 per share. The Preferred Stock was
convertible into common stock (initially at a ratio of one to one) and had
a liquidation preference of $10.0 million. The Preferred Stock would
automatically convert to common stock upon the subsequent sale of an
additional $10.0 million of the Company's securities.

In accordance with Emerging Issues Task Force Abstract No. 98-5,
"Accounting for Convertible Securities with Beneficial Conversion Features
or Contingently Adjustable Conversion Ratios," the net proceeds from the
Series A financing were allocated between the conversion feature and the
preferred stock; because the fair value of the common stock was
significantly in excess of the conversion price implicit in the Series A
stock, the net proceeds were allocated to the conversion feature. Since the
Preferred Stock was immediately convertible into common stock, an immediate
dividend or accretion of $9,050,371 was recorded from common stockholders'
equity to the carrying value of the Preferred Stock.

In April 2000, the Company completed the sale of approximately 4.2
million shares of common stock to accredited investors at $5.00 per share.
Upon completion of the sale of common stock, the Preferred Stock
automatically converted, in accordance with its terms, into 2.5 million
shares of common stock. The Company

completed the sale of approximately 0.3 million additional shares of common
stock at prices ranging from $4.00 to $5.00 per share in May 2000.

The Company received $18.1 million from the sale of the common and
Preferred Stock during the three months ended March 31, 2000 and $14.3
million during the three months ended June 30, 2000. The $32.4 million in
proceeds will be used for research and development, marketing and general
working capital or such other purposes as the Company may determine from
time to time in its discretion.

Costs incurred in connection with the sale of the common and Preferred
Stock were $991,129, including $711,229 representing the fair value of
warrants issued to the placement agent to purchase 58,975 shares of the
common stock at $4 per share. The fair value of the warrants was calculated
using the Black-Scholes option pricing model, with a risk-free interest
rate of 6%, an expected life of two years, no dividends and a volatility
factor of 150%. Because the Preferred Stock was immediately convertible
into common stock, an immediate dividend or accretion of $576,776,
representing the difference between the quoted market price of the common
stock and the exercise price of the warrants was recorded from common
stockholders equity relating to the warrants.

On May 19, 2000, the Company's stockholders approved an amendment to
the 1999 Incentive Compensation Plan, as amended and restated as of May 1,
2000, increasing the aggregate number of shares which may be issued under
the plan from 3,500,000 to 8,000,000 shares.

5. STOCK-BASED COMPENSATION

The Company accounts for stock options granted to employees in
accordance with Accounting Principals Board Opinion ("APB") No.25,
"Accounting for Stock Issued to Employees." Under APB No. 25, stock options
which include stock appreciation rights ("SARs") are accounted for as a
variable plan and compensation expense is measured at each reporting date
based on the difference between the option exercise price and the market
price of the common stock. For unvested options, compensation expense is
recognized over the vesting period; for vested options, compensation
expense is adjusted up or down at each reporting date based on changes in
the market price of the common stock.

During the six months ended June 30, 2000, compensation related to the
employee stock options totaled $13,021,654, due primarily to the SARs as
the quoted market price of the common stock at June 30, 2000 ($12.625)
exceeded the fair market value at the dates of grant. Because a substantial
portion of the options is vested, the charge to expense in the six months
ended June 30, 2000 was $12,019,860. The balance relates to unvested
options and will be charged to expense over the vesting period. Based on
the number of vested options at June 30, 2000, a $1 increase (decrease) in
the market price of the Company's common stock results in the immediate
recognition of compensation expense (benefit) of approximately $3,500,000.

During the three months ended June 30, 2000, a stock-based compensation
benefit of $9,661,760 was recorded. This benefit is due primarily to a
$12,911,127 benefit recognized as a result of the decrease in the Company's
quoted market price as of June 30, 2000 ($12.625) as compared to March 31,
2000 ($18.00), and its effect on the SARs. This benefit was offset by
$2,764,978 of compensation expense incurred as a result of the Company's
issuance of stock options to employees at an exercise price less than the
quoted market price at the grant date and $484,389 in compensation expense
related to stock options and warrants granted to non-employees.

The fair value of the options and warrants granted to non-employees was
calculated using the Black-Scholes option pricing model, with a risk-free
interest rate of 6%, an expected option life of two years, no dividends and
a volatility factor of 150%.

