- Quarterly Report (10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC   20549

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2011

Commission File Number: 000-30781

MANGO CAPITAL, INC. (formerly MangoSoft, Inc.)

(Exact name of registrant as specified in its charter)

Nevada		87-0543565
(State or other jurisdiction		(IRS Employer Identification No.)
of incorporation or organization)
108 Village Square, Suite 315 Somers, NY		10589
(Address of principal executive offices)		(Zip code)

Issuer’s telephone number: [phone]

 

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

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

Large accelerated filer ¨		Accelerated filer ¨
Non-accelerated filer (Do not check if a smaller reporting company) ¨		Smaller reporting company x

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

As of August 15, 2011, there were 5,643,157 shares of common stock outstanding.

 

 

 

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 MANGO CAPITAL, INC. AND SUBSIDIARIES

INDEX

		Page
PART I.       FINANCIAL INFORMATION
ITEM 1 – Condensed Consolidated Financial Statements (Unaudited):
Balance Sheets as of June 30, 2011 and December 31, 2010		3
Statements of Operations for the Three Months Ended June 30, 2011 and 2010		4
Statements of Operations for the Six Months Ended June 30, 2011 and 2010		5
Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010		6
Notes to Unaudited Condensed Consolidated Financial Statements		7
ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
ITEM 4 – Controls and Procedures		18
PART II.      OTHER INFORMATION
ITEM 1 – Legal Proceedings		19
ITEM 6 – Exhibits and Reports on Form 8-K		20
Signature		22
Officer Certification

 

 

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MANGO CAPITAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

		June 30,				December 31,
		2011				2010
ASSETS
Current Assets:
Cash and cash equivalents		$	260,886			$	178,291
Accounts receivable			64,764				709
Prepaid expenses			-				1,417
Note receivable related party			-				600,000
Investments			353,358				463,155
Interest receivable			-				7,000
Total current assets			679,008				1,250,572
Property and equipment, net of accumulated depreciation			7,285				8,735
Goodwill			2,529,010				2,529,010
Total assets		$	3,215,303			$	3,788,317
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	472,731			$	293,166
Accrued expenses			32,965				31,103
Total current liabilities			505,696				324,269
Note payable related party			2,200,146				2,171,290
Total liabilities			2,705,842				2,495,559
Stockholders’ Equity:
Preferred stock - $.001 par value; authorized, 5,000,000 shares; issued and outstanding, 20,000 shares			20				20
Common stock - $.001 par value, authorized 15,000,000 shares; issued and outstanding, 5,643,157 shares			5,643				5,643
Additional paid-in capital			90,967,011				90,946,074
Accumulated deficit			(90,463,213	)			(89,658,931	)
Noncontrolling interest			-				(48	)
Total stockholders' equity			509,461				1,292,758
Total liabilities and stockholders' equity		$	3,215,303			$	3,788,317

See notes to the unaudited condensed consolidated financial statements.

 

 

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MANGO CAPITAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

		Three Months Ended June 30,
		2011				2010
Structured settlements revenue		$	544,604			$	-
Costs of structured settlements revenue:
Annuitant funding			452,749				-
Brokers’ fees			20,712				-
Legal and professional fees			34,033				-
Administrative fees			3,550				-
Total costs of structured settlements revenue			511,044				-
Gross profit			33,560				-
Operating expenses:
Compensation and payroll taxes			305,672				53,340
Marketing and advertising			106,855				-
Interest			8,283				-
Depreciation and amortization			725				-
Other legal and professional fees			84,092				21,160
Other			42,654				24,365
Total operating expenses			548,281				98,865
Loss from operations			(514,721	)			(98,865	)
Interest income			9,289				22,046
Gain on sale of investments			-				3,118
Unrealized investment gain (loss)			(2,615	)			8,895
Net loss		$	(508,047	)		$	(64,806	)
Net loss per share – basic and diluted		$	(0.09	)		$	(0.01	)
Weighted average shares outstanding – basic and diluted			5,643,157				5,443,157

See notes to the unaudited condensed consolidated financial statements.

 

 

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MANGO CAPITAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

		Six Months Ended June 30,
		2011				2010
Structured settlements revenue		$	1,783,755			$	-
Costs of structured settlements revenue:
Annuitant funding			1,368,499				-
Brokers’ fees			80,158				-
Legal and professional fees			136,741				-
Administrative fees			9,800				-
Total costs of structured settlements revenue			1,595,198				-
Gross profit			188,557				-
Operating expenses:
Compensation and payroll taxes			560,162				63,920
Marketing and advertising			207,809				-
Interest			16,474				-
Depreciation and amortization			1,450				-
Other legal and professional fees			128,922				38,184
Other			113,489				51,596
Total operating expenses			1,028,306				153,700
Loss from operations			(839,749	)			(153,700	)
Interest income			31,659				43,935
Gain on sale of investments			56,485				6,580
Unrealized investment gain (loss)			(52,630	)			19,816
Net loss		$	(804,235	)		$	(83,369	)
Net loss per share – basic and diluted		$	(0.14	)		$	(0.02	)
Weighted average shares outstanding – basic and diluted			5,643,157				5,443,157

See notes to the unaudited condensed consolidated financial statements.

