SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-KSB





x
      ANNUAL REPORT PURSUANT
      TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934





For
      the
      Fiscal Year ended December 31, 2007




OR





o
      TRANSITION REPORT
      PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE OF
      1934





For
      the
      Transition Period From______ to_____




Commission
      File No. 33-20432





MAGNITUDE
      INFORMATION SYSTEMS, INC.


Exact
      Name of Registrant as Specified in its Charter




DELAWARE
            
            75-2228828State
                or Other Jurisdiction
                of
              Incorporation
                or Organization
            
            IRS
                Employer
              Identification
                Number





1250
      State Route 28, Ste. 309, Branchburg, New Jersey 08876


Address
      of Principal Executive Offices Zip Code





(908)
      879-2722


Registrants
      Telephone Number, Including Area Code




Securities
      Registered Pursuant to Section 12(b) of the Act:


NONE





Title
                of Each Class
            
            Name
                of Each Exchange on Which RegisteredNONE
            
            NONE





Securities
      Registered pursuant to Section 12(g) of the Exchange Act:


Common
      Stock, par value $0.0001




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of 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
x No
o





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-B is not contained herein, and will not be contained, to the best
      of registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB. o





The
      Registrant’s revenues for the fiscal year ended December 31, 2007 were
      $29,745.





Common
      stock, par value $.0001 per share (“Common Stock”), was the only class of voting
      stock of the Registrant outstanding on March 28, 2008. Based on the closing
      price of the Common Stock on the OTC Electronic Bulletin Board as reported
      on
      March 28, 2008, ($0.02), the aggregate market value of the 63,685,964 shares
      of
      the Common Stock held by persons other than officers, directors and persons
      known to the Registrant to be the beneficial owners (as the term is defined
      under the rules of the Securities and Exchange Commission) of more than five
      percent of the Common Stock on March 28, 2008, was approximately $ 1,273,719.
      By
      the foregoing statements, the Registrant does not intend to imply that any
      of
      the officers, directors, or beneficial owners are affiliates of the registrant
      or that the aggregate market value, as computed pursuant to rules of the
      Securities and Exchange Commission, is in any way indicative of the amount
      which
      could be obtained for such shares of Common Stock.





As
      of
      March 28, 2008, 376,242,570 shares of Common Stock, $.0001 par value, were
      outstanding.





DOCUMENTS
      INCORPORATED BY REFERENCE: SEE EXHIBIT INDEX









MAGNITUDE
      INFORMATION SYSTEMS, INC.




CONTENTS


PagePART I.Item
                  1.
              Business
              3Item
                  2.
              Properties
              12Item
                  3.
              Legal
                  Proceedings
              12Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              12PART
                  II.Item
                  5.
              Market
                  for Registrant's Common Equity and Related Shareholder
                  Matters
              13Item
                  6.
              Management’s'
                  Discussion and Analysis of Financial Conditionand
                  Results of Operations
              16Item
                  7.
              Financial
                  Statements and Supplementary Data
              20Item
                  8.
              Changes
                  in and Disagreements with Accountants on Accounting andFinancial
                  Disclosure
              20Item
                  8A.
              Management’s
                  Annual Report on Internal Control Over Financial Reporting
              20Item
                  8B.
              Other
                  Information
              21PART
                  III.Item
                  9.
              Directors
                  and Executive Officers of the Registrant
              22Item
                  10.
              Executive
                  Compensation
              24Item
                  11.
              Security
                  Ownership of Certain Beneficial Owners and Management
              29Item
                  12.
              Certain
                  Relationships and Related Transactions
              31Item
                  13.
              Principal
                  Accountant Fees and Services
              31Item
                  14.
              Exhibits
              33Signatures
              34Exhibit
                Index
              35





2




**PART
      I**


**ITEM**  **1:**  **BUSINESS**




Section
      1.1  The
      Company




Magnitude
      Information Systems, Inc. (the “Company”) was incorporated as a Delaware
      corporation on April 19, 1988 under the name Fortunistics, Inc. On November
      18,
      1998, the Company changed its name to Magnitude Information Systems, Inc. The
      Company owns substantially all outstanding stock of Magnitude, Inc., an
      operating subsidiary. The 1% of Magnitude, Inc. not owned by the Company
      constitutes a minority interest which is valued at $0.





On
      August
      16, 2007 the Company acquired all outstanding shares of Kiwibox Media,
      Inc.





The
      Company, Magnitude, Inc. and Kiwibox Media Inc. are separate legal entities,
      with Kiwibox Media, Inc. being a wholly owned subsidiary. The operations of
      the
      combined entity are currently comprised almost exclusively of the operations
      of
      Kiwibox Media, Inc.





Prior
      to
      the implementation of its strategic business plan in 2007, the Company’s primary
      product was an integrated suite of proprietary software modules previously
      marketed under the name ErgoEnterpriseTM. During the latter half of fiscal
      year 2006, Company management concluded that the marketplace for the Company’s
      ergonomic software products was not developing, and would not develop to the
      material extent necessary in the next 12 to 24 months, to support and sustain
      the Company’s sales efforts. Accordingly, management determined that it would be
      in the best interests of the Company and its shareholders to identify another
      business opportunity and pursue it for the benefit of our shareholders. On
      February 19, 2007, the Company, pursuant to its strategic plan to seek another
      business opportunity, signed an Agreement and Plan of Reorganization with the
      owners of a social networking website, to acquire their Kiwibox.com website
      and
      business, represented by Kiwibox Media, Inc. Pursuant to that certain Agreement
      and Plan of Reorganization, in August, 2007, Kiwibox Media, Inc. merged with
      and
      into Magnitude Operations, Inc., a wholly owned subsidiary of Magnitude
      Information Systems, Inc., in a “reverse merger” transaction. The three
      shareholders of Kiwibox Media, Inc. transferred and delivered all of the
      outstanding stock of Kiwibox Media, Inc. to Magnitude Operations, Inc. for
      cancellation **** and
      received in exchange shares of Magnitude Information Systems, Inc. at closing.
      Also at closing and as a result of the merger, the separate legal existence
      of
      Magnitude Operations, Inc. ceased and Kiwibox Media, Inc. became the surviving
      corporation of the merger and a wholly owned subsidiary of Magnitude Information
      Systems, Inc. Following the merger, Magnitude Information Systems, Inc. is
      planning to change its corporate name to “KiwiAge Enterprises, Inc .”





The
      Company is currently subject to the reporting requirements of Section 15(d)
      of
      the Securities Exchange Act of 1934. The Company has the authority to issue
      an
      aggregate of Seven Hundred Million (700,000,000) Common Shares, par value
      $.0001, and Three Million (3,000,000) Preferred Shares, par value $.001, of
      which at December 31, 2007, Two Thousand Five Hundred (2,500) were designated
      as
      Cumulative Preferred Shares, par value $.001; Three Hundred Thousand (300,000)
      were designated as Series A Senior Convertible Preferred Stock, par value
      $0.001; Three Hundred Fifty Thousand (350,000) were designated as Series B
      Senior Convertible Preferred Stock, par value $0.001; One Hundred Twenty
      Thousand (120,000) were designated as Series C Senior Convertible Preferred
      Stock, par value $0.001; Five Hundred Thousand (500,000) were designated as
      Series D Senior Convertible Preferred Stock, par value $0.001; Five Hundred
      Thousand (500,000) were designated as Series E Senior Convertible Preferred
      Stock, par value $0.001, and Forty-Three Thousand Six Hundred Ten (43,610)
      were
      designated Series G Senior Convertible Preferred Stock





As
      of
      December 31, 2007, there were outstanding 276,709,237 Common Shares, 1
      Cumulative Preferred Share, and 129,500 Convertible Preferred
      Shares.




3





**Item
      1. Description of Business**





Overview





Through
      our subsidiary, we own and operate “Kiwibox.com”, a social networking website
      for teens. **** Initially
      launched in 1999, Kiwibox.com is an online social networking website dedicated
      to teen users. With approximately 1.8 million registered members, the Kiwibox
      website provides online content in several categories, dedicated to teens,
      including entertainment, fashion and games. We have formed a user-based
      contingent of contributors that submit, review and comment upon content and
      articles from all over the world, 24 hours a day, seven days a week. Kiwibox.com
      uses a “points” reward system for users, where a user may acquire elevated peer
      status and/or earn prizes which in many cases are provided by advertiser and/or
      sponsors. We are in the final stages of re-launching our website with increased
      functions, etc., scheduled for release in May, 2008.”





Our
      Prior
      Ergonomic Software Business





Early
      in
      2007, Company management determined that it would be in the best interests
      of
      shareholders to acquire the new business opportunity presented by the Kiwibox
      social networking business. In making its decision, management considered the
      following factors:





·
            The
                Company’s ergonomic software business had not generated sales and revenues
                sufficient to  support its continuing
                operations;





·
            The
                acquisition of Kiwibox would provide the Company and its shareholders
                with
                the opportunity to acquire and expand a product in the growing social
                networking website industry and provide the Company with, perhaps,
                a
                better platform with which to raise equity capital;





·
            The
                Kiwibox.com website was a functional platform, already generating
                some
                revenue while the two other business opportunities that the Board
                reviewed
                and considered in early 2007 would have required further development
                before they could have been launched,
                and;





·
            On
                April 10, 2007, pursuant to negotiations that began earlier in the
                year,
                we entered into a License and Client Software Support Agreement with
                Imminent Technologies, LLC ("IMT"), pursuant to the principal terms
                of
                which, we appointed IMT as a non-exclusive licensee/reseller for
                our suite
                of ergonomic software products (the "Software"), appointing IMT as
                our
                exclusive agent to provide support services to our current customers
                with
                service contracts. The Agreement permits IMT to resell and sublicense
                the
                Software worldwide at prices determined exclusively by IMT. IMT will
                pay
                us a royalty payment equal to 10% of the gross revenues in excess
                of
                $200,000 earned from the sale of the Software during each year of
                the
                Agreement. We agreed to pay IMT $20,000 to assist IMT in providing
                the
                customer support services in the commencement and transition period.
                The
                Agreement will automatically renew for successive one-year periods
                unless
                terminated by a party.