6. NET INCOME (LOSS) PER COMMON SHARE

Basic net income per common share is computed by dividing income
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted net income per common share
reflects the potential dilution as if common equivalent shares outstanding
were exercised and/or

converted into common stock unless the effect of such equivalent shares was
antidilutive.

A reconciliation of net income per common share and the weighted
average shares used in the earnings per share ("EPS") calculations for the
periods indicated is as follows:

Net Income (Loss)
Applicable to Common
Stockholders Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------

Three Months Ended June 30, 2000
Basic ............................. $ 7,067,382 26,142,501 $ 0.27
============
Effect of warrants ................ 154,865 --
Effect of SARs .................... 2,529,074 (0.02)
Effect of stock options ........... 653,458 (0.01)
------------ ---------
Diluted ........................... $ 7,067,382 29,479,898 $ 0.24
============ ============ =========

Three Months Ended June 30, 1999
Basic ............................. $ (2,539,340) 136,949 $ (18.54)
============
Common stock equivalents .......... -- --
------------ ---------
Diluted ........................... $ (2,539,340) 136,949 $ (18.54)
============ ============ =========
Six Months Ended June 30, 2000
Basic ............................. $(26,802,848) 23,153,033 $ (1.16)
============
Effect of warrants ................ -- --
Effect of SARs .................... -- --
Effect of stock options ........... -- --
------------ ---------
Diluted ........................... $(26,802,848) 23,153,033 $ (1.16)
============ ============ =========

Six Months Ended June 30, 1999
Basic ............................. $ (5,142,908) 136,949 $ (37.55)
============
Common stock equivalents .......... -- --
------------ ---------
Diluted ........................... $ (5,142,908) 136,949 $ (37.55)
============ ============ ==========

All outstanding options and warrants to purchase common stock were
included in the computation of diluted EPS for the three-month period ended
June 30, 2000. All outstanding options and warrants to purchase common
stock were excluded from the computation of diluted EPS for the six-month
period ended June 30, 2000 and 1999 and the three-month period ended June
30, 1999, as their inclusion would have been antidilutive.

7. TRANSACTIONS WITH STOCKHOLDERS

Demand Notes Payable - In March 2000, the Company repaid the $232,500
in demand notes payable to related parties, plus the related accrued
interest expense of $9,783.

Administrative Services - During 2000 and 1999, a stockholder provided
administrative assistance to the Company. Amounts expensed and accrued for
such services in the three months ended June 30, 2000 and 1999 were $19,000
and $12,021, respectively. Amounts expensed and accrued for such services
in the six months ended June 30, 2000 and 1999 were $19,000 and $19,603,
respectively

In March 2000, the Company repaid $712,683 in accrued expenses to
related parties for administrative services provided to the Company during
1998 and 1999.

PART I. FINANCIAL INFORMATION

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

OVERVIEW

This Quarterly Report on Form 10-QSB, including the following discussions,
contains trend analysis and other forward-looking statements within the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Any
statements in this Quarterly Report that are not statements of historical facts
are forward-looking statements, which involve risks and uncertainties. Our
actual results may differ materially from those indicated in the forward-looking
statements as a result of the factors set forth elsewhere in this Quarterly
Report on Form 10-QSB, including under "Cautionary Statements." 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, 1999 and our Form 8-K filed with the Securities
and Exchange Commission on September 21, 1999 (as amended on October 27, 1999).

We develop and market advanced software technology to simplify, expand and
integrate networking and pooled use of computer resources. We are considered to
be a development stage company since we have not generated significant revenues
from the products that have been developed-to-date. We are subject to a number
of risks similar to those of other companies in an early stage of development.
Principal among these risks are dependencies on key individuals, competition
from other substitute products and larger companies, the successful development
and marketing of our products and the need to obtain adequate additional
financing necessary to fund future operations.

RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2000 AND 1999

Revenue was $2,234 in for the three-month period ended June 30, 2000
compared with $7,991 for the comparable period in 1999. The decrease was
attributable to declining sales of our Medley product. Customers representing
10% or more of our revenues for the three months ended June 30, 2000 were IPEX
Information Technology Group and Ramp Networks, Inc. (approximately 50% and 15%,
respectively). A single customer, Hitachi, Ltd., represented 85% of our revenues
for the three months ended June 30, 1999. No other customer represented 10% or
more of our revenues in either period.

Cost of revenue in 1999 represented disk replication costs. In 2000, our
software products were delivered via the Internet and we therefore incurred no
disk replication costs.