 

 

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MANGO CAPITAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

		Six Months Ended June 30,
		2011				2010
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss		$	(804,235	)		$	(83,369	)
Adjustments to reconcile net loss to net cash used in operating activities:
Unrealized (gain) loss in marketable securities			52,630				(19,816	)
Stock-based compensation			20,939				3,000
Depreciation and amortization			1,450				-
Gain on sale of investments			(56,485	)			-
Increase (decrease) in cash from the change in:
Accounts receivable			(64,055	)			1,968
Prepaid expenses and other assets			1,417				(27,447	)
Accounts payable			179,565				(33,931	)
Accrued expenses			1,862				(27,770	)
Net cash used in operating activities			(666,912	)			(187,365	)
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Note receivable related party			600,000				-
Interest receivable			7,000				233
Proceeds from sale of investments			113,651				62,844
Net cash provided by investing activities			720,651				63,077
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Related party payable			28,856				-
Net cash provided by financing activities			28,856				-
NET INCREASE (DECREASE)  IN CASH AND CASH EQUIVALENTS			82,595				(124,288	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			178,291				677,581
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	260,886			$	533,293
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest		NONE				NONE
Cash paid for income taxes		NONE				NONE

See notes to the unaudited condensed consolidated financial statements.

 

 

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 MANGO CAPITAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business and Operations

The Company

On January 25, 2011, the Company changed its name to Mango Capital, Inc.  In conjunction with the name change, the Company changed its stock symbol to MCAP effective February 16, 2011.

During the fourth quarter of 2010, we completed the acquisition of Structured Settlement Investments, L.P. (“SSI”), a Delaware limited partnership, that originates, purchases and resells structured settlements from beneficiaries of insurance, litigation and lottery awards.  The partnership had recently re-branded itself using the d/b/a of Aspyre Settlement Funding.  Aspyre Settlement Funding, Inc. (“Aspyre”) was incorporated in the State of Pennsylvania effective January 25, 2011 and has assumed the operations of SSI and SSI will be dissolved.

The structured settlement investment business provides liquidity to beneficiaries in the form of cash purchases of future payments to which the sellers are entitled as successful plaintiffs in personal injury, medical malpractice or other litigations.  Structured settlements refer to a contract between a plaintiff and defendant whereby the plaintiff agrees to settle a lawsuit (usually a personal injury, product liability or medical malpractice claim) in exchange for periodic payments over time.  A defendant’s payment obligation with respect to a structured settlement is usually assumed by a casualty insurance company.  This payment obligation is then satisfied by the casualty insurer through the purchase of an annuity from an insurance company which provides a high credit quality stream of payments to the plaintiff.

Although, we are evaluating alternate applications for our intellectual property, our technology business currently generates no revenue and is not the main focus of management and as such, management has deemed it unnecessary to report on this business segment until something materially changes.

The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the annual 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.

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, 2010 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.

As shown in the unaudited condensed consolidated financial statements, during the six months ended June 30, 2011 and 2010, the Company incurred net losses of $804,235 and $83,369, respectively. Cash used in operations during the six months ended June 30, 2011 and 2010 was $666,912 and $187,365, respectively. These factors, among others, raise significant doubt about the Company’s ability to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately attain profitability.

 

 

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MANGO CAPITAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies

Principles of Consolidation - The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries after the elimination of all significant intercompany balances.  The portion of net loss attributable to noncontrolling interests is presented as net loss applicable to noncontrolling interests on the unaudited condensed consolidated statements of operations, and the noncontrolling interest portion of SSI is presented as noncontrolling interest in the unaudited condensed consolidated balance sheets.  As of June 30, 2011, there is no longer a noncontrolling interest due to the incorporation of Aspyre Settlement Funding, Inc., effective January 25, 2011.

Goodwill - Goodwill and other intangibles with indefinite useful lives that are not subject to amortization are tested for impairment in the fourth quarter of each fiscal year, or more frequently whenever events or changes in circumstances indicate that impairment may have occurred.  Possible indicators of impairment include, but are not limited to sustained operating losses or poor operating performance trends, a significant decline in our expected future cash flows for a reporting unit, a decrease in our market capitalization below our book value for a sustained period of time, significant impairment of long-lived assets, or an expectation that a reporting unit will be disposed of or sold.  When indicated, we perform an evaluation to determine if impairment has occurred.  If impairment is identified, we measure and record the amount of the impairment loss.