The
      Kiwibox Acquisition





On
      August
      16, 2007, we acquired Kiwibox Media, Inc. through a reverse merger between
      Kiwibox and our wholly owned acquisition subsidiary. As a result of the merger,
      Kiwibox became our wholly owned subsidiary.





At
      the
      Kiwibox closing, we (1) issued an aggregate 30,000,000 restricted common shares
      to the three Kiwibox shareholders,  (2) issued an aggregate 43,610 shares
      of our Senior Convertible Series G Preferred stock to these principals, (3)
      paid
      an aggregate $150,000 in cash to these Kiwibox principals, less a $7,000
      investment banking fee paid to Southridge Investment Group, and (4) signed
      two-year employment agreements with Messrs. Lin Dai, Ivan Tumanov and Michael
      Howard, the three Kiwibox shareholders, all pursuant to the terms and provisions
      of the Agreement and Plan of Reorganization, dated February 19, 2007, and
      amendments thereto, and as most recently modified by Amendment No. 6
      between the parties on February 28, 2008. The
      43,610 Series G Preferred Shares issued to the Kiwibox principals at closing
      have an aggregate conversion value of $500,000 (the “Conversion Value”), which
      $500,000 Conversion Value is convertible into our common shares by dividing
      it
      by the “Market Price”, representing the average price of our common stock during
      the twenty (20) successive trading days immediately preceding the second
      anniversary of the agreement. At the closing, the Company agreed to issue
      750,000 of the Kiwibox shareholders’ restricted common shares to Southridge
      Investment Group, LLC as part of its fee.




4




As
      previously reported on our prior Form 8-K current report of August 2, 2007,
      the
      Swiss investment firm, Tell Capital AG, issued its commitment to subscribe
      to
      purchase an aggregate $3,000,000 of Company equity securities. This commitment
      provided us with the funds to close the Kiwibox acquisition.





As
      of the
      date of this report, Tell Capital AG and its assignees have invested $1,800,000.
      We used these subscription proceeds to pay the Kiwibox principals $150,000
      due
      under our original agreement and to fund the Kiwibox business development and
      our corporate operating expenses. Most of the scheduled subscription payments
      from Tell Capital AG were late and we negotiated a series of six amendments
      and
      two standstill agreements with the Kiwibox principals. As a result of these
      amendments, we made $250,000 in cash payments to the Kiwibox principals and
      still owe them approximately 30,000,000 common shares and a payment against
      a
      corporate promissory note in the principal amount of $225,000 due June 15,
      2008. On
      March
      7, 2008, we closed on a private placement with 10 accredited investors and
      received subscription proceeds of $1,500,000. As a result, we met the last
      funding requirements for the acquisition and all conditions, including the
      Kiwibox right of rescission, terminated.





At
      the
      Kiwibox closing, we signed and delivered employment agreements with the three
      Kiwibox principals, covering a two year term and agreed to pay each Kiwibox
      Shareholder an annual base salary of $150,000. In addition, we agreed to pay
      each an annual bonus if certain business goals are met: a $100,000 bonus if
      the
      Kiwi Business has received no less than an average 215,000 “Unique Visitors”
during either the 10th, 11th or 12th month of the first year of the term or
      achieved no less than $316,000 in gross revenues within the 12 moth period
      following the Closing. Alternatively, we agreed to pay each a $50,000 bonus
      if
      the Kiwi Business has received at least an average 175,000 but less than an
      average 215,000 “Unique Visitors” during either the 10th, 11th or 12th month of
      the first year of the term or at least $237,000 in gross revenues but less
      than
      $316,000 within the 12 moth period following the Closing. A “Unique Visitor” is
      a person who visits a Kiwibox website during any month during the term. For
      the
      second year of their employment agreements, we agreed to pay each a $100,000
      bonus if the Kiwi Business has received no less than an average 550,000 Unique
      Visitors during either the 22nd, 23rd or 24th month of the second year of the
      term or attained $1,961,000 in gross revenues, or a bonus of $50,000 each if
      the
      Kiwi Business has received at least an average 415,000 but less than an average
      550,000 Unique Visitors during either the 22nd, 23rd or 24th month of the second
      year of the term or attained at least $1,500,000 in gross revenues but less
      than
      $1,961,000. Each Kiwibox Shareholder received a stock option to purchase up
      to
      7,500,000 shares of our common stock at an exercise price of $.05 per share
      which shall vest and be exercisable by the Kiwibox Shareholders, 50% on the
      first anniversary date of the Closing, 25% 18 months after the Closing and
      25%
      on the second anniversary of the Closing. Each was issued, as well, under the
      terms of their employment agreements, a performance stock option to purchase
      up
      to an additional 3,000,000 shares of our common stock, 1,500,000 of which
      options shall vest and be exercisable by the Kiwibox Shareholders after the
      first anniversary date of the Closing if the Kiwi Business has received no
      less
      than an average 215,000 Unique Visitors during either the 10th, 11th or
      12 th month of
      the first year of the term or achieved $316,000 in gross revenues during the
      first year, and the balance, or 1,500,000 options shall vest and be exercisable
      by the Kiwibox Shareholders after the second anniversary date of the Closing
      if
      the Kiwi Business has received at least an average 550,000 Unique Visitors
      during either the 22nd, 23rd or 24th month of the second year of the term or
      achieved $1,961,000 in gross revenues during the second year of the agreements.
      The exercise prices for these stock options is $.05 per share.




5




History





Kiwibox.com
      was founded in 1999 by 3 students attending Carnegie Mellon University.
      Kiwibox.com was built as an online destination for teens, combining editorial
      content with interactive community features. Kiwibox.com produces a “For Teen by
      Teens” Online Magazine, and currently has over one-thousand (1,000) active
      member contributors and editors. This user generated entertainment content
      is
      managed though a proprietary Kiwibox.com editorial system that is unique to
      Kiwibox.com, and is highly acclaimed by the user base. Acceptance of this model
      was demonstrated through through exponential membership growth during the first
      two years of operations. This membership growth required better access to
      entertainment and content sources, advertisers, and business partners, thus
      in
      2000 Kiwibox relocated from Pittsburgh to New York City. When the 2001 “dot-com”
bubble burst in 2001 many Internet advertising agencies as well as Kiwibox
      competitors were forced out of business. In response Kiwibox.com reduced its
      operations and focused on maintaining and growing its membership community,
      while establishing itself as a highly trusted and safe teen destination.. As
      the
      Internet Advertising industry recovered over the next 6 years, Kiwibox.com
      steadily grew its registered membership base to 1.8 million.





Kiwibox
      Operations





In
      the
      United States alone the teenage population is approximately 44 million, as
      estimated by the US Census Bureau, and they spent over $189 billion in 2006
      according to eMarketer. Spending by and on teens is projected to grow to 208
      billion by 2011. To reach teens online, marketers will increasingly look to
      social networks. According to eMarekter, advertising on social networking
      websites is projected to be over $2 billion for 2008 and to grow to over $4
      billion by 2011. Today’s teenagers are the first generation to grow up using the
      Internet for everything from entertainment and information, to shopping and
      communication. In fact, according to the Pew Internet and American Life Project,
      83 percent of U.S. teenagers are online. And although there are a number of
      websites that have targeted this large marketplace no one site has yet to
      dominate it. We will strive through technology and content enhancements to
      make
      the Kiwibox.com website one of the most exciting teenage, multimedia sites
      available





Re-launch
      of our Website “2.0”





Kiwibox.com
      has been one of the pioneer web sites combining content and community features
      for teens. Over the past several years, new web technologies have emerged
      offering more flexibility and scalability for the creation and management of
      content, as well as a better user interface and experience. Such a collection
      of
      web technology is generally referred to as “Web 2.0 technology”. Kiwibox.com is
      in the process of redesigning the entire site to incorporate new software and
      features with a complete new interface and design. The re-launch of “Kiwibox
      2.0” website is expected in April, 2008, with major improvements in the
      following categories:





*Articles
      and Content* - User
      generated content, supplemented by an enhanced editorial staff is being
      condensed into 5 major categories: Music, Entertainment, Games, Body &
Style, Life & Love. Utilizing Kiwibox.com’s proprietary editorial system
      content currently contributed by 1,000 teen writers will be expanded, as
      will the delivery of exclusive video and interactive content. through
      partnership agreements with major media companies.





*Community
      Features* - An
      improved user profile will provide better social networking functionality,
      increasing interaction between users on Kiwibox.com and other social networking
      website.





*Points
      and Rewards* - To
      drive membership Kiwibox.com is expanding the number of activities for its
      members to earn points and rewards. Through increased partnership and sponsor
      programs Kiwibox.com is expanding its selection of member prizes and rewards.





*Games* -
      Kiwibox is expanding its partnerships with online game sites and online game
      developers, and will provide fresh new ways for users to compete and interact
      with one another, while providing our sponsors an enhanced platform to integrate
      their marketing message and advertising campaigns.




6





Potential
      Revenue Streams





Currently
      we generate the majority of our revenue from advertising/sponsorships. Although
      we anticipate average web advertising CPM (click per thousand) rates to remain
      steady in 2008, significant revenue growth is expected as the revitalized site
      is launched, and membership activity increases. New revenues, in the form of
      Mobile advertising will increase Kiwibox’s revenue base in 2008. Kiwibox Mobile,
      with an anticipated launch in Q2 2008, will include both text messaging services
      (SMS) and a Kiwibox mobile internet experience (WAP) Mobile services demand
      higher advertising revenue rates (CPM’s) than traditional website CPM’s, thus we
      expect Mobile revenues to significantly contribute to Kiwibox.com’s overall
      revenue stream.





