Room 4561
October 6, 2005
Mr. Steve D. Rudnik
President
Magnitude Information Systems, Inc.
401 State Route 24
Chester, New Jersey 07930
Re: Magnitude Information Systems, Inc.
Schedule 14A filed September 29, 2005
File No. 0-32485
Dear Mr. Rudnik:
This is to advise you that we have limited our review of the
above filing to the matters addressed in the comments below.
Where
indicated, we think you should revise your document in response to
these comments. If you disagree, we will consider your
explanation
as to why our comment is inapplicable or a revision is
unnecessary.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with supplemental
information so we may better understand your disclosure. After
reviewing this information, we may or may not 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.
Purpose and Approval of Amendment..., page 3
1. In the last paragraph on page 3, you state that you "intend to
reissue the 4,507,709 stock options and 2,283,916 warrants also
surrendered...with an equal amount of common shares underlying
these
securities." Elsewhere in your disclosure, however, you appear to
state that upon approval of the amendment increasing your number
of
shares authorized the surrendered options and warrants will be
replaced by the granting or issuance of options and warrants on
the
same terms and provisions as that surrendered. Please clarify.
For
example, if you meant that you will reissue the options and
warrants
and that these reissued options and warrants will have the same
terms
and provisions and have an equal amount of underlying common
shares
underlying as those that were surrendered, please so state. If
the
options and warrants are not convertible into common shares on a
one-
to-one basis, disclose the conversion or exercise ratio.
2. You state that, "The Board of Directors has approved this
amendment to...have the additional shares of Common Stock
available
for general corporate purposes, including acquisitions, equity
financings, stock dividends or stock splits." You also state that
"[a]part from utilizing these new common shares... [for the
replacement of the surrendered options, warrants and shares] and
for
issuance in future equity financings," you have no current plans
for
the increased authorized capital. From the foregoing statement,
it
appears that there may be plans for the issuance of common stock
in
connection with future equity financings. Please revise your
disclosure to discuss the plans, proposals or arrangements to
issue
any of the newly authorized shares of common stock in equity
financings and include materially complete descriptions of the
future
financing transactions. In addition, if you currently have plans
proposals or arrangements to issue to effect acquisitions, equity
financings, stock dividends or stock splits or other transactions
that would involve the issuance of your common stock, please
discuss
these and their material terms.
3. We note your discussion of stock issuances on page 6. Please
discuss how such disclosure relates to your request for written
consent from stockholders for the amendment to your charter.
Please
clarify your disclosure. For example, please disclose if the
shares
issued in the discussed issuances are currently included in the
disclosure at the bottom of page 6 regarding the number of shares
of
outstanding common stock, stock option, warrants, convertible
preferred stock and irrevocable subscription agreements. With
respect to your on-going private placement, please disclose the
number of shares that may be issuable until such time that the
private placement is completed. Finally, please discuss the
consequences of the failure to obtain the requisite shareholder
approval for the amendment to your charter.
4. We note your discussion of the possible anti-takeover effects
of
the increase in authorized shares. Inform holders that management
might use the additional shares to resist or frustrate a third-
party
transaction providing an above-market premium that is favored by a
majority of the independent shareholders. Please also discuss
other
anti-takeover mechanisms that may be present in your governing
documents or otherwise and whether you have any plans or proposals
to
adopt other provisions or enter into other arrangements that may
have
material anti-takeover consequences.
The Consent Procedure, page 7
5. Please clarify what information must be included in a written
notice of revocation and whether adherence to any form of such
notice
is necessary.
6. Please advise us how you will determine the deadline date for
the
written consents.
Exhibit A: Certificate of Amendment of Certificate of
Incorporation
7. Please be advised that, should you wish to incorporate by
reference this Exhibit A into other filings with us, the Exhibit
will
need to be clearly identified in the reference by caption or
otherwise, including the file number of this Schedule 14A and the
filing date so that readers may easily locate this Exhibit. See
Rule
411 of Regulation C. As an example, we note that in the Form 10-
KSB
for the year ended December 31, 2004, under Exhibit 3(i), you
provide
a reference to "Articles of Incorporation and Amendments thereto,
incorporated herein by reference to Exhibits of previous filings
with
the Commission." This reference is insufficient. Please ensure
that
future filings will comply with Rule 411.
* * * *
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. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested supplemental information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendments and
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings to be certain that the
filings includes all information required under the Exchange Act
and
that they have provided all information investors require for an
informed investment 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.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging 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.
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 connection with our review of
your
filing or in response to our comments on your filing.
You may contact Daniel Lee at (202) 551-3477, or Anne
Nguyen,
Special Counsel, at (202) 551-3611, with any questions. If you
need
further assistance, you may contact me at (202) 551-3730.
Sincerely,
Barbara C. Jacobs
Assistant Director
cc: Via Facsimile
Joseph J. Tomasek, Esq.
75-77 North Bridge Street
Somerville, New Jersey 08876
Facsimile: (908) 429-0400