Operating expenses, including research and development, selling and
marketing, general and administrative and consulting fees paid to related
parties, but excluding stock-based compensation, increased 77% to $2,979,651 for
the three-month period ended June 30, 2000 compared to $1,682,572 for the
comparable period in 1999. The increase is primarily attributable to costs
associated with the on-going development of our Mangomind service and the
expansion of our marketing, sales and support activities for the Mangomind and
Cachelink services. A summary of our operating expenses for the three months
ended June 30, 2000 as compared to the same period in 1999 is as follows:

Three Months Ended June 30, Increase (Decrease)
-------------------------- --------------------
2000 1999 $ Amount %
---- ---- -------- ---

Research and development (excluding a
stock-based compensation benefit of
$6,161,463, net in 2000) ............... $ 1,347,442 $ 920,479 $ 426,963 46%
Selling and marketing (excluding a
stock-based compensation benefit of
$578,789, net in 2000) ................. 431,927 41,621 390,306 938
General and administrative (excluding a
stock-based compensation benefit of
$2,921,508, net in 2000) ............... 1,181,282 708,451 472,831 67
Consulting fees paid to related party ..... 19,000 12,021 6,979 58
----------- ----------- -----------
2,979,651 1,682,572 1,297,079 77
Stock-based compensation benefit, net ..... (9,661,760) -- (9,661,760) N/A
----------- ----------- -----------
Operating expenses, net ............ $(6,682,109) $ 1,682,572 $(8,364,681) (497)%
=========== =========== ===========

The stock-based compensation benefit of $9,661,760 during the three
months ended June 30, 2000 relates primarily to stock appreciation rights
("SARs") granted in tandem with certain employee stock options. A benefit was
recorded for the three-month period ended June 30, 2000 due to a decrease in the
quoted market price of our common stock from $18.00 per share at March 31, 2000
to $12.625 per share at June 30, 2000. There was no stock-based compensation
during the three-month period ended June 30, 1999.

Income from operations increased $8,359,012, or 499%, to $6,684,343 for
the three-month period ended June 30, 2000 compared with a loss from operations
of $1,674,669 for the comparable period in 1999 as a result of the above
factors.

Interest income increased $385,188 to $385,710 for the three months
ended June 30, 2000 compared to $522 for the three months ended June 30, 1999.
The increase is attributable to interest earned on the investment of the
proceeds we received from the sale of our common stock and the Convertible
Preferred Stock, Series A in March and April 2000.

Interest expense decreased $156,680 to $171 for the three months ended
June 30, 2000 compared to $156,851 for the three months ended June 30, 1999. The
decrease was attributable to the conversion of our debt into common stock in
conjunction with our merger in September 1999.

RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2000 AND 1999

Revenue was $3,569 in for the six-month period ended June 30, 2000
compared with $7,991 for the comparable period in 1999. The decrease was
attributable to declining sales of our Medley product. Customers representing
10% or more of our revenues for the six months ended June 30, 2000 were IPEX
Information Technology Group and Ramp Networks, Inc. (approximately 32% and 17%,
respectively). A single customer, Hitachi, Ltd., represented 85% of our revenues
for the six months ended June 30, 1999. No other customer represented 10% or
more of our revenues in either period.

Cost of revenue in 1999 represented disk replication costs. In 2000, our
software products were delivered via the Internet and we therefore incurred no
disk replication costs.

expansion of our marketing, sales and support activities for the Mangomind and
Cachelink services. A summary of our operating expenses for the six months ended
June 30, 2000 as compared to the same period in 1999 is as follows:

Six Months Ended June 30, Increase (Decrease)
--------------------------- -------------------
2000 1999 $ Amount %
---- ---- -------- ---

Research and development (excluding
stock-based compensation expense of
$4,957,803 in 2000) .................... $ 2,489,223 $ 2,097,751 $ 391,472 19%
Selling and marketing (excluding stock-
based compensation expense of
$902,070 in 2000) ...................... 711,710 59,625 652,085 1,094
General and administrative (excluding
stock-based compensation expense of
$6,644,376 in 2000) .................... 1,850,347 1,319,479 530,868 40
Consulting fees paid to related party ..... 19,000 19,603 (603) (3)
------------ ------------ ------------
5,070,280 3,496,458 1,573,822 45
Stock-based compensation expense .......... 12,504,249 -- 12,504,249 N/A
------------ ------------ ------------
Total operating expenses ........... $ 17,574,529 $ 3,496,458 $ 14,078,071 403%
============ ============ ============

The stock-based compensation expense of $12,504,249 during the six months
ended June 30, 2000 relates primarily to stock appreciation rights ("SARs")
granted in tandem with certain employee stock options. An expense was recorded
for the six-month period ended June 30, 2000 due to a increase in the quoted
market price of our common stock from $9.75 per share at December 31, 1999 to
$12.625 per share at June 30, 2000. There was no stock-based compensation during
the three-month period ended June 30, 1999.