Marketing
      Strategy





Our
      website is being constructed to promote safe and easy interactivity between
      the
      teen audience while providing a quality teen magazine. To date, we have devoted
      our resources to developing our teen magazine. Our new website will provide
      a
      platform for simple social interaction and connectivity among our teen members
      who will be able to share information and provide a portal for their social
      communication. The 2006 Nielsen Net Ratings have calculated that the top ten
      networking sites have grown approximately 47% and are expected to continue
      to
      grow at that rate for some time. The sites serve an estimated audience of
      approximately 68.8 million people, a large segment of the United States
      population.





We
        expect
        to spend approximately $300,000 on marketing in Q3 and Q4 of 2008, focusing
        on
        both web user acquisition as well as mobile user acquisition. Furthermore,
        the
        strategic placement of widgets and web apps on major competitor websites
        will
        further drive potential members to Kiwibox.com. Once potential new users
        reach
        Kiwibox via designated landing pages, they will be greeted with customized
        content, contests and features of their preference, along with points and
        incentives for them to join. New viral tools will be available to existing
        members to increase referrals and generate significant membership growth
        via
        word-of-mouth. We expect conversion and retention rate to significantly increase
        starting in Q3, with the goal to lower the per member acquisition cost by
        50% or
        more by the end of 2008.
 
 We
        will
        also pursue partnerships with smaller web sites with similar or complementary
        demographic and establish an affiliate network. Through co-marketing programs
        and revenue share advertising deals, we look to increase our brand exposure
        to
        potential members on affiliate sites, as well as further identifying potential
        web sites as acquisition targets.


Safety





Kiwibox.com
      has developed a proprietary monitoring model which assists in maintaining a
      safe
      site for our member base, combining both technology based systems and user
      authority interaction. Over the last 8 years our team have selected trusted
      long
      term members to become “site monitors” known on the Kiwibox.com site as
“KiwiHelpers”. These KiwiHelpers utilize internal Kiwibox provided tools to
      remove inappropriate content as needed, guide and warn users, and continually
      scan the site for unsafe content or user activity. These helpers have an icon
      next to their username denoting that they are a KiwiHelper, thus users who
      believe they are not being treated respectfully, or otherwise feel
      uncomfortable, may easily find and reach a KiwiHelper to gain their assistance.
      If a KiwiHelper deems that a user or site issue requires further escalation,
      they in turn immediately contact Kiwibox personnel, which then evaluates and
      resolves the issue.





Kiwibox
      is constantly learning new and improved techniques to further our tools and
      methods, keeping Kiwibox.com one of the safest social networking destinations
      on
      the internet. We pride ourselves on our member involvement, and their ability
      to
      interact in an open yet safe environment, monitored by their peers.







7





Competition





Our
      primary competitors are other youth targeted online social networks, including
      Facebook.com, MyYearbook.com, and MySpace.com. MySpace and Facebook are widely
      considered the industry leaders, however, recently statistics and strategic
      announcements from both companies has indicated a shift in the target audience
      from teens and college students to a much broader and more adult demographic.
      We
      plan to distinguish ourselves by focusing on the teen users and offering
      superior and exclusive content for this audience.





Secondary
      competitors include teen content providers and entertainment bloggers such
      as
      Seventeen.com, PerezHilton.com, etc. These sites generate unique and engaging
      content that the teen audience enjoys and attracts a dedicated following.
      However, these teen content provider sites offer none or very limited social
      networking features. We plan on establishing partnerships and co-marketing
      agreements with certain strategic companies in this category, as well as
      utilizing our technology tools to aggregate content found on other popular
      teen
      sites.





Intellectual
      Property





Except
      for our patent covering our ErgoSentry software product, we currently do not
      own
      any other patents, trademarks, or license of any kind. However, the copyright
      on
      the Kiwibox.com web and mobile software and other related intellectual property
      rights are important assets. We hold the Internet domain names Kiwibox.com,
      Kiwibox.net, Kiwibox.org, Kiwibox.info, Kiwibox.tv, Kiwibox.us, Kiwibox.mobi,
      Kiwibox.cn, and Kiwibox.com.cn. Furthermore, for our mobile offerings, we hold
      the SMS short code 45494 (4KIWI) and related Internet domain names 4Kiwi.com,
      ForKiwi.com, and FourKiwi.com.





Governmental
      Regulations





Our
      Kiwibox website operations are subject to state, federal and international
      laws,
      rules and regulations that cover on-line business, privacy policies, consumer
      protection and product marketing. The Kiwibox website business is subject to
      state, federal and international laws, rules and regulations applicable to
      online commerce, including user privacy policies, product pricing policies,
      website content and general consumer protection laws.  Various laws, rules
      and regulations have been adopted, and probably will be adopted in the future,
      that apply to the Internet, including available online content, privacy
      concerns, online marketing, “spam” and unsolicited commercial email, taxation
      issues, and regulations that effect and monitor the quality of products and
      services.




A
      portion
      of these laws, rules and regulations that concern the Internet and its uses
      have
      been only recently adopted. Courts and administrative agencies have not yet
      fully interpreted these legal requirements as to their application and scope.
      Accordingly, our Kiwibox website business is subject to the uncertainties of
      future interpretations and application of these legal requirements. The
      application and interpretation of these legal requirements or the passage of
      new
      and/or revised laws, rules and regulations could reduce the demand for Kiwibox
      website services, increase its operational costs, and expose it to potential
      liability. Any such events could have a material adverse effect upon our Kiwibox
      website business and financial condition. Our failure, or that of our business
      partners, to accurately predict and anticipate the interpretation or application
      of these laws, rules and regulations, whether now in force or adopted in the
      future, could have a detrimental impact on our operations, create negative
      publicity for us and expose us to potential liability.




State
      and
      federal agencies are applying consumer protection laws to regulate the on-line
      use, collection and dissemination of personal information and website content.
      These laws require us to implement programs to notify our website users of
      our
      privacy and security programs. One of the anticipated features of our new
      Kiwibox website, scheduled for launch in April, 2008, will permit our members
      to
      post their personal information on their membership pages and exchange this
      information with others. These new website networking functions require that
      we
      also provide our members with direct access to their personal information and
      the ability to edit, correct or delete part or all of their personal
      information. Consumer protection laws will require us to obtain the consent
      of
      our website users if we want to collect and use certain portions of their
      personal information.





The
      Federal Trade Commission (“FTC”) is the lead federal agency monitoring Internet
      websites and their content. State attorneys general have become active monitors
      of the Internet at the local State level. These governmental bodies may
      investigate or bring enforcement actions against website operators they deem
      in
      violation of applicable consumer protection laws. We believe that our Kiwibox
      website’s collection and dissemination of information programs, including our
      privacy policies, do and will continue to comply with existing laws. However,
      a
      decision by a federal or state agency that any of our Kiwibox website’s business
      practices do not meet applicable legal standards could result in liability
      and
      have a material adverse effect on our business and financial
      condition.




8





Employees





Currently,
      we have one part-time and 12 full-time employees. We expect to hire an
      additional 2 or 3 full-time persons during 2008.





Risks
      Related to Our Business




**Early
      Stage Company; Generation of Revenues**





Kiwibox
      can be considered an early stage company and investors can not reasonably assume
      that we will ever be profitable. As a early stage company, we are likely to
      continue to have financial difficulties for the foreseeable future. We may
      successfully re-develop our website operations and generate additional revenues
      but still be unable to achieve profitability. Kiwibox has devoted substantial
      funds to develop its new website, scheduled for launch in April, 2008, but
      investors should be aware that there can be no assurance that Kiwibox will
      ever
      achieve revenues that exceed its operational costs. We may not obtain the
      funding necessary to provide Kiwibox with the working capital necessary to
      continue to develop and market its website. Moreover, the Kiwibox.com website
      may not receive sufficient internet traffic to increase revenues or achieve
      profitability.




**Doubt
      Raised About our Ability to Continue as a Going
      Concern.**





Our
      financial statements have been presented on the basis that we will remain a
      going concern and that our assets will increase and that we will satisfy our
      liabilities in the normal course of our business. Kiwibox has had minimal
      revenues and has incurred operating losses during the fiscal year ended December
      31, 2007. Our independent auditors have concluded, these factors create an
      uncertainty about our ability to continue as a going concern. Our ability to
      continue as a going concern is dependent, among other factors, on our continued
      success in raising capital.





**Need
      for Additional Capital; Long-Term Viability of Company**




Our
      Kiwibox website business’s future capital requirements will depend on many
      factors, including the degree to which teenagers use the kiwibox.com Website
      and
      the degree to which Kiwibox is able to generate revenues from users of its
      site.
      The proceeds of our recent private placement securities offerings, which most
      recently raised a total of $1,500,000, will not enable our Kiwibox business
      to
      achieve a profitable level of operations before additional financing becomes
      necessary. As we will require additional financing, there is no
      assurance that such funding will be available on acceptable terms, or at all.
       If we elect to sell equity to raise additional funds, there is no
      assurance that additional equity can be sold on terms favorable to the Company
      and to its existing shareholders, with the result that existing shareholders
      may
      incur substantial dilution. Without the necessary funding, we may be required
      to
      delay, reduce or terminate some or all of our Kiwibox website business or our
      efforts to obtain additional funding.




**No
      Formal Feasibility and Market Research Plan**




We
      have
      collected data and statistics concerning the potential market for the
      Kiwibox.com website and the costs of marketing our services. We have relied
      principally on the judgment and conclusions of our management, based on their
      respective knowledge and experiences. We have not performed any formal marketing
      study that confirms any absolute demand for the services we will provide on
      our
      new Kiwibox.com website, scheduled for launch in April, 2008.