For goodwill, the first step of the impairment analysis is performed by comparing the estimated fair value of each reporting unit to the related carrying value of the net assets of that reporting unit.   If the fair value of the reporting unit exceeds the carrying value of the net asset of that reporting unit, goodwill is not deemed to be impaired and no further testing is performed.  If the carrying value of the net assets for a reporting unit exceeds the related fair value, the second step of the impairment test is performed to measure any potential impairment.

The second step of the goodwill impairment test compares the fair value of the reporting unit’s goodwill with the carrying value of goodwill.  To determine the fair value of goodwill, the fair value of the reporting unit is allocated to all of its assets and liabilities, with the excess allocated to goodwill.  If the carrying amount of a reporting unit’s goodwill exceeds the fair value of that goodwill, an impairment loss is recognized for the difference.

Revenue Recognition - Structured settlements are generally contractual arrangements for a defined payment stream between a claimant and a defendant’s insurance carrier or a defined payment stream as a result of lottery winnings. Upon acquisition and the settlement of contractual obligations, the Company is assigned the streams of payments paid by the insurance company or other funding agent. All funding for the purchase of structured settlements is provided by third party or related party investors. The purchase of the structured settlements from the claimant or annuitant occurs simultaneously with the sale of such contract to the investor, therefore revenue is recorded upon court approval of the structured settlement contract with the investor upon which the right to receive the defined payment streams are readily convertible to cash. Payment is made to the annuitants for the purchase price of the structured settlements.  The Company does not currently maintain an inventory of structured settlements for future sales.

Cost of Structured Settlements Revenue - The costs of purchasing and selling structured settlements include lump sum payment to annuity holder, fees paid to brokers for introducing the structured settlements, legal expenses and court costs associated with the assignment of the structured settlement to the Company and the investor, and administrative fees.

Stock-Based Compensation - The Company accounts for stock-based employee compensation arrangements based on the estimated grant-date fair value.  During the six months ended June 30, 2011, the Company issued to certain officers and directors of the Company an aggregate of 972,150 options to purchase shares of the Company.  The options vest over a three year service period.  The stock options are exercisable at the date of grant, in accordance with the specified vesting schedule, and expire no later than ten years from the date of grant.

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

Reclassification - Certain items on the 2010 financial statements were reclassified to conform to current year classifications.

 

 

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 MANGO CAPITAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies (continued)

Net Loss Per Common Share - Basic net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share reflects, in addition to the weighted average number of common shares, the potential dilution if common stock options were exercised into common stock and if shares of convertible preferred stock were converted into shares of common stock, unless the effects of such exercises and conversions would have been anti-dilutive. At June 30, 2011, there were 972,150 stock options and 20,000 shares of convertible preferred stock outstanding which have not been included in the calculation of diluted common shares outstanding as their effect would be anti-dilutive.

 

 

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MANGO CAPITAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. Property and Equipment

Property and equipment consist of the following:

		June 30,
		2011
Furniture and fixtures		$	14,050
Computer equipment			29,809
Office equipment			9,745
			53,604
Less: accumulated depreciation			46,319
		$	7,285

4. Income Taxes

At June 30, 2011 and December 31, 2010, the Company had no reserves for unrecognized tax benefits on the balance sheet.

There are currently no income tax examinations in progress.

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Company, files income tax returns in the U.S. federal jurisdiction and in the states of Pennsylvania and New York. The Company is no longer subject to U.S. federal and state and local tax examinations by tax authorities for years before 2007, although carry forward tax attributes that were generated prior to 2005 may still be adjusted upon examination by tax authorities if they either have been or will be utilized. It is the Company’s policy to recognize interest and penalties related to income tax matters in penalty expense. For both the quarters ended June 30, 2011 and 2010, there were no amounts of interest and penalties recognized.

 

 

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 MANGO CAPITAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. Stock Option Plan

As part of our compensation programs offered to our employees, we grant stock options. In addition, we have engaged third-party consultants and advisors and have compensated them in the form of stock options. The Company accounts for stock-based employee compensation arrangements based on the estimated grant-date fair value.  Stock based compensation expense for the six months ended June 30, 2011 was $20,937.

The Company currently has one stock-based compensation plan, which was ratified by the Board of Directors in January 2011 (the “2010 Plan”).  This plan provides for the issuance of up to 2,000,000 shares of common stock to employees, officers, directors and consultants in the form of nonqualified and incentive stock options, restricted stock grants or other stock-based awards, including stock appreciation rights. The stock options are exercisable as specified at the date of grant and expire no later than ten years from the date of grant.  The stock options vest over a three year service period. As of June 30, 2011, there were 1,128,750 remaining options available for grant under this plan.

In January 2011, options to purchase a total of 972,150 shares of common stock were issued, 377,150 of which were due to the cancellation of options granted in 2009 and 2010:

New Grants issued under the 2010 Plan.

