Joseph J. Tomasek
77 North Bridge Street
Somerville, New Jersey 08876
October 28, 2005
FOR THE EXCLUSIVE USE
OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
VIA EDGAR AND OVERNIGHT DELIVERY Filing Desk Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20005
Attention: Barbara C. Jacobs, Assistant Director
RE: Magnitude Information Systems, Inc. (the "Company")
Schedule 14A Filed September 29, 2005
Commission File No. 0-32485
Dear Ms. Jacobs:
On behalf of the Company, we are filing today Amendment No. 1 to the
Company's Schedule 14A Proxy Statement filed with the Commission on September
29, 2005 (the "Amendment") via Edgar and in response to the comments set forth
in the Staff's letter to Mr. Steven D. Rudnik, President of the Company, dated
October 6, 2005.
For the convenience of the Staff's review, we are enclosing three (3)
paper copies of the Amendment marked to indicate changes made to the original
filing, together with copies of the Staff's letter to the Company, dated October
6, 2005, which contains seven numbered paragraphs.
Please be advised that Company management has determined to call a
Special Meeting of Stockholders, tentatively scheduled for December 7, 2005, to
not only include a stockholder vote on the Certificate of Amendment to the
Company's Certificate of Incorporation, increasing the number of authorized
common shares, but to also include a stockholder vote on election of directors,
the approval of an amendment to the employment agreement of Steven D. Rudnik,
the Company's President and Chief Executive Officer, and the ratification of the
appointment of the Company's auditors for fiscal year 2005. Accordingly, the
Amendment includes substantial new information and disclosures required under
Schedule 14A and Regulation S-B.
The Company's responses to the Staff's comments set forth in the Staff
letter dated October 6, 2005 letter are as follows:
Barbara C. Jacobs, Assistant Director
Securities and Exchange Commission
October 28, 2005
Page 2
Comment No. Company Response
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 mean 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 ration.
Please be advised that the disclosures, referred to by the Staff in the
last paragraph on page 3 of the original filing, have been clarified to
clearly state that the Company intends to reissue the 4,507,709 stock
options and 2,281,916 warrants and that these reissued options and
warrants will have the same terms and provisions as those previously
surrendered and will also have an equal amount of underlying common shares
as those surrendered as well at page 14 of the Amendment.
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 they 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.
Pursuant to the Staff's comment, we have revised the disclosure concerning
management's current plans to use any of the newly authorized common
shares to discuss the plans, proposals or arrangements to issue any of the
newly authorized shares of common stock in equity financings: the
disclosure of Company management's intention to offer up to 4,166,666
units, consisting of 1 common share and 1 common stock purchase warrant
and the proposed offering terms is found at page 16 of the Amendment.
Please be advised that Company management has no current plans, proposals
or arrangements to issue common stock to effect acquisitions, equity
financings, stock dividends or stock splits or other transactions except
as expressly set forth in the Amendment which contains a representation to
this effect at page 17 of the Amendment.
Barbara C. Jacobs, Assistant Director
Securities and Exchange Commission
October 28, 2005
Page 3
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.
As stated in this correspondence and reflected in the Amendment, the
Company has amended its original filing to substitute a Special Meeting of
Stockholders to vote on the matters set forth in the Notice of Special
Meeting at page 2 of the Amendment in lieu of a consent solicitation.
Pursuant to the Staff's comment, we have disclosed that the stock
issuances, including the number of common shares underlying outstanding
stock options, warrants, convertible preferred stock and those subject to
irrevocable subscription agreements are included in the 139,106,672 number
of common shares currently outstanding, as well as disclosing the
Company's current plans to reissue surrendered stock options, warrants and
common shares to its officers and directors and the projected number of
shares the Company intends to offer to accredited investors in its current
private placement, identifying the projected aggregate common share
requirement number of 224,035,192 common shares that will be outstanding
pursuant to the Company's current plans and provided Proposal Two is
approved by stockholders.
Pursuant to the Staff's request, the Amendment includes a new disclosure
discussing the consequences of the failure to obtain the requisite
shareholder approval of the amendment to the Company's Certificate of
Incorporation at page 17 of the Amendment.
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.
Pursuant to the Staff's comment, a new disclosure informing stockholders
that management might use the additional common shares to resist or
frustrate a third-party transaction providing an above-market premium that
is favored by a majority of the independent shareholders has been inserted
into the Amendment at page 17. In further response to the Staff's comment,
a new disclosure stating that the Company's Certificate of Incorporation
or Bylaws do not contain any other provisions which the Company reasonably
believes have any anti-takeover effects and that the Company has no
current plans or proposals to adopt other provisions or enter into other
arrangements that may have material anti-takeover consequences at page 18
of the Amendment.