9




**Unpredictability
      of Future Revenues; Potential Downturns in Operating
      Results**




Due
      to
      Kiwibox’s minimal revenues since inception and the uncertainty of revenues that
      may be generated through potential partners and alliances, we are currently
      unable to forecast our future revenues with accuracy.  Our current and
      future operational costs are based primarily on our marketing and website
      development plans and our estimates of future revenues. Our potential
      advertising and joint marketing sales results are difficult are difficult
      to forecast at this stage.  It will be difficult for us to realign our
      operational expenses should future revenue forecasts not materialize which
      would
      require that we curtail or cease certain aspects of our operations. Accordingly,
      if our future revenues are insufficient to fund our planned operations, such
      a
      shortfall could have an immediate adverse effect on our business, prospects,
      financial condition and results of operations.





We
      may
      experience cyclical downturns in our future operating results due to various
      factors, many of which are beyond our control. Some of the factors that could
      impact our operating results include: (a) our ability to attract and retain
      new
      members to our Kiwibox.com website; (b) new developments by our competitor
      websites; (c) advertising and product price competition; (d) our ability to
      develop enhancements to our website, upgrade its internet functionality and
      services; (e) our ability to attract and retain necessary personnel; (f)
      difficulties with our software or hardware equipment, including any
      interruptions in the development and maintenance of our internet equipment
      and
      related infrastructure systems related to our Kiwibox.com website; (g) the
      future impact of governmental rules, regulations and laws, and; (h) general
      economic conditions.





**Website
      and Service Development Risks**




The
      development of our new Kiwibox.com website is a highly complex technical process
      that has already experienced significant delays. Although scheduled to launch
      in
      April, 2008, we may experience additional problems that could further delay
      the
      public availability of our new Kiwibox.com website. Following the launch of
      our
      website, we will be required to add enhancements and services in the future
      to
      remain competitive in our teen marketplace. If we are unable to develop and
      introduce new services or enhancements to our website in a timely manner in
      response to changing market conditions or customer requirements, our business,
      prospects, operating results and financial condition could be materially
      adversely affected.




**Limited
      Senior Management Team; Potential Problems with Expanding
      Personnel**




We
      have a
      limited number of senior management personnel, planning, developing and managing
      our website business. We are in the process of expanding our website operations
      to accommodate potential growth in our membership and marketplace. We will
      experience significant pressure on our financial resources and management
      personnel as a result of the current expansion. In order to manage this
      expansion, we may be required to adopt new operating procedures, develop new
      advertising and marketing plans, financial controls and procedures and policies
      to supervise a growing employee population. We will also be required to attract,
      retain and properly administer the expansion of our employee population.
      Investors should be aware that we may not be able to adequately manage all
      of
      these new developments in our expansion, in which case our operations, business
      prospects, operating results and financial condition could be materially
      adversely affected.




**Competition**




Our
      website business in the teen marketplace is highly competitive. We can give
      no
      assurances that our website business will effectively compete with the more
      established teen websites currently operating in this marketplace.


Many
      of
      our competitors have significantly greater financial resources, established
      brand names and significantly larger membership and customer bases and we expect
      our competition to only intensify.




10





**Dependence
      on Management**




Kiwibox.com
      website’s success will be substantially dependent on the continued services and
      on the performance of our current senior management. We will also be dependent
      upon our ability to retain and incentivize our management team. The loss of
      services of any one or more of our senior management team could have a material
      adverse affect on our operating results, business prospects and financial
      condition.





Our
      success will be dependent, in large part, on the services of our principal
      officers and employees.  The loss of any of these individuals could have a
      material adverse effect on our business or results of operations.  We do
      not maintain “key-man” life insurance policies on the lives of our officers to
      compensate us in the event of their deaths.


Except
      for issues that require shareholder approval, investors should be aware that
      they will have no vote on our operations, business developments or any
      management issues, including expansion, website enhancements or personnel
      decisions. You should not invest in our company unless you understand that
      all
      business and operational decisions are made by our management.





**We
      expect to spend significant financial and management resources in our efforts
      to
      comply with the internal control attestation provisions of Section 404 of
      the Sarbanes-Oxley Act of 2002 beginning with the fiscal year ended
      December 31, 2008**




Pursuant
      to Section 404 of the Sarbanes-Oxley Act of 2002, and the rules and
      regulations promulgated thereunder, our management will be required to attest
      to
      the adequacy of our internal controls and procedures in our annual report on
      Form 10-KSB for the year ended December 31, 2008.  Our management
      has limited experience in complying with Section 404.  In order to
      prepare our management and to implement additional controls and/or procedures,
      if necessary, to be compliant with these new legal standards, we have retained
      an outside accounting and financial firm to audit the internal controls and
      procedures we currently have in place. There is a possibility, therefore, that
      we will be required to make substantial changes to our internal controls in
      order for our management to be able to attest that our internal controls are
      effective as of December 31, 2008.  If our management is unable to
      attest that our internal controls are effective as of December 31, 2008,
      the price of our common stock may be adversely affected **.**




**Creation
      of Brand Awareness**




It
      will
      be crucial to the economic success of our Kiwibox.com website that we promote
      and establish brand awareness. A successful brand awareness campaign will tend
      to decrease our marketing expenses over time. If we are not able to adequately
      establish our brand in our marketplace, our operating results, market growth
      and
      financial condition could be materially adversely affected.





**Potential
      for Defects in our Products and Services**




Our
      Kiwibox.com website, its functionality, product offerings and services may
      contain defects or problems yet undetected. Such defects or problems could
      delay
      the launch of our new Kiwibox.com website, generate negative public comment
      and
      inhibit marketplace acceptance, any one or more of which could have a material
      adverse affect on our operating results and financial condition.




**Penny
      Stock Regulation**




Our
      common shares are subject to the “penny stock rules” that require broker-dealers
      who sell our shares to make specific disclosures before selling to certain
      persons. Unless an exception is available, the regulations require the delivery,
      prior to any transaction involving a penny stock, of a disclosure schedule
      explaining the penny stock market and the risk associated therewith as well
      as
      the written consent of the purchaser of such security prior to engaging in
      a
      penny stock transaction. These penny stock restrictions will continue to apply
      as long as the Company’s common stock continues to trade at market prices below
      $5.00. Investors should be aware that the regulations on penny stocks may
      significantly restrict the ability of any purchaser of our common shares to
      sell
      his or her Company common shares in the market.




11





**Absence
      of Dividends**




We
      have
      not paid any dividends on our common stock and we are not likely to do so in
      the
      foreseeable future. We presently intend to retain earnings for use in growing
      our business. We may pay for some of our future expansion through debt
      financing, in which case lenders traditionally prohibit the payment of any
      such
      dividends. Investors should be aware, therefore, that the Company intends to
      re-invest any earnings back into our business for the foreseeable future and
      that they should have no expectations of receiving any dividends on the common
      shares they may purchase.





**ITEM
      2. Description of Property**





We
      maintain our principal corporate offices at 1250 Route 28, Suite 309,
      Branchburg, New Jersey. We lease an approximate 850 square feet of office space
      pursuant to the terms of a 3-year lease we signed on September 1, 2006, which
      we
      may terminate upon notice. We pay a base rental payment of $1,103 per month
      plus
      utility/cam/property tax charges of approximately $600 per month, with nominal
      annual increases. In addition, we maintain offices for our Kiwibox operations
      at
      330 W. 38 th Street,
      Suite #1602, New York, New York 10018, consisting of approximately 1,600 square
      feet. We have a two-year lease covering these offices and pay monthly rent
      of
      $4,189.18.





**ITEM
      3:**  **LEGAL
      PROCEEDINGS**





At
      the
      time of this report, the Company is not a party to any material legal
      proceedings.




**ITEM
      4:**  **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**





No
      matters were submitted to a vote of the security holders during the fourth
      quarter of this fiscal period.




12


**PART
      II**





**ITEM
      5:**  MARKET
      FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
      MATTERS





(a)
      Market Information





The
      Company’s common stock currently trades on the Electronic Bulletin Board of the
      OTC market, under the symbol MAGY. The following table sets forth, for the
      calendar quarters indicated, and for the last two years, the high and low sales
      prices for the Company’s common stock.




OTC-BBLow/Bid
              
              High/Ask2006First
                  Quarter
              
              $
              0.06
              
              $
              0.12Second
                  Quarter
              
              
              0.05
              
              
              0.09Third
                  Quarter
              
              
              0.03
              
              
              0.06Fourth
                  Quarter
              
              
              0.03
              
              
              0.042007First
                  Quarter
              
              $
              0.03
              
              $
              0.06Second
                  Quarter
              
              
              0.04
              
              
              0.08Third
                  Quarter
              
              
              0.04
              
              
              0.07Fourth
                  Quarter
              
              
              0.02
              
              
              0.05





(b)
      Shareholders





As
      of
      March 28, 2008, there were approximately 400 shareholders of record for the
      Company’s Common Stock. The number of record holders does not include
      shareholders whose securities are held in street names.





(c)
      Dividends





The
      Company has not declared or paid, nor has it any present intention to pay,
      cash
      dividends on its Common stock. The Company is obliged to pay cash dividends
      on
      its outstanding convertible preferred stock and, under certain circumstances,
      on
      its outstanding cumulative preferred stock. See "DESCRIPTION OF CAPITAL STOCK"
      -
      "The Series A Stock", "The Series B Stock", "The Series C Stock", "The Series
      D
      Stock" and "The Series E Stock", below.





Recent
      Issues of Unregistered Securities





During
      the fourth quarter of 2007 the Company issued the following unregistered
      securities:





1.
      We
      committed to issue 2,500,000 **** Units
      pursuant to a subscription agreement with an accredited investor and received
      subscription proceeds of $125,000 on or about July 23, 2007, as reported in
      our
      current report filed on Form 8-K on August 2, 2007. The subscription price
      for
      each Unit was $.05, with each Unit comprised of one restricted common share
      and
      one common stock purchase warrant. Each warrant is exercisable during a five
      year period at the exercise price of $.07 per warrant and contains a cashless
      exercise provision.