Directors & Executive Officers		Title		New Grants Issued				Value
Dennis M. Goett		Chairman & CEO			300,000			$	33,000
Sean M. Gavin		CFO			70,000			$	7,700
All Directors & Executive Officers as a Group					370,000

Non-Executive Directors		Title		New Grants Issued				Value
Elliott Singer		Director			50,000			$	5,500
All Non-Executive Directors as a Group					50,000

Non-Executive Officers		Title		New Grants Issued				Value
Michael Betzig		President of wholly owned subsidiary			100,000			$	11,000.00
Houston Winn		Chief Marketing Officer of wholly owned subsidiary			75,000			$	8,250.00
All Non-Executive Officers as a Group					175,000

The estimated fair value of these options on the grant date is $0.11 and was determined using the Black-Scholes option pricing model. The assumptions used in the model were an estimated life of 6.25 years, volatility of 435%, dividend yield of 0.0% and a risk free interest rate of 2.76%.

There were no options exercised, forfeited or cancelled during the six months ended June 30, 2011.  Of the options outstanding at June 30, 2011, 190,330 are exercisable.

 

 

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MANGO CAPITAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6. Fair Value Measurements

ASC 820, "Fair Value Measurements and Disclosures," defines fair value and establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

·	Level 1 - Quoted prices in active markets for identical assets or liabilities;

·

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.  Level 2 asset values are determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. The pricing model information is provided by third party entities (e.g. banks or brokers). In some instances, these third party entities engage external pricing services to estimate the fair value of these securities; and

·	Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company has presented the LawCash investment as a Level 3 asset based upon the unobservable inputs involved with the investment’s fair value.  The following table represents the fair value hierarchy for our financial assets and liabilities held by the Company measured at fair value on a recurring basis for the six months ended June 30, 2011 and December 31, 2010:

2011
		Level 1				Level 2				Level 3				Total
LawCash investment		$	—			$	—			$	248,835			$	248,835
Equity securities			104,523				—				—				104,523
Total		$	104,523			$	—			$	248,835			$	353,358

 

2010
		Level 1				Level 2				Level 3				Total
LawCash investment		$	—			$	—			$	248,835			$	248,835
Equity securities			214,320				—				—				214,320
Total		$	214,320			$	—			$	248,835			$	463,155

 

 

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MANGO CAPITAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7.  Related Party Transactions

Note receivable – related party represents an amount pursuant to an agreement entered into on January 29, 2009.  Under this agreement the Company agreed to loan $600,000 to Plaintiff Holding XI LLC, a newly formed wholly owned subsidiary (the “Subsidiary”) of Plaintiff Funding Holding, Inc., d/b/a LawCash (“LawCash”).  Such $600,000 loan is evidenced by a secured promissory note issued by the Subsidiary to MangoSoft having a term of one (1) year and bearing interest at the rate of 14% per annum (the “MangoSoft Secured Note”).  The loan was renewed on January 29, 2010 with a term of one year and bearing interest at the rate of 14% per annum.  LawCash, through its various subsidiaries, is in the business of financing litigations, and the proceeds of the loan was used to fund various plaintiffs’ receivables in the normal course of LawCash’s business.  The Subsidiary’s obligations with respect to the MangoSoft Secured Note are guaranteed by LawCash (the “LawCash Guarantee”), and in addition, Mr. Selig Zises has agreed to guarantee up to $120,000 of losses incurred by the Company in connection with the MangoSoft Secured Note (the “Loss Guarantee”).  The loan maturity date was extended on January 29, 2011 for sixty (60) days and the interest rate was raised to a rate of 16.0% per annum.  We received a partial payment of $200,000 on March 24, 2011.  On March 31, 2011, the loan maturity date was extended for ninety (90) days and the interest rate remained at the rate of 16.0% per annum. On June 28, 2011, the loan was paid in full. Interest income recognized was $31,659 during the six months ended June 30, 2011.

Note payable related party – On December 22, 2010, SSI entered into an unsecured promissory note agreement with Plaintiff Funding Holding, Inc. in the amount of $2,170,471. The agreement provides for interest to be accrued at 1.53% per annum beginning on December 22, 2010 through December 31, 2015, payable on the maturity date.  The loan, including interest accrued, may be prepaid at any time prior to the maturity date.  Interest expense charged to operations during the six months ended June 31, 2011 was $16,474 and is outstanding as of June 30, 2011.  Principal payable under the note agreement is to be repaid in four installments amounting to the lesser of 25% of the original note balance ($542,618) each or 10% of the operating profit of Structured Settlement Investments, LP.  The four installments are due annually beginning on December 31, 2012 through December 31, 2015.

8.   Investments

Investments include certain marketable securities with a fair value of $104,523 at June 30, 2011, which are held in a brokerage account. Fair value is determined for this investment using quoted prices in an active market. This pricing methodology applies to Level 1 investments in the fair value hierarchy.