The loss from operations increased $14,082,130, or 404%, to $17,570,960 for
the six-month period ended June 30, 2000 compared with a loss from operations of
$3,488,830 for the comparable period in 1999 as a result of the above factors.

Interest income increased $395,664 to $398,935 for the six months ended
June 30, 2000 compared to $3,271 for the six months ended June 30, 1999. The
increase is attributable to interest earned on the investment of the proceeds we
received from the sale of our common stock and the Convertible Preferred Stock,
Series A in March and April 2000.

Interest expense decreased $232,988 to $9,954 for the six months ended June
30, 2000 compared to $242,942 for the six months ended June 30, 1999. The
decrease was attributable to the conversion of our debt into common stock in
conjunction with our merger in September 1999.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

We were formed in June 1995 and, since our formation, have raised
approximately $74.2 million as of June 30, 2000 through the private placement of
debt and equity securities.

In addition, we have, at times, depended upon bank debt, loans from
stockholders and Directors and credit from suppliers to meet interim financing
needs. We incurred $750,000 of bank debt in 1998 to purchase capital equipment,
which was subsequently repaid using proceeds we received from issuance of the
12% Senior Secondary Secured Convertible Notes in 1999. Borrowings from
stockholders and Directors have generally been refinanced with new debt
instruments or converted into additional equity. At June 30, 2000, approximately
$2.0 million in additional financing was provided through accounts payable,
accrued expenses and other trade credit, a significant portion of which was past
due.

The proceeds we raised through the private placement of debt and equity
securities have been used in the development of our current products with
approximately $25.5 million invested in research and development and
approximately $10.2 million in sales and marketing, principally due to an
earlier attempt to distribute our products

through traditional retail software channels. The remaining proceeds have been
used for working capital and general corporate purposes.

To date, product sales have provided a minor source of liquidity. From
inception through June 30, 2000, we have generated approximately $0.3 million in
sales and incurred cumulative net losses of approximately $86.3 million,
including net losses of $17.2 million in the six months ended June 30, 2000 and
$33.0 million during the year ended December 31, 1999. We expect to incur
additional operating losses and expect cumulative losses to increase
substantially as we expand our marketing, sales and research and development
efforts. The auditors' opinion on our financial statements for the fiscal years
ended December 31, 1999 and 1998 includes a going concern explanatory paragraph,
which highlights the uncertainty of our ability to continue our operations.
Unless we can generate a significant level of on-going revenue and attain
adequate profitability in the near-term, we will need to seek additional sources
of equity or debt financing. Although we have been successful in raising past
financing, there can be no assurance that any additional financing will be
available to us on commercially reasonable terms, or at all. Any inability to
obtain additional financing when needed will have a material adverse effect,
requiring us to significantly curtail or possibly cease our operations. In
addition, any additional equity financing may involve substantial dilution to
the interests of our then existing shareholders.

We received approximately $14.3 million from the sale of common stock in
the three months ended June 30, 2000 and approximately $18.1 million from the
sale of the common and Preferred Stock in the three months ended March 31, 2000.
The $32.4 million in proceeds will be used for research and development,
marketing and general working capital or such other purposes we may determine
from time to time in our discretion. Costs incurred in connection with the sale
of our common and Preferred Stock were approximately $1.0 million, including
$0.7 million representing the fair value of warrants issued to the placement
agent to purchase 58,975 shares of stock at $4.00 per share.

Under the terms of the Preferred Stock issuance, the Preferred Stock
automatically converted into common stock on a one-for-one basis in April 2000
when $10.0 million or greater was raised in the subsequent sale of our common
stock. The offer and sale of our common and Preferred Stock were exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) of the
Securities Act or Regulation D promulgated thereunder. Management believes the
$32.4 million in proceeds from the sale of our common and Preferred Stock will
be adequate to fund our existing operations for at least the next twelve (12)
months.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended in June 2000 and effective for
the fiscal years beginning after June 15, 2000. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
Management is currently evaluating the effect, if any, SFAS No. 133 will have on
our consolidated financial position and results of operations. We will adopt
this accounting standard on January 1, 2001, as required.