2.
      We are
      committed to issue an aggregate 35,700,000 Units to a Swiss based investor
      and
      its two assignees for aggregate subscription proceeds of $1,785,000: $500,000
      received on or about August 16, 2007 and reported in our Form 8-K filed on
      August 16, 2007; $250,000 received on or about September 19, 2007 and reported
      in our Form 8-K filed on October 5, 2007; $250,000 received on or about October
      3, 2007 and reported in our Form 8-K filed on October 5, 2007; $660,000 received
      on or about November 5, 2007 and reported in our Form 8-K filed on November
      5,
      2007; $15,000 received on or about December 28, 2007 and reported in our Form
      8-K filed on December 28, 2007, and; $110,000 received on or about January
      25,
      2008 and reported in our Form 8-K filed on January 29, 2008. The subscription
      price for each Unit was $.05, with each Unit comprised of  one
      restricted common share and one common stock purchase warrant. Each warrant
      is
      exercisable during a five year period at the exercise price of $.07 per warrant
      and contains a cashless exercise provision.




13





3.
      On
      October 31, 2007, three noteholder/investors converted the outstanding principal
      balances and accrued interest under six Company note, representing aggregate
      debt of $402,365.73, into restricted Company securities at a conversion rate
      equal to the Company’s then current “unit” investment terms. This conversion
      rate is at $.05 per unit, with each unit comprised of one restricted common
      share and one 5-year warrant, exercisable at $.07, resulting in the issue of
      8,091,315 restricted common shares and an equal number of warrants to these
      three individuals.





4.
      We
      also issued the following shares of restricted common stock:





(i)
      7,289,000 shares of common stock in return for cancellation of promissory notes
      for $364,450, and 802,315 shares for interest accrued on such note, to three
      domestic accredited investors;





(ii)  1,281,250
      shares of common stock to two
      consultants for services rendered.





(iii)  3,000,000
      shares of common stock to two domestic investors as loan origination fees and
      in
      return for the extension of the maturity of such loans;





(iv)  Options
      for 500,000 shares, exercisable $0.05 and vesting over a three year period,
      to a
      senior manager employed by the Company.





All
      of
      the above offerings, sales and conversions were made in reliance upon the
      exemption from registration under Rule 506 of Regulation D promulgated under
      the
      Securities Act and/or Section 4(2) of the Securities Act, based on the
      following: (a) the investors confirmed to us that they were “accredited
      investors,” as defined in Rule 501 of Regulation D promulgated under the
      Securities Act; (b) the investors were all shareholders of or prior investors
      in, the Company, had pre-existing relationships with the Company and the Company
      did not engage in any general solicitation with respect to the offerings; (c)
      the investors acknowledged that all securities being purchased were “restricted
      securities” as defined under applicable securities laws, and agreed to transfer
      such securities only in a transaction registered under the Securities Act or
      pursuant to available exemptions from such registration requirements; and (d)
      a
      legend was placed on the certificates representing each such security,
      disclosing that such securities are deemed restricted securities and could
      only
      be sold or otherwise transferred if registered under the Securities Act or
      pursuant to exemptions from such registration requirements.





Selected
      Financial Data





Except
      for historical information, the Company's reports to the Securities and Exchange
      Commission on Form 10-KSB and Form 10-QSB and periodic press releases, as well
      as other public documents and statements, contain "forward-looking statements"
      within the meaning of Section 21E of the Securities Exchange Act of 1934.
      Forward-looking statements are subject to risks and uncertainties that could
      cause actual results to differ materially from those expressed or implied by
      the
      statements. These risks and uncertainties include general economic and business
      conditions, development and market acceptance of the Company’s products, current
      dependence on the willingness of investors to continue to fund operations of
      the
      Company and other risks and uncertainties identified in the Company's reports
      to
      the Securities and Exchange Commission, periodic press releases, or other public
      documents or statements.





Readers
      are cautioned not to place undue reliance on forward-looking statements. The
      Company undertakes no obligation to republish or revise forward-looking
      statements to reflect events or circumstances after the date hereof or to
      reflect the occurrences of unanticipated events.




The
      selected financial information presented below under the captions "Statement
      of
      Operations" and "Balance Sheet" for the years ended December 31, 2007 and 2006
      is derived from the financial statements of the Company and should be read
      in
      conjunction with the financial statements and notes thereto.




14





The
      financial data are those of Magnitude Information Systems, Inc. including the
      operations of Magnitude, Inc and KiwiBox Media, Inc. All inter-company accounts
      and transactions have been eliminated in consolidation.





SELECTED
      FINANCIAL DATA




Balance
                Sheet
              
              
              December
                  31, 2007Total
                  assets
              
              $
              3,221,336Current
                  liabilities
              
              
              6,316,912Long-term
                  debt
              
              
              -Working
                  capital (deficit)
              
              
              (5,826,532
              )Shareholders’
                  equity (deficit)
              
              $
              (3,095,576
              )




Statement
              of Operations
            
            
            For the Year Ended December 31,2007
            
            
            2006Total
                revenues
            
            $
            29,745
            
            $
            47,701Operating
                income (loss)
            
            
            (2,119,832
            )
            
            (3,716,867
            )Net
                (loss)
            
            
            (3,881,652
            )
            
            (3,895,262
            )Net
                (loss) after dividendsOn
                Preferred Shares
            
            
            (3,935,133
            )
            
            (4,473,726
            )Net
                loss per common share
            
            $
            (0.02
            )
            $
            (0.03
            )Number
                of shares used in computingper
                share data
            
            
            243,609,819
            
            
            170,692,731




15




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





**CAUTIONARY
      STATEMENT PURSUANT TO "SAFE HARBOR" PROVISIONS OF SECTION 21E OF THE SECURITIES
      EXCHANGE ACT OF 1934**





The
      information in this annual report contains forward-looking statements within
      the
      meaning of the Private Securities Litigation Reform Act of 1995. Such Act
      provides a “safe harbor” for forward-looking statements to encourage companies
      to provide prospective information about their businesses so long as they
      identify these statements as forward looking and provide meaningful cautionary
      statements identifying important factors that could cause actual results to
      differ from the projected results. All statements other than those statements
      of
      historical fact made in this report are forward looking. In particular, the
      statements herein regarding industry prospects and future results of operations
      or financial position are forward-looking statements. Forward-looking statements
      reflect management’s current expectations and are inherently uncertain. Our
      actual results may differ significantly from management’s
      expectations.




The
      following discussion and analysis should be read in conjunction with the
      consolidated financial statements of Magnitude Information Systems, Inc.,
      included herewith. This discussion should not be construed to imply that the
      results discussed herein will necessarily continue into the future, or that
      any
      conclusion reached herein will necessarily be indicative of actual operating
      results in the future. Such discussion represents only the best present
      assessment of our management.





Background





On
      August
      16, 2007, we closed on our acquisition of Kiwibox Media, Inc., a business that
      had developed a social networking website dedicated to teenagers. As a result
      of
      this acquisition, accomplished through a reverse merger, Kiwibox Media, Inc.
      became our wholly owned subsidiary. Prior to this acquisition, we entered into
      a
      License and Client Software Support Agreement with Imminent Technologies, LLC
      on
      April 10, 2007, licensing our prior business’ suite of ergonomic software
      products and thereby, effectively terminating our involvement in the ergonomic
      software business, all as disclosed in the current report on Form 8-K we filed
      on April 11, 2007.





The
      Kiwibox Closing - August 16, 2007.





On
      August
      16, 2007, we closed our acquisition of Kiwibox Media, Inc. through a reverse
      merger between Kiwibox and our wholly owned acquisition subsidiary. As a result
      of the merger, Kiwibox became our wholly owned subsidiary.At
      the
      Kiwibox closing, we (1) issued an aggregate 30,000,000 restricted common shares
      to the three Kiwibox shareholders,  (2) issued an aggregate 43,610 shares
      of our Senior Convertible Series G Preferred stock to these principals, (3)
      paid
      an aggregate $150,000 in cash to these Kiwibox principals, less a $7,000
      investment banking fee paid to Southridge Investment Group, and (4) signed
      two-year employment agreements with Messrs. Lin Dai, Ivan Tumanov and Michael
      Howard, the three Kiwibox shareholders, all pursuant to the terms and provisions
      of the Agreement and Plan of Reorganization, dated February 19, 2007, and
      amendments thereto, and as most recently modified by Amendment No. 6
      between the parties on February 28, 2008. The 43,610 Series G Preferred Shares
      issued to the Kiwibox principals at closing have an aggregate conversion value
      of $500,000 (the “Conversion Value”), which $500,000 Conversion Value is
      convertible into our common shares by dividing it by the “Market Price” of our
      common stock during the twenty (20) successive trading days immediately
      preceding the second anniversary of the agreement. At the closing, the Company
      promised to issue 750,000 of the KiwiBox shareholders’ restricted common shares
      to Southridge Investment Group, LLC as part of its fee. Based
      upon our original Agreement and Plan of Reorganization of February 2007, we
      committed to invest $3.5 Million in the Kiwibox business. This commitment was
      based upon our communications with a Swiss based shareholder and investor in
      our
      Company, Tell Capital AG, who on July 26, 2007, sent us a commitment to invest
      $3 million of equity in our Company. Based upon Tell Capital’s commitment, we
      executed Amendment No. 3 to our original February, 2007 agreement with Kiwibox,
      committing to invest $3.5 million in various tranches, corresponding to the
      investment schedule set forth in the Tell Capital commitment, as well as
      agreeing to pay 60,000 restricted common shares for each day any of our
      scheduled investment tranches were late. Because of the delays in the receipt
      of
      the equity investments from Tell Capital, scheduled through November 1, 2007,
      our corresponding investment commitments to the Kiwibox business were also
      late.
      The continuing lateness of our investment commitments to the Kiwibox business
      resulted in further amendments to our Kiwibox agreement and required us to
      make
      a $100,000 penalty payment to the Kiwibox shareholders in 2007. The final
      modification to our original agreement, Amendment No. 6, executed on February
      28, 2008, provided that if we raised $1.5 million in equity on or before March
      7, 2008 and dedicated $700,000 of that amount to the Kiwibox business, made
      another penalty payment of $150,000 and delivered our corporate note in the
      principal amount of $225,000 to the Kiwibox shareholders, all rescission rights
      held by the Kiwibox shareholders and any further obligations to invest in the
      Kiwibox business would terminate. On March 7, 2008, we received $1.5 Million
      in
      subscription proceeds from investors, from which proceeds we dedicated $700,000
      to the Kiwibox business, made the $150,000 penalty payment to the Kiwibox
      shareholders and delivered to them our $225,000 corporate note. Accordingly,
      the
      Kiwibox shareholders’ rights of rescission and our obligation to invest further
      funds in the Kiwibox business terminated. We have paid the Kiwibox shareholders
      $250,000 in cash, delivered to them our $225,000 corporate note, due June 15,
      2008, and must issue to them approximately 30,000,000 restricted common shares
      resulting from the series of delays in meeting our commitments to invest funds
      into the Kiwibox business.