On May 22, 2009, the Company purchased from a related party, Plaintiff Funding Holding, Inc., d/b/a LawCash (“LawCash”), for the sum of $400,000 (the “Purchase Price”), all of LawCash’s rights, title and interest in certain specified litigations that had been funded by LawCash (the “Cases”).  LawCash, through its various subsidiaries, is in the business of financing personal injury litigations, such as the Cases, and in connection therewith, receives a contingent interest in the proceeds of the potential recovery by a personal injury claimant or litigant.  In accordance with the bill of sale entered into on May 22, 2009 by the Company and LawCash pursuant to which the Company acquired the Cases (the “Bill of Sale”), LawCash will service the Cases pursuant to a master services agreement dated May 22, 2009 (the “Master Services Agreement”) and the Company is entitled to receive from the disposition of the Cases (i) the return of the Purchase Price, and (ii) a return on the Purchase Price of 14% per annum.  This investment is valued at $248,835 at June 30, 2011.  Due to the uncertainty of future cash flows, this investment is on nonaccrual status and accounted for using the cost recovery method of accounting and is classified as a Level 3 asset by the Company.

 

 

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MANGO CAPITAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9.       Subsidiary – Aspyre Settlement Funding, Inc.

On December 22, 2010, the Company acquired SSI from the limited partner, Structured Settlements 2009, LLC, and the General Partner, SSI-GP Holding, LLC (the “GP”).  SSI purchases structured settlements including insurance, legal, lottery and other contractual annuity payment and sells such contracts into a market of private investors.   The partnership re-branded itself using the d/b/a of Aspyre Settlement Funding. On January 20, 2011, a First Amendment to Partnership Interest Purchase Agreement was entered into to ensure that the SSI legal entity would continue until such time as a new corporation was formed to continue the operations of SSI.  Aspyre Settlement Funding, Inc. (“Aspyre”) was incorporated in the State of Pennsylvania effective January 25, 2011 and has since assumed the operations of SSI. By March 31, 2011, the Company issued the remaining stock due to the GP thereby fully consummating the December 22, 2010 acquisition and eliminating any non-controlling interest in SSI previously held by the GP. SSI will be dissolved this year.

10.       Subsequent Events

The Company has evaluated all subsequent events through the date these financial statements are being filed with the Securities & Exchange Commission.

 

Since June 30, 2011, the Company felt it was necessary to put in place work force reductions, at the Company and subsidiary level, in an effort to reduce the overall administrative expenses and cost of sales. Four (4) positions have been eliminated as a result of these work force reductions. The cost savings will not be fully realized until Q4 as certain expenses associated with the work force reductions (such as severance pay) will be paid in Q3. As a result of the eliminations, 100,000 stock options that were previously granted have been cancelled.

 

 

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

This Quarterly Report on Form 10-Q contains 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. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. Our actual results may differ materially from those indicated in the forward-looking statements as a result of the factors set forth elsewhere in this Quarterly Report on Form 10-Q, including under “Risk Factors.” You should read the following discussion and analysis together with our unaudited condensed consolidated financial statements for the periods specified and the related notes included herein. Further reference should be made to our Annual Report on Form 10-K for the period ended December 31, 2010 filed with the Securities and Exchange Commission.

Overview

Structured Settlement Business:

The structured settlement investment business provides liquidity to beneficiaries in the form of cash purchases of future payments to which the sellers are entitled as successful plaintiffs in personal injury, medical malpractice or other litigations.  Structured settlements refer to a contract between a plaintiff and defendant whereby the plaintiff agrees to settle a lawsuit (usually a personal injury, product liability or medical malpractice claim) in exchange for periodic payments over time.  A defendant’s payment obligation with respect to a structured settlement is usually assumed by a casualty insurance company.  This payment obligation is then satisfied by the casualty insurer through the purchase of an annuity from a highly rated insurance company which provides a high credit quality stream of payments to the plaintiff.

Recipients of structured settlements are permitted to sell their deferred payment streams pursuant to state statutes that require certain disclosures, notice to the obligors and state court approval.  Through such sales, we purchase a certain number of fixed, scheduled future settlement payments on a discounted basis in exchange for a single lump sum payment, thereby serving the liquidity needs of structured settlement holders.

Technology Business:

Although, we are evaluating alternate applications for our intellectual property, our technology business currently generates no revenues and is not the main focus of management and as such, management has deemed it unnecessary to report on this business segment until something materially changes.

Costs and Expenses

Cost of Structured Settlement Revenue - The costs of purchasing and selling structured settlements include lump sum payment to annuity holder, fees paid to brokers for introducing the structured settlements, legal expenses and court costs associated with the assignment of the structured settlement to the Company and the investor, and administrative fees.

