Mail Stop 4561
October 21, 2005
Steven D. Rudnik
Chief Executive Officer, President and
Director
Magnitude Information Systems, Inc.
401 State Route 24
Chester, NJ 07930
Re: Magnitude Information Systems, Inc.
Form 10-KSB for the Fiscal Year Ended
December 31, 2004
Filed March 30, 2005
File No. 000-32485
Dear Mr. Rudnik:
We have reviewed your response to our letter dated September
8,
2005 in connection with our review of the above referenced filings
and have the following comments. Please note that we have limited
our review to the matters addressed in the comments below. We may
ask you to provide us with supplemental information so we may
better
understand your disclosure. Please be as detailed as necessary in
your explanation. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Consolidated Statements of Operations, page 3
1. Please refer to comment 1 of our letter dated September 8,
2005.
We note in your response that you believe that you have properly
reflected the stock based compensation as one line item in your
consolidated statements of operations as all relate to selling,
general and administrative expense. As noted in our previous
comment, stock based compensation related to selling, general and
administrative expenses can continue to be shown as one line item
in
your statements of operations. However, you must provide either a
footnote disclosure or disclosure below your statement of
operations
indicating that all of your stock based compensation relates to
selling, general and administrative expenses. Revise your
presentation by allocating the total amount of stock based
compensation expense to the selling, general and administrative
expense line item or provide the appropriate disclosure on the
face
of the statements of operations or in a footnote indicating that
such
stock based compensation relates solely to selling, general and
administrative expense.
Summary of Significant Accounting Policies
Securities Issued for Services, page 10
2. Please refer to comment 2 and 3 of our letter dated September
8,
2005. We are unable to conclude on your response as it relates to
the fair value of your options/warrants issued to non-employees
and
employees for services until you file your amendment with the
revised
financial statements and disclosures. Please ensure that when you
file the amended Exchange Act reports you supplementally provide
the
Staff with detailed support to your revisions, including the
adjustments to periods prior to January 1, 2003.
3. Please refer to comment 4 of our letter dated September 8,
2005.
We reissue our previous comment to provide us with a schedule of
options/warrants granted in exchange for services to both
employees
and non-employees that includes (a) the date of grant, (b) the
number
of option granted, (c) the name of the recipient, and (d) the fair
value of the options/warrants and the assumptions and method used
to
determine such value. This schedule should be provided for each
period in which an income statement is presented, including the
interim period through the date of your response.
General
4. Tell us how you will consider the revisions to your financial
statements in disclosing information relating to your disclosure
controls and procedures and your internal controls, pursuant to
Item
307 and 308 of Regulation S-K in your periodic Exchange Act
reports.
In this regard, we note your current disclosure in your Form 10-
KSB
and subsequent 10-QSB`s that your Chief Executive Officer and
Chief
Financial Officer have concluded that your disclosure controls and
procedures were effective. Tell us whether you consider your
disclosure controls and procedures effective as of the end of the
periods covered by these reports notwithstanding the recent
restatement in your 10-KSB for the year ended December 31, 2004
and
your 10-QSB`s for the quarters ended March 31, 2005 and June 30,
2005
and tell us whether you considered Exchange Act Rule 13a-15(e) and
the requirement that your controls and procedures ensured that
information required to be disclosed by you in the reports that
are
filed or submitted under the Exchange Act are recorded, processed,
summarized and reported, within the time periods specified in the
Commission`s rules and forms. If necessary, please revise to
expressly identify any material weaknesses in your internal
controls
over financial reporting and any significant deficiency that, when
combined with other significant deficiencies, is determined to be
a
material weakness or conversely state that even as a result of the
internal control concerns that caused your recent restatement, you
did not have a material weakness or significant deficiencies.
5. We note from your responses that you plan on amending your 2004
10-KSB and subsequent 10-QSB filings. Tell us what consideration
you
have given to filing and Item 4.02 8-K in connection with the
restatement of your financial statements in the aforementioned
filings.
6. In connection with our prior comment letter dated September 8,
2005, we note that you did not provide, as previously requested, a
statement in writing that the company acknowledges that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
Please provide us with these acknowledgements and be advised that
a
letter signed by counsel would not satisfy the requirement of this
comment. In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff
of
the Division of Corporation Finance in our review of your filing
or
in response to our comments on your filing.
* * * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. Please submit all correspondence and
supplemental
materials on EDGAR as required by Rule 101 of Regulation S-T. You
may wish to provide us with marked copies of any amendment to
expedite our review. Please furnish a cover letter with any
amendment that keys your responses to our comments and provides
any
requested information. Detailed cover letters greatly facilitate
our
review. Please understand that we may have additional comments
after
reviewing any amendment and your responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
You may contact Patrick Gilmore at (202) 551-3406 or me at
(202)
551-3730 if you have questions regarding comments on the financial
statements and related matters.
Sincerely,
Kathleen Collins
Accounting Branch Chief
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Steven D. Rudnik
Magnitude Information Systems, Inc.
October 21, 2005
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