We
      signed
      and delivered two-year employment agreements with the three Kiwibox Shareholders
      at the closing. These employment agreements pay each Kiwibox Shareholder an
      annual base salary of $150,000 and an annual bonus if certain business goals
      are
      met. Each Kiwibox Shareholder received a stock option to purchase up to
      7,500,000 shares of our common stock which vests over time as well as a
      performance stock option to purchase up to an additional 3,000,000 shares of
      our
      common stock, vesting upon the attainment of certain business goals. All of
      these stock options are exercisable at $.05 per share.




16





Plan
      of Operations





Since
      our
      acquisition of Kiwibox, we have been developing a new version of our website.
      Scheduled to launch in April, 2008, our new Kiwibox.com website contains
      significant enhancements over the current website. Our new website
      operations will include the following:





*Increase
      in our editorial sta* ff
      - we
      have hired additional editorial staff persons to augment and expand our
      approximate 1,000 volunteer teen writers to provide more coverage in our content
      categories of music,
      entertainment, games, body & style and life & love;





*Enhanced
      Community Features* - our
      new website will employ advanced social networking functionality that will
      permit increased interaction between our website and provide interface between
      our Kiwibox.com website and other social networking website.





*More
      Points and Rewards* - we are
      expanding the number of activities for our members to earn points and rewards.
      We expect this increase, as well as the new offering of virtual prizes, will
      attract new members to our website.





*Expansion
      of our Game Offerings* - we are
      expanding our partnerships with online game sites and online game developers,
      providing new interactivity between our users and a better platform for sponsors
      to integrate their marketing message and advertising campaigns.





In
      addition to the above features, we expect to continue to develop and enhance
      our
      user options and interface technology on our Kiwibox.com website.


**Results
        of Operations for the Twelve Months Ended December 31, 2007 Compared to the
        Twelve Months Ended December 31, 2006.**
 
 The
        Company had no material revenues during 2007. Its former ergonomic software
        -
        based business had been discontinued and the acquisition of Kiwibox Media
        Inc.
        with its potentially significant revenues took place only in August 2007
        and, by
        year-end, had not yet matured to a stage where significant revenues could
        be
        generated. For the year ended December 31, 2007, total revenues amounted
        to
        $29,745 compared to $47,701 in 2006. Revenues consisted almost entirely of
        $25,493 from the Kiwibox operations.
 Gross
          profits amounted to $29,745, which equates revenues in the absence of directly
          attributable cost of goods sold. This contrasts to 2006 when in the course
          of
          the Company pursuing it former software business, gross profits were burdened
          with a fixed charge for amortization of certain proprietary software assets.
          After deducting selling -, research -, and general and administrative expenses
          of $2,477,577 compared to the $3,619,072 recorded in 2006, the Company
          realized
          an operating loss of $2,447,832 compared to an operating loss of $3,716,867
          in
          2006. $375,488 of such SG&A expenses were attributable to the cost of
          funding the operations of the new Kiwibox business and $1,594,778 were
          incurred
          in Magnitude. The decrease in these expenses from the $3,619.072 incurred
          in the
          prior year is primarily due lesser compensation expenses for salaries and
          stock-based consultancy fees. These savings were achieved through staff
          reductions and lesser dependency on outside services. The major items making
          up
          non-operating income and expenses included approximately $897,000 interest
          and
          amortization of financing expenses, mostly related to the acquisition of
          Kiwibox
          Media, Inc. During 2006, such expenses totaled approximately $327,000.
          In
          addition, we incurred a charge of approximately $559,000 in connection
          with the
          change in fair value of a derivative liabilities, compared to a gain of
          approximately $295,000 in 2006. The year concluded with a net loss of
          $3,881,652. After accounting for dividends accrued and discounts on outstanding
          preferred stock which totaled $53,481 the net loss applicable to common
          shareholders was $3,935,133 or $0.02 per share, compared to a loss of $4,473,726
          or $0.03 per share.
 17
 **Liquidity
        and Capital Resources**
 
 We
        have
        financed our business with new debt and equity capital since our cash flow
        is
        insufficient to provide the working capital necessary to fund our operations.
        We
        recorded $1,800,000 in cash from subscriptions for new equity capital from
        accredited private investors during 2007. In addition, we received $472,000
        from
        short-term loans.
 
 Our
        deficit in working capital amounted to $5,826,532 at December 31, 2007, as
        compared to $2,553,451 at December 31, 2006. Stockholders’ equity showed an
        impairment of $3,095,576 at the end of the year, compared to an impairment
        of
        $2,505,485 at the beginning of the year. The negative cash flow from operations
        totaled $1,261,783 and was substantially financed by new debt and equity
        which
        was obtained through private placements. The new equity placements were
        consummated by issuance of common stock and warrants to primarily foreign
        investors. Details of such transactions can be found in the “Changes and
        Issuance of Securities” sections in the Company’s quarterly reports on Forms
        10-QSB during the year, as well as in the pertinent section of this report.
        During 2007, the Company filed several amendments to its four previously
        filed
        registration statements on Form SB-2, all of which covered common shares
        directly issued as well as common shares underlying the previously issued
        convertible preferred stock and warrants, in connection with prior financing
        transactions.
  We
        have
        no bank debt and aside from trade payables and accruals, our indebtedness
        at
        December 31, 2007, consisted of certain notes and loans aggregating
        approximately $450,000. The position “Obligations to be settled in stock” of
        $1,622,921 represents, the
        value
        of stock to be issued under the before mentioned equity subscriptions, and
        of
        stock to be issued to the former principals of Kiwibox Media, Inc. as well
        as
        stock to be issued to certain consultants (see Financial Footnote Item
“Obligations to be Settled in Stock”).Current liabilities also include
        $376,743 accrued unpaid dividends on outstanding preferred stock. Such dividends
        will be paid only if and when capital surplus and cash-flow from operations
        are
        sufficient to cover the outstanding amounts without thereby unduly impacting
        the
        Company’s ability to continue operating and growing its business.
  Our
        current cash reserves and net cash flow from operations expected during the
        near
        future will be insufficient to fund our website development, operations and
        marketing plan over the next twelve months. We expect to fund these requirements
        with further investments in form of debt or equity capital, targeted for
        the
        second quarter of 2008. There can be no assurance, however, that we will
        be able
        to identify a financing source or sources and if we do, whether the terms
        of
        such financing will be acceptable or commercially reasonable.
 
 The
        major
        investor in our stock was Tell Capital AG and its assignees, who have invested
        $1,675,000 in our operations through December 31, 2007, pursuant to its
        commitment of July 26, 2007, to invest a total of $3 million on or before
        November 1, 2007. During this same period, Tell Capital AG indicated its
        further
        interest to invest a second $3 million of equity into our operations in early
        2008. Because Tell Capital AG’s initial $3 million investment was not timely and
        due to the fact that the total $3 million was not received, our commitments
        to
        fund the Kiwibox business were correspondingly late. Because of this tardiness
        in meeting our Kiwibox funding commitments, we paid the Kiwibox Shareholders
        penalty cash payments of $250,000 and delivered our promissory note for $225,000
        due June 15, 2008. We also owe a penalty of approximately 30,000,000 common
        shares to the Kiwibox Shareholders due to the partial investment amount actually
        received and the delays in our receipt of these funds. Although we have received
        an additional $110,000 of investment from Tell Capital AG and received
        $1,500,000 of subscription proceeds from additional investments in 2008,
        we will
        need the approximate $3 million of additional investment in order to fund
        our
        business plan through the next 12 months. See “Subsequent Event”
below.




Absent
      the receipt of this additional $3 million funding, our website development,
      results of operations and financial condition could be subject to material
      adverse consequences. There can be no assurance in such a case that we could
      find alternative funding for the working capital required to finance on-going
      operations. If we failed in these efforts, either by not receiving
      the **** investment
      commitments from Tell Capital AG or an alternative source, or we do not receive
      such funds in a timely manner, our management may be forced to effect severe
      cut-backs in our operations.


NEW
        ACCOUNTING PRONOUNCEMENTS
 
 In
        2007,
        the Financial Accounting Standards Board (FASB) issued Statement of Financial
        Accounting Standard (SFAS) No. 141 (revised 2007) Business Combinations.
        This
        Statement replaces FASB Statement No. 141, Business Combinations. This Statement
        requires an acquirer to recognize the assets acquired, the liabilities assumed,
        and any non-controlling interest in the acquiree at the acquisition date,
        measured at their fair values as of that date, with limited exceptions specified
        in the Statement.
 
 SFAS
        No.
        141 (revised) is effective for business combinations for which the acquisition
        date is on or after the beginning of the first annual reporting period beginning
        on or after December 15, 2008. Management does not expect the implementation
        of
        this new standard to have a material impact on the Company's financial position,
        results of operations and cash flows.
 