Barbara C. Jacobs, Assistant Director
Securities and Exchange Commission
October 28, 2005
Page 4
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.
In response to the Staff's comment, a disclosure informing shareholders of
their right to revoke his or her proxy at any time prior to its exercise
by giving notice to the Secretary of the Company in person, or by written
notification actually received by the Secretary prior to the exercise of
the proxy at the Special Meeting of Stockholders in the last paragraph of
the Notice of Special Meeting of Stockholders, page 2 of the Amendment,
and in the first paragraph of page 1 of the proxy statement.
6. Please advise us how you will determine the deadline date for the written
consents.
In response to the Staff's comment and as set forth in the Amendment,
Company management has tentatively fixed December 7, 2005 as the date for
the Special Meeting of Stockholders.
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.
Please be advised that Company management will clearly identify all
exhibits included in the Amendment by the file number of the
Amendment/Proxy Statement, the filing date and will assign a specific
Exhibit number in accordance with Rule 411 of Regulation C in all other
filings the Company shall make with the Commission.
Barbara C. Jacobs, Assistant Director
Securities and Exchange Commission
October 28, 2005
Page 5
Please be advised that pursuant to Staff letters from Kathleen Collins,
Accounting Branch Chief to Steven D. Rudnik, President and Chief Executive
Officer of the Company, dated September 8, 2005 and October 21, 2005,
respectively, the Company is filing via Edgar today its Amendment No. 1 to
its Form 10-KSB for the fiscal year ended December 31, 2004, Amendment No.
1 to its Form 10-QSB for the quarter ended March 31, 2005, Amendment No. 1
to its Form 10-QSB for the quarter ended June 30, 2005 and its current
report on Form 8-K in connection with the restated financial statements
contained in these amendments.
Please be further advised that the Company is filing today via Edgar the
acknowledgments by the Company's officers and directors, of their
respective obligations and responsibilities in connection with the
accuracy and adequacy of the disclosures contained in the subject Company
reports filed with the Commission.
Very truly yours,
/s/ Joseph J. Tomasek
Joseph J. Tomasek, Esq.
Encl.
c: Commission Staff:
Daniel Lee, Esq.
Anne Nguyen, Special Counsel
Board of Directors:
Magnitude Information Systems, Inc.
SEC Letter- MAGY.14A filed Sept. 29, 2005- 10-26-05
Magnitude Information Systems, Inc.
401 State Route 24
Chester, New Jersey 07930
October 20, 2005
FOR THE EXCLUSIVE USE
OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
VIA EDGAR AND OVERNIGHT DELIVERY
- --------------------------------
Filing Desk Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20005
Attention: Kathleen Collins, Accounting Branch Chief
RE: Magnitude Information Systems, Inc. (the "Company")
Form 10-KSB for the Fiscal Year Ended
December 31, 2004
Filed March 30, 2005
File No. 000-32485
Dear Ms. Collins:
The undersigned, including the Chief Executive Officer and the Chief
Financial Officer, comprising the executive officers of the Company, and all of
the four (4) directors of the Company, hereby acknowledge to the Commission
their respective obligations in connection with Amendment No. 1 to the Company's
Form 10-KSB for the fiscal year ended December 31, 2004 and Amendments No. 1 to
the Company's Forms 10-QSB for the quarters ended March 31, 2005 and June 30,
2005 (collectively, the "Filing"), filed with the Commission via Edgar on or
about October 21, 2005, which include that:
o the Company is responsible for the adequacy and accuracy of the
disclosures in the Filing;
o Staff comments or changes to disclosures in the Filing and the
Company's responses to Staff comments do not foreclose the
Commission from taking any action with respect to the Filing; and
Barbara C. Jacobs, Assistant Director
Securities and Exchange Commission
October 20, 2005
Page 7
o 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.
Very truly yours,
MAGNITUDE INFORMATION SYSTEMS, INC.
By: /s/ Steven D. Rudnik
-----------------------------------
Steven D. Rudnik, President, Chief
Executive Officer and Director
By: /s/ Joerg H. Klaube
------------------------------------
Joerg H. Klaube, Chief Financial
Officer
By: /s/ Steven Gray
------------------------------------
Steven Gray, Director
By: /s/ Ivano Angelastri
------------------------------------
Ivano Angelastri, Director
By: /s/ Joseph J. Tomasek
-------------------------------------
Joseph J. Tomasek, Director