On December 3, 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 provides guidance on the recognition, presentation and
disclosure of revenues in financial statements filed with the Securities and
Exchange Commission. Management is currently evaluating the effect, if any, SAB
No. 101 will have on our financial position and results of operations. We will
adopt this accounting standard during the fourth quarter of 2000, as required.

CAUTIONARY STATEMENTS

An investment in our common stock is highly speculative and subject to a
high degree of risk. You may lose money by investing in our common stock so only
persons who can bear the risk of the entire loss of their investment should
invest. Prospective investors should carefully consider the following factors in
deciding whether to invest in our common stock.

WE HAVE A LIMITED OPERATING HISTORY AND SUBSTANTIAL CUMULATIVE OPERATING LOSSES.

Our current operations substantially commenced in May 1997. Accordingly,
our prospects should be evaluated based on the expenses and operating results
typically experienced by any early stage business. We have a history of
substantial operating losses and an accumulated deficit of approximately $89.4
million as of June 30, 2000. For the fiscal years ended December 31, 1999 and
1998, our losses from operations were $27.8 million and $13.1 million,
respectively. For the six months ended June 30, 2000, our loss from operations
was $17.6 million. We have historically experienced cash flow difficulties
primarily because our expenses have exceeded our revenues. We expect to incur
additional operating losses and expect cumulative losses to increase
substantially as we expand our marketing, sales and research and development
efforts. The auditors' opinion on our financial statements for the fiscal years
ended December 31, 1999 and 1998 includes a going concern explanatory paragraph,
which highlights the uncertainty of our ability to continue our operations. 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.

OUR PERFORMANCE DEPENDS ON MARKET ACCEPTANCE OF OUR PRODUCTS.

We expect to derive a substantial portion of our future revenues from the
sales of Cachelink and Mangomind, neither of which have been previously
marketed. If markets for our products fail to develop, develop more slowly than
expected or are subject to substantial competition, our business, financial
condition and results of operations will be materially and adversely affected.

WE HAVE AN EVOLVING MARKET STRATEGY.

We expect our future marketing efforts will focus 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.

WE WILL NEED ADDITIONAL FINANCING.

We will require substantial additional capital to finance our growth and
product development. We can provide no assurances that we will obtain additional
financing sufficient to meet our future needs on commercially reasonable terms
or otherwise. If we are unable to obtain the necessary financing, our business,
operating results and financial condition will be materially and adversely
affected.

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 no established market for the common stock. Although we intend to apply to
have our common stock listed on the Nasdaq Stock Market in the near future, we
can provide no assurances that we will be able to have our common stock listed
on an exchange or quoted on the Nasdaq Stock market or that it will continue to
be quoted on the OTC Bulletin Board. If there is no trading market, the market
price of our common stock will be materially and adversely affected. In
addition, approximately 25.2 million of the Company's outstanding shares of
common stock are not freely tradable as of June 30, 2000. If the shares are
listed on an exchange or quoted on the Nasdaq Stock Market and a large number of
shares of common stock are sold by the shareholders, the market price of the
common stock may be materially and adversely affected.

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 such
competition. If our technology is rendered obsolete or we are unable to compete
effectively, our business, operating results and financial condition will be
materially and adversely affected.

LITIGATION CONCERNING INTELLECTUAL PROPERTY COULD ADVERSELY AFFECT OUR BUSINESS.

We rely on a combination of trade secrets, copyright 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 assurances 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.

OUR SUCCESS DEPENDS ON KEY PERSONNEL.

Our success is dependent upon the efforts of our senior management
including: Dale Vincent, President and Chief Executive Officer; Donald A.
Gaubatz, Senior Vice President and Chief Operating Officer; Scott H. Davis, Vice
President and Chief Technology Officer; Daniel J. Dietterich, Vice President,
Research; Robert E. Parsons, Vice President and Chief Financial Officer; Robert
J. Primmer, Vice President, Marketing; Peter Caparso, Vice President, Business
Development; and Thomas Teixeira, Vice President, Engineering. The loss of Mr.
Vincent, Mr. Gaubatz, Mr. Davis, Mr. Dietterich, Mr. Parsons, Mr. Primmer, Mr.
Caparso or Mr. Teixeira could have a material and adverse affect on our
business. In addition, competition for qualified personnel in the computer
software industry is intense, and we can provide no assurances that we will be
able to retain existing personnel or attract and retain additional qualified
personnel necessary for the development of our business. Our inability to
attract and retain such personnel would have a material and adverse effect on
our business, financial condition and results of operations.