 In
        February 2007, the Financial Accounting Standards Board (FASB) issued Statement
        of Financial Accounting Standard (SFAS) No. 159, "The Fair Value Option for
        Financial Assets and Financial Liabilities" including and amendment of FASB
        Statement No. 115 with respect to improvement of financial reporting of certain
        investments in debt and equity securities. This Statement permits entities
        to
        choose to measure many financial instruments and certain other items at fair
        value. The objective is to improve financial reporting by providing entities
        with the opportunity to mitigate volatility in reported earnings caused by
        measuring related assets and liabilities differently without having to apply
        complex hedge accounting provisions. This Statement is expected to expand
        the
        use of fair value measurement, which is consistent with the Board's long-term
        measurement objectives for accounting for financial instruments.
 
 SFAS
        No.
        159 is effective as of the beginning of the Company's first fiscal year that
        begins after November 15, 2007. Management does not expect the implementation
        of
        this new standard to have a material impact on the Company's financial position,
        results of operations and cash flows.
 
 In
        September 2006, the Financial Accounting Standards Board (FASB) issued Statement
        of Financial Accounting Standard (SFAS) No. 157, Fair Value Measurements.
        SFAS
        No. 157 defines fair value, establishes a framework for measuring fair value
        in
        generally accepted accounting principles (GAAP), and expands disclosures
        about
        fair value measurements.
 
 SFAS
        No.
        157 is effective for financial statements issued for fiscal years beginning
        after November 15, 2007, and interim periods within those fiscal years.
        Management does not expect the implementation of this new standard to have
        a
        material impact on the Company's financial position, results of operations
        and
        cash flows.
 
 In
        December 2007, the Financial Accounting Standards Board (FASB) issued Statement
        of Financial Accounting Standard (SFAS) No. 160 Noncontrolling Interest in
        Consolidated Financial Statements as an amendment to ARB No. 51. This Statement
        is expected to improve the relevance, comparability and transparency of the
        financial information that a reporting entity provides in its consolidated
        financial statements by establishing accounting and reporting standards for
        the
        noncontrolling interest in a subsidiary and for the deconsolidation of a
        subsidiary. Management does not expect the implementation of this new standard
        to have a material impact on the Company's financial position, results of
        operations and cash flows.


18





**Subsequent
      Events - Fiscal Year 2008**





On
      January 28, 2008, we received a $110,000 investment from Tell Capital AG and
      on
      March 7, 2008, an additional $1,500,000 in subscription proceeds from 10
      accredited foreign and domestic investors. We committed to issue 2,200,000
      units
      to Tell Capital AG for its investment, at the subscription price of $.05 per
      unit, with each unit comprised of one restricted common share and one five-year
      warrant, exercisable at $.07 per share. The Company committed to issue to the
      March 7 th investors an aggregate 50,000,000 restricted common shares and 50,000,000 common
      stock purchase warrants at the subscription price of $.02 per common share
      and
      $.01 per warrant. The warrants are exercisable anytime during their 5 year
      exercise period at the exercise price of $.05 per warrant with provisions for
      cashless exercise. The receipt of these private offering proceeds was disclosed
      in our current report on Form 8-K filed on March 7, 2008.






Based
        upon our original Agreement and Plan of Reorganization of February 2007,
        we
        committed to invest $3.5 Million in the Kiwibox business. This commitment
        was
        based upon our communications with a Swiss based shareholder and investor
        in our
        Company, Tell Capital AG, who on July 26, 2007, sent us a commitment to invest
        $3 million of equity in our Company. Based upon Tell Capital’s commitment, we
        executed Amendment No. 3 to our original February, 2007 agreement with Kiwibox,
        committing to invest $3.5 million in various tranches, corresponding to the
        investment schedule set forth in the Tell Capital commitment, as well as
        agreeing to pay 60,000 restricted common shares for each day any of our
        scheduled investment tranches were late. Because of the delays in the receipt
        of
        the equity investments from Tell Capital, scheduled through November 1, 2007,
        our corresponding investment commitments to the Kiwibox business were also
        late.
        The continuing lateness of our investment commitments to the Kiwibox business
        resulted in further amendments to our Kiwibox agreement and required us to
        make
        a $100,000 penalty payment to the Kiwibox shareholders in 2007. The final
        modification to our original agreement, Amendment No. 6, executed on February
        28, 2008, provided that if we raised $1.5 million in equity on or before
        March
        7, 2008 and dedicated $700,000 of that amount to the Kiwibox business, made
        another penalty payment of $150,000 and delivered our corporate note in the
        principal amount of $225,000 to the Kiwibox shareholders, all rescission
        rights
        held by the Kiwibox shareholders and any further obligations to invest in
        the
        Kiwibox business would terminate. On March 7, 2008, we received $1.5 Million
        in
        subscription proceeds from investors, from which proceeds we dedicated $700,000
        to the Kiwibox business, made the $150,000 penalty payment to the Kiwibox
        shareholders and delivered to them our $225,000 corporate note. Accordingly,
        the
        Kiwibox shareholders’ rights of rescission and our obligation to invest further
        funds in the Kiwibox business terminated. We have paid the Kiwibox shareholders
        $250,000 in cash, delivered to them our $225,000 corporate note, due June
        15,
        2008, and must issue to them approximately 30,000,000 restricted common shares
        resulting from the series of delays in meeting our commitments to invest
        funds
        into the Kiwibox business.





On
      March
      20, 2008, two shareholder/investors converted their Company promissory notes,
      representing an aggregate indebtedness of $350,000, into an aggregate 9,333,333
      restricted common shares and an equal number of common stock purchase
      warrants.





19





**ITEM
      7** :  **FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA**





The
      Company's Financial Statements and Notes to Financial Statements are attached
      hereto as Exhibit A and incorporated herein by reference.




**ITEM
      8.** ****** **CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON** **ACCOUNTING
      AND FINANCIAL DISCLOSURE**





**** There
      have been no changes in or disagreements with the Registrant’s independent
      auditors during the last two years.





**ITEM
      8A.**  **MANAGEMENT’S
      ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting for the company in accordance with as defined
      in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
      over financial reporting is designed to provide reasonable assurance regarding
      the (i) effectiveness and efficiency of operations, (ii) reliability of
      financial reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting principles, and (iii)
      compliance with applicable laws and regulations.  Our internal
      controls framework is based on the criteria set forth in the Internal Control
      -
      Integrated Framework issued by the Committee of Sponsoring Organizations of
      the
      Treadway Commission (COSO).





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





Management
      has conducted, with the participation of the Chief Executive Officer and the
      Chief Financial Officer, supported by an outside accounting firm, an assessment
      of the effectiveness of the small business issuer’s internal control over
      financial reporting as of the year ended December 31, 2007. Management
      determined that at December 31, 2007, the Company had a material weakness
      because it did not have sufficient number of personnel with adequate knowledge,
      experience and training of U.S. GAAP commensurate with the Company’s reporting
      requirements. This material weakness required the identification of adjustments
      during the financial statement close process that have been recorded in the
      Company’s consolidated financial statements. Contributing to this lack of
      personnel resources was the Company’s acquisition of Kiwibox Media, Inc. on
      August 16, 2007 and the integration of this new subsidiary’s accounting and
      finance functions with those of the Company. Therefore, in order to present
      the
      Company’s consolidated financial statements for the fiscal year ended December
      31, 2007 in accordance with U.S. GAAP, the Company hired a controller to be
      stationed at our Kiwibox Media’s offices and performed additional reviews and
      procedures. In addition, during the first quarter of 2008 the Company
      retained an outside accounting firm with technical and financial reporting
      expertise and intends to hire an additional accountant with substantial U.S.
      GAAP and SEC reporting experience to remediate the lack of qualified
      personnel.





This
      annual report does not include an attestation report of the company’s registered
      public accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by the Company’s registered
      public accounting firm pursuant to temporary rules of the SEC that permit the
      Company to provide only management’s report in this annual report.





Changes
      in Internal Control over Financial Reporting




20





Other
      than described above, there have been no change in the Company’s internal
      control over financial reporting that occurred during the fiscal quarter ended
      December 31, 2007, that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.





**ITEM
      8B. OTHER INFORMATION**




None.


21


**PART
      III**





**ITEM
      9.**  **DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL** **PERSONS**





The
      names
      of all directors and executive officers of the Company are as
      follows:


Name
              
              Positions
              
              Term
                  Served (Expires)Edward
                  L. Marney
              
              DirectorPresident,
                  Chief Executive Officer
              
              May
                  8, 2006Joerg
                  H. Klaube
              
              DirectorSr.
                  Vice President, Secretary, Chief Financial Officer
              
              December
                  2, 2005Steven
                  L. Gray
              
              DirectorChairman
                  of the Board
              
              August
                  30, 2006Joseph
                  J. Tomasek
              
              Director
              
              Feb.
                  11, 1999 (2006)




All
      Directors of the Company hold office until the next annual meeting of the
      shareholders and until successors have ben elected and qualified. Executive
      Officers of the Company are appointed by the Board of Directors at meetings
      of
      the Company 's Directors and hold office until they resign or are removed from
      office.





***Edward
      L. Marney*** ,
      Age 50
      - Director, President and Chief Executive Officer.  Mr. Marney joined
      Magnitude, Inc. in May 2006 and was appointed a director in August 2006. 
From 2003 to 2006, Mr. Marney was Managing Director of Triad Partners, LLC,
      a
      privately held investment company.  Prior to that from 2001-2003 Mr. Marney
      was Vice President, Business Intelligence at Medical Manager/WebMD
      Corporation.  Mr. Marney founded TouchPoint Software Corporation in
      1994 and served as its CEO & President until its acquisition by WebMD
      Corporation in 2001.  Prior to that Mr. Marney served in various marketing
      and sales roles at Medical Information Technology and Burroughs
      Corporation.  He graduated with a B.S. from the Whittemore School of
      Business and Economics at the University of New Hampshire.