Operating Expenses - General and administrative expenses consisted primarily of salaries and related personnel costs, marketing and advertising costs, and other general corporate costs such as facility costs, interest, commercial and general liability insurance, accounting and legal expenses and other costs typical of a publicly held corporation.

Workforce - At June 30, 2011, we had eleven (11) employees and outsourced our legal, accounting and payroll functions.

 

 

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Results of Operations – Three Months Ended June 30, 2011 and 2010

Revenues.   Our revenues increased to $544,604 in 2011 from $0 in 2010.  The reason for the increase was due to our recent acquisition of Aspyre Settlement Funding, Inc., formerly SSI.  During the three months ended June 30, 2011, the Company closed nine (9) transactions. There were no revenues recognized from the technology business in the second quarter of 2011 or 2010.

 

Cost of Revenue.   Our cost of revenue increased to $511,044 in 2011 from $0 in 2010.  The reason for the increase was due to increased revenues from our structured settlement business line, which was acquired in December 2010.

Compensation and Payroll Taxes.   Our compensation and payroll taxes increased by 473% to $305,672 in 2011 from $53,340 in 2010.  The reason for the increase was due to the increase in personnel, both through organic growth and the acquisition of SSI.  During the three months ended June 30, 2011, the Company had eleven (11) full-time employees compared to three (3) for the comparable period in 2010.

Marketing and Advertising Expense.   Our marketing and advertising expenses increased to $106,855 in 2011 from $0 in 2010.  The increase was primarily due to the production of two television advertisements for Aspyre.  The commercials were completed in March and are currently airing nationally on select, targeted television stations.

Loss from Operations.   Our loss from operations increased $415,856 to $514,721 for the three months ended June 30, 2011 compared with a loss from operations of $98,865 for the comparable period in 2010, as a result of the above factors.

Interest Income.  Interest income decreased $12,757 to $9,289 for the three months ended June 30, 2011 compared to $22,046 for the comparable period. This interest is related to our investment in LawCash, as described in Note 7 to our unaudited condensed consolidated financial statements.

Realized and Unrealized Investment Gain (Loss).  For the three months ended June 30, 2011, there was $0 in realized gains recognized from the sale of investments and $2,615 in unrealized losses from investments held at Ladenburg Thalmann. For the three months ended June 30, 2010, there was $3,118 in realized gains on the sale of investments and $8,895 in unrealized gains from investments held at Ladenburg Thalmann.

Results of Operations – Six Months Ended June 30, 2011 and 2010

Revenues.   Our revenues increased to $1,783,755 in 2011 from $0 in 2010.  The reason for the increase was due to our recent acquisition of Aspyre Settlement Funding, Inc., formerly SSI.  During the six months ended June 30, 2011, the Company closed twenty-two (22) transactions. There were no revenues recognized from the technology business during the six months ended June 20, 2011 and 2010.

 

Cost of Revenue.   Our cost of revenue increased to $1,595,198 in 2011 from $0 in 2010.  The reason for the increase was due to increased revenues from our structured settlement business line, which was acquired in December 2010.

Compensation and Payroll Taxes.   Our compensation and payroll taxes increased by 776% to $560,162 in 2011 from $63,920 in 2010.  The reason for the increase was due to the increase in personnel, both through organic growth and the acquisition of SSI.  During the six months ended June 30, 2011, the Company had eleven (11) full-time employees compared to three (3) for the comparable period in 2010.

Marketing and Advertising Expense.   Our marketing and advertising expenses increased to $207,809 in 2011 from $0 in 2010.  The increase was primarily due to the production of two television advertisements for Aspyre as well as a targeted web campaign.  The commercials were completed in March and are currently airing nationally on select, targeted television stations.

Loss from Operations.   Our loss from operations increased $686,049 to $839,749 for the six months ended June 30, 2011 compared with a loss from operations of $153,700 for the comparable period in 2010, as a result of the above factors.

Interest Income.  Interest income decreased $12,276 to $31,659 for the six months ended June 30, 2011 compared to $43,395 for the comparable period. This interest is related to our investment in LawCash, as described in Note 8 to our unaudited condensed consolidated financial statements.

Realized and Unrealized Investment Gain (Loss).  For the six months ended June 30, 2011, there was $56,485 in realized gains recognized from the sale of investments and $52,630 in unrealized losses from investments held at Ladenburg Thalmann. For the six months ended June 30, 2010, there was $6,580 in realized gains on the sale of investments and $19,816 in unrealized gains from investments held at Ladenburg Thalmann.

 

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Financial Condition, Liquidity and Capital Resources

At June 30, 2011, we had a cash balance of approximately $261,000 and a working capital balance of approximately $173,000. We do not have any commercial commitments or off balance sheet financing.