DEFECTS IN OUR SOFTWARE PRODUCTS MAY ADVERSELY AFFECT OUR BUSINESS.

Complex software such as the software developed by us 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.

NO DIVIDENDS

We intend to retain any future earnings to finance our operations and do
not intend to pay dividends.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

On August 30, 1999, one of the Company's stockholders filed suit in
Orange County, California Superior Court alleging damages for fraud in the sale
of securities under both federal and California state law and seeking rescission
of the purchase price of such securities. The stockholder seeks damages in the
amount of $50,000 plus interest.

On May 8, 2000, Jose Benitez filed suit against MangoSoft Corporation in
the Circuit Court of the 11th Judicial Circuit for Miami-Dade County, Florida
alleging certain causes of action in connection with the unauthorized use of his
image and claiming damages in excess of $15,000.

Management believes that neither of the above-referenced litigations will
have a material adverse effect on the Company's business, financial condition
and results of operations.

ITEM 2. CHANGES IN SECURITIES.

During the three months ended June 30, 2000, the Company received $14.3
million from the sale of approximately 2.8 million shares of common stock to
accredited investors at $4.00 and $5.00 per share. The proceeds from the sale of
these securities will be used for research and development, marketing and
general working capital or such other purposes as the Company may determine from
time to time in its discretion.

During the three months ended March 31, 2000, the Company received $18.1
million from the sale of 2.5 million shares of Convertible Preferred Stock,
Series A, (the "Preferred Stock") to accredited investors for $4.00 per share
and approximately 1.6 million shares of common stock for $5.00 per share. The
proceeds from the sale of these securities will be used for research and
development, marketing and general working capital or such other purposes as the
Company may determine from time to time in its discretion.

Under the terms of the offer and sale of the Preferred Stock, the
Preferred Stock automatically converted into common stock on a one-for-one basis
in April 2000 when $10.0 million or greater was raised in the subsequent sale of
common stock. Accordingly, all of the Preferred Stock was converted into common
stock and subsequently cancelled. The offer and sale of the common and Preferred
Stock in 2000 were exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) of the Securities Act or Regulation D promulgated
thereunder.

In September 1999, the Company sold 3.0 million shares of its common
stock at $1.25 per share to accredited investors as defined in Rule 501 of
Regulation D. The $3,690,000 in net proceeds from the sale was used for working
capital and general corporate purposes.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

The Annual Meeting of Stockholders was held on May 19, 2000 to consider
and vote upon three matters so described in the Company's Proxy Statement dated
May 1, 2000. The following is a brief description of the matters voted upon, the
number of votes cast for and against each proposal, the number of abstentions
and the number of votes unvoted, where applicable.

1. To elect six (6) Directors, each to hold office until the next annual
meeting and until his successor has been elected and qualified. The
following Directors were elected :

Director Name Votes For Votes Against Abstain
------------- --------- ------------- -------

Dale Vincent 16,684,555 None 1,500
Craig D. Goldman 16,684,555 None 1,500
Paul C. O'Brien 16,684,555 None 1,500
Dr. Ira Goldstein 16,684,555 None 1,500
Selig Zises 16,684,555 None 1,500
Dr. Nick Tredennick 16,684,555 None 1,500

2. To approve the Company's 1999 Incentive Compensation Plan, as amended and
restated as of May 1, 2000, including an increase in the number of shares,
which may be issued thereto, from 3,500,000 to 8,000,000.

Votes For: 15,875,912
Votes Against: 70,975
Abstain: 6,758
Shares Not Voted: 732,410

3. To ratify the appointment of Deloitte & Touche LLP as independent
accountants for the Company for the fiscal year ending December 31, 2000.

Votes For: 16,685,005
Votes Against: None
Abstain: 1,050

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits:

11. Computation of Net Income (Loss) Per Common Share
27. Financial Data Schedule

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the three months ended June
30, 2000.

SIGNATURES

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

August 11, 2000 MANGOSOFT, INC.

/S/ Robert E. Parsons
-------------------------------------
Robert E. Parsons
Chief Financial Officer
(Principal Financial and Accounting Officer)

EXHIBIT INDEX

EXHIBIT DESCRIPTION
- ------- -----------

11. Computation of Net Income (Loss) Per Common Share
27. Financial Data Schedule