On December 22, 2010, the Company acquired SSI from the limited partner, Structured Settlements 2009, LLC, and the General Partner, SSI-GP Holding, LLC.  SSI purchases structured settlements including insurance, legal, lottery and other contractual annuity payment and sells such contracts into a market of private investors.  The Company incurred approximately $115,000 of expenses related to the SSI acquisition.  Also, the Company issued 200,000 shares of restricted common stock related to the SSI acquisition.

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

As shown in the unaudited condensed consolidated financial statements, during the six months ended June 30, 2011 and 2010, we recognized net losses of $804,235 and $83,369, respectively. Cash used in operations during the six months ended June 30, 2011 and 2010 was $666,912 and $187,365, respectively. These factors, among others, raise significant doubt about our ability to continue as a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow and meet our obligations on a timely basis and ultimately attain profitability.

 

 

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.

We carried out an evaluation, under the supervision and with our executive officers, Dennis M. Goett in his role as Chief Executive Officer and President and Sean M. Gavin in his role as Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934).  Based upon that evaluation, the officers concluded that our disclosure controls and procedures are not effective as of June 30, 2011.

We have not made any changes in our internal control over financial reporting during the three months ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

 

 

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ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)               Exhibits:

Number			Description of Exhibit
2.1			Agreement and Plan of Merger by and among First American Clock Co., MangoSoft Corporation and MangoMerger Corp., dated as of August 27, 1999. (1)
3.1			Articles of Incorporation, as amended. (2)
3.2			By-laws. (2)
4.1			Rights Plan. (6)
14			Code of Ethics. (7)
21			Subsidiary of the Registrant. (2)
31.1			Certification of Chief Executive Officer required by Rule 13a 14(a) or Rule 15-d14 (a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of Chief Financial Officer required by Rule 13a 14(a) or Rule 15-d14 (a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1			1999 Incentive Compensation Plan, as amended and restated on May 1, 2000. (1)
99.2			Form of Subscription Agreement for purchase of common stock, dated as of March 20, 2000. (1)
99.3			Form of Warrant Agreement. (1)
99.4			Hosting License Agreement, dated January 1, 2010 between MangoSoft, Inc. and Built Right Networks LLC. (5)
99.5			Partnership Interest Purchase Agreement, dated December 22, 2010 by and among MangoSoft, Inc. (“Buyer”), Structured Settlements 2009, LLC and SSI-GP Holding, LLC. (8)
(1)			Filed as an exhibit to our Current Report on Form 8-K for an event dated September 7, 1999 and hereby incorporated by reference thereto.
(2)			Filed as an exhibit to our Registration Statement on Form 10-SB, filed June 9, 2000, and hereby incorporated by reference thereto.
(3)			Filed as an exhibit to our Quarterly Report filed November 9, 1999 for the quarter ended September 30, 1999 and hereby incorporated by reference thereto.
(4)			Filed as an exhibit to our Current Report on Form 8-K for an event dated September 30, 2002 and hereby incorporated by reference thereto.
(5)			Filed as an exhibit to our Current Report on Form 8-K for an event dated March 21, 2003, as amended on July 25, 2003, and hereby incorporated by reference thereto.
(6)			Filed as an exhibit to our Annual Report filed on March 26, 2004 for the year ended December 31, 2003 and hereby incorporated by reference thereto.
(7)			Filed as an exhibit to our Current Report on Form 8-K for an event dated December 22, 2010 and hereby incorporated by reference thereto.

 

 

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(b)

Reports on Form 8-K:

(1)

On January 29, 2009, Form 8-K was filed indicating that MangoSoft agreed to loan $600,000 to Plaintiff Holding XI LLC, a newly formed wholly owned subsidiary (the “Subsidiary”) of Plaintiff Funding Holding, Inc., d/b/a LawCash. Such loan is evidenced by a secured promissory note issued by the Subsidiary to MangoSoft having a term of one year and bearing interest at the rate of 14% per annum. Each of the Company and LawCash are directly or indirectly controlled by Mr. Selig Zises and Mr. Jay Zises.

(2)

On May 22, 2009, MangoSoft, Inc. (the “Company”) agreed to purchase from Plaintiff Funding Holding, Inc., d/b/a LawCash (“LawCash”), for the sum of $400,000 (the “Purchase Price”), all of LawCash’s rights, title and interest in certain specified litigations that had been funded by LawCash (the “Cases”).  LawCash, through its various subsidiaries, is in the business of financing personal injury litigations, such as the Cases, and in connection therewith, receives a contingent interest in the proceeds of the potential recovery by a personal injury claimant or litigant.  In accordance with the bill of sale entered into on May 22, 2009 by the Company and LawCash pursuant to which the Company acquired the Cases (the “Bill of Sale”), LawCash will service the Cases pursuant to a master services agreement dated May 22, 2009 (the “Master Services Agreement”) and the Company is entitled to receive from the disposition of the Cases (i) the return of the Purchase Price, and (ii) a return on the Purchase Price of 14% per annum.

(3)

Effective December 31, 2009, the Company and Built Right Networks, LLC (“Built Right”) entered into a Hosting License Agreement. Under the terms of this new non-exclusive license, commencing January 1, 2010, Built Right will independently maintain, host and support the Company suite of software offerings and service the Company’s existing customers. Built Right will have the rights to and responsibility for these former client accounts and collect any and all fees related thereto. The Company retains all intellectual property rights. Built Right retains the right to use the Company’s trademarks under the terms of the hosting agreement and will maintain the Company’s web-site for the purposes of continuing these services.

(4)

On January 27, 2010, MangoSoft, Inc. (the “Company”) announced the appointment of Dennis M. Goett as Chief Operating Officer and Chief Financial Officer of the Company as well as his election to the Board of Directors. The Company also announced the transition of its offices to New York. The Company’s new mailing address is 108 Village Square, Suite 315, Somers, New York 10589. The telephone number for the new executive offices is 914-669-5333.

(5)

Effective February 24, 2010, Selig Zises resigned his interim roles as Chairman and CEO of the Company. Dennis Goett replaces Mr. Zises as Chairman and CEO. At that same time, Elliott H. Singer and Joseph Luminoso, were elected to the Company’s Board of Directors. Mr. Singer brings experience in both corporate development and board service. He founded A+ Communications, a telecommunications company, and built it into a $100 million enterprise. He serves on two other boards; Neurologix Inc. and Ameritrans Capital Corporation and is a founding principal of Fairview Advisors, a middle market merchant bank. Mr. Luminoso is a seasoned software and services senior executive who manages Technical Solutions for 3Par, a manufacturer of systems and software for data storage and information management. He has a long history of successful IT management having previously served at SoftNet Technologies, NetApp and Computer Associates. Mr. Luminoso also served on the board of SoftNet Technologies.

(6)

On June 17, 2010, MangoSoft, Inc. (the “Company”) announced the appointment of Sean M. Gavin as its Chief Financial Officer effective May 24, 2010.  Mr. Gavin is a seasoned executive with a strong background in finance, investments, internal audit, analytics and strategic planning and is a Chartered Financial Analyst. With this appointment, Dennis M. Goett, the Company’s Chairman and CEO, relinquished his position as CFO of the Company.

(7)

On December 22, 2010, whereby the Company acquired Structured Settlement Investments, L.P., a Delaware limited partnership, in exchange for 200,000 shares of the Company’s common stock. At the time of the approval of the acquisition, the transaction was valued at $20,000 ($0.10 per share).  On December 27, 2010, the Company announced in a press release (MangoSoft Acquires Structured Settlement Firm) that the Company acquired Structured Settlement Investments, L.P. (“SSI LP”), a Delaware limited partnership that originates, purchases and resells structured settlements from beneficiaries of insurance, litigation and lottery awards. The structured settlement investment business provides liquidity to beneficiaries in the form of cash purchases of streams of future payments which the sellers are entitled to receive over a number of years. SSI LP was formed as a limited partnership in 2005 and has purchased streams of payments in excess of $85 million in the aggregate.

(8)

On March 3, 2011, the Company filed a Form 8-K/A where it announced the following: (i) pursuant to written consent of a majority of the shareholders of the Company, the Company filed an Amendment to the Company’s Articles of Incorporation with the Secretary of State of the State of Nevada changing its name from MangoSoft, Inc. to Mango Capital, Inc.  The Company filed all required notifications with FINRA to effect the change in the name of the Company and simultaneously changed its trading symbol to MCAP effective February 17, 2011. ( See, the Company’s Form 14C filing with the SEC)., (ii) Sean M. Gavin, the Chief Financial Officer of the Company, was elected as corporate Secretary of the Company effective February 16, 2011, simultaneously Dennis M. Goett, the Chief Executive Officer of the Company resigned as corporate Secretary and was elected assistant corporate Secretary, (iii) The agreement to acquire was amended SSI LP was to ensure that the SSI legal entity would continue until such time as Aspyre Settlement Funding, Inc. (“Aspyre”) could be organized and that Aspyre Settlement Funding, Inc. was incorporated as a Pennsylvania domestic corporation effective January 25, 2011, and (iv) the Company entered into a First Amendment to Secured Promissory Note amending the Maturity Date of the Secured Promissory Note, for an initial period of sixty (60) days, in exchange for the accrual of a higher rate of interest.

 

 

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SIGNATURE

In accordance with 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 15, 2011	MANGO CAPITAL, INC.
	/S/ Dennis M. Goett
	Dennis M. Goett
	Chief Executive Officer
August 15, 2011	MANGO CAPITAL, INC.
	/S/ Sean M. Gavin
	Sean M. Gavin
	Chief Financial Officer

 

 

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