***Joerg
      H. Klaube*** ,
      Age 66
      - Director and Chief Financial Officer, Senior Vice President. Joerg joined
      Magnitude, Inc. in December 1994. From 1993 to 1994 he was Vice President
      Administration for Comar Technologies Inc., a computer retail firm, and from
      1983 to 1993 Chief Financial Officer for Unitronix Corporation, a publicly
      traded software design and computer marketing firm. Prior to that, Mr. .Klaube
      was employed for 16 years with Siemens Corp., the US subsidiary of Siemens
      AG,
      where he served most recently as Director of Business Administration for its
      Telecommunications Division. He graduated from the Banking School in Berlin,
      Germany, and holds an MBA degree from Rutgers University.





***Joseph
      J. Tomasek*** ,
      Age 61
      - Director. Mr. Tomasek was appointed a director in February 2000. He has been
      engaged in the private practice of corporate and securities law in his own
      law
      firm for the last ten years. Mr. Tomasek was appointed to serve as general
      counsel for the Company in 1999. In addition to his work with the Company,
      Mr.
      Tomasek represents several other clients in the area of corporate law.





***Steven
      L. Gray*** ,
      Age 58
      - Director. Mr. Gray was elected to serve on the Board on May 18, 2000. He
      is a
      resident of Venice, Florida. For the past six years, Mr. Gray has served as
      the
      President and is a shareholder of a private Florida corporation engaged in
      the
      retail distribution of nutritional products. This corporation has a customer
      base in nine countries. Prior to that time, Mr. Gray ran his own real estate
      development company, specializing in the design and construction of multi-family
      housing.




22





**Family
      Relationships**




There
      are
      no family relationships between any of the directors or executive
      officers.





Compliance
      with Section 16(a) of the Securities Exchange Act of 1934





The
      Company knows of no person, who at any time during the period from the date
      at
      which it filed its annual report on Form 10-KSB for the year ended December
      31,
      2006 to the present, was a director, officer, beneficial owner of more than
      ten
      percent of any class of equity securities of the Company (a "Reporting Person"),
      that failed to file on a timely basis any reports required to be furnished
      pursuant to Section 16(a).


23


**ITEM
      10:**  **EXECUTIVE
      COMPENSATION**





**2007
      SUMMARY COMPENSATION TABLE**





The
      following table sets forth certain compensation information for: (i) the person
      who served as the Chief Executive Officer of Magnitude during the year ended
      December 31, 2007, regardless of the compensation level, and (ii) certain
      of our other executive officers, serving as an executive officer at any time
      during 2007, as well as the most highly compensated employees who did not serve
      as executive officers during 2007. Compensation information is shown for the
      fiscal years ended December 31, 2007 and 2006:


(1)Name
                  and Principal Position
              
              Year
              
              Salary
                  ($)
              
              Bonus
                  ($)
              
              Stock
                  Awards ($)
              
              Option
                  Awards ($)
              
              Non-
                  Equity Incentive Plan Compensation($)
              
              Non-Qualified
                  Deferred Compensatio n Earnings ($)
              
              All
                  Other Compensation($)
              
              Total
                  ($)(a)
              
              (b)
              
              (c)
              
              (d)
              
              (e)
              
              (f)
              
              (g)
              
              (h)
              
              (i)Edward
                  L. Marney
              
              
              2007
              
              
              161,538
              
              
              35,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              12,884
              
              
              209,422Chief
                  Executive
              
              
              2006
              
              
              86,538
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,950
              
              
              92,488Officer,
                  President
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Joseph
                  J. Tomasek,
              
              
              2007
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              127,000
              
              
              127,000Esq.,
                  Director and
              
              
              2006
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              96,121
              
              
              96,121General
                  Legal CounselLegal
                  Fees:Steven
                  Gray
              
              
              2007
              
              
              20,000
              
              
              
              
              
              111,000
              
              
              
              
              
              
              
              
              
              
              
              3,481
              
              
              134,481Director
              
              
              2006
              
              
              30,000
              
              
              
              
              
              107,450
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              137,450Lin
                  Dai
              
              
              2007
              
              $
              57,692
              
              
              
              
              
              472,186
              
              
              376,500
              
              
              
              
              
              
              
              
              91,536
              
              
              844,915Employee
                  ofSubsidiaryMichael
                  Howard
              
              
              2007
              
              
              57,692
              
              
              
              
              
              312,286
              
              
              376,500
              
              
              
              
              
              
              
              
              71,037
              
              
              664,516Employee
                  of SubsidiaryIvan
                  Tumanov
              
              
              2007
              
              
              57,692
              
              
              
              
              
              385,528
              
              
              376,500
              
              
              
              
              
              
              
              
              80,426
              
              
              747,147Employee
                  of SubsidiaryAll
                  executive officers
              
              
              2007
              
              
              388,764
              
              
              15,000
              
              
              1,281,000
              
              
              683,833
              
              
              
              
              
              
              
              
              386,364
              
              
              2,754,961And
                  Employees
              
              
              2006
              
              
              147,914
              
              
              -
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              8,576
              
              
              156,490As
                  a group (2 persons)





Explanation :
      Except
      for the employees, Lin Dai, Michael Howard, Ivan Tumanov and Paul Farris, no
      current Company officer or employee has an employment agreement with the
      Company. All
      of
      the items of compensation paid to the officers, directors and employees listed
      in the above Summary Compensation Table are discussed in the following
      paragraphs, under the individual’s name.





Edward
      L. Marney; 2007-2006. Ed
      Marney joined the Company in May, 2006, becoming first our Chief Executive
      Officer, then our President and a director. We paid Mr. Marney a cash salary
      of
      $161,538,a bonus of $35,000 and $12,884 for healthcare
      insurance expenses in 2007; we paid Mr. Marney $86,538 and reimbursed
      $5,950 of healthcare payments to him during 2006.




Joseph
      J. Tomasek 2007 and 2006: During
      fiscal years 2007 and 2006, the Company paid $127,000 and $ 96,121,
      respectively, to Mr. Tomasek for his legal services rendered to the
      Company.




24





Steven
      Gray 2006 and 2007. During
      fiscal year 2007 we paid Mr. Gray $20,000 and issued 1,850,000 restricted shares
      to him and an assignee, and 500,000 common stock purchase options for services
      rendered to the Company. We also issued 74,031 shares for interest on loans
      to
      the Company. During fiscal year 2006, we paid $30,000 and issued an
      aggregate 1,550,000 restricted common shares and 500,000 common stock purchase
      options to Mr. Gray for services rendered to the Company. During 2006, Mr.
      Gray
      assisted the Company in its change of management, providing day-to-day
      assistance in operations, customer relations including, interviewing
      potential **** candidates
      for management positions and coordinating the various audit schedule and
      management review projects. As set forth in the column “All Other Compensation”
in the above table for 2007 and 2006, we valued the restricted common shares
      issued in the subject years based upon their average public market trading
      price
      as of the dates we issued these shares; we valued the 500,000 options granted
      in
      2006, based upon a formula called the Black-Scholes Model.





Lin
      Dai 2007: During
      fiscal year 2007 we paid Mr. Dai a salary of $57,697 and, in connection with
      the
      acquisition of Kiwibox Media Inc. by Magnitude and in exchange against their
      ownership interest in Kiwibox Media Inc, paid a cash amount of $91,536 and
      issued 11,804,632 restricted common shares (listed under “Stock Awards”) and
      options for 7,500,000 shares, vesting over a 24-months period, exercisable
      at
      $0.057 per share. In addition to the options listed above Mr. Dai was issued
      performance stock options for 3,000,000 shares, further detailed below. As
      set
      forth in the column “All Other Compensation” in the above table for 2007, we
      valued the restricted common shares issued based upon their average public
      market trading price as of the dates we issued these shares; we valued the
      stock
      options based upon a formula called the Black-Scholes Model.





Michael
      Howard 2007: During
      fiscal year 2007 we paid Mr. Howard a salary of $57,697 and, in connection
      with
      the acquisition of Kiwibox Media Inc. by Magnitude and in exchange against
      their
      ownership interest in Kiwibox Media Inc, paid a cash amount of $71,037 and
      issued 7,807,155 restricted common shares (listed under “Stock Awards”) and
      options for 7,500,000 shares, vesting over a 24-months period, exercisable
      at
      $0.057 per share. In addition to the options listed above Mr. Howard was issued
      performance stock options for 3,000,000 shares, further detailed below. As
      set
      forth in the column “All Other Compensation” in the above table for 2007, we
      valued the restricted common shares issued based upon their average public
      market trading price as of the dates we issued these shares; we valued the
      stock
      options based upon a formula called the Black-Scholes Model.





Ivan
      Tumanov 2007: During
      fiscal year 2007 we paid Mr. Tumanov a salary of $57,697 and, in connection
      with
      the acquisition of Kiwibox Media Inc. by Magnitude and in exchange against
      their
      ownership interest in Kiwibox Media Inc, paid a cash amount of $80,426 and
      issued 9,638,213 restricted common shares (listed under “Stock Awards”) and
      options for 7,500,000 shares, vesting over a 24-months period, exercisable
      at
      $0.057 per share. In addition to the options listed above Mr. Tumanov was issued
      performance stock options for 3,000,000 shares, further detailed below. As
      set
      forth in the column “All Other Compensation” in the above table for 2007, we
      valued the restricted common shares issued based upon their average public
      market trading price as of the dates we issued these shares; we valued the
      stock
      options based upon a formula called the Black-Scholes Model.





Employment
      Agreements





Lin
      Dai, Michael Howard and Ivan Tumanov - 2007 .
      As part
      of our acquisition of Kiwibox, on August 16, 2007, we entered into employment
      agreements with each these three principals of Kiwibox. an annual base salary
      of
      $150,000. In addition, we agreed to pay each an annual bonus if certain business
      goals are met: a $100,000 bonus if the Kiwi Business has received no less than
      an average 215,000 “Unique Visitors” during either the 10th, 11th or 12th month
      of the first year of the term or achieved no less than $316,000 in gross
      revenues within the 12 moth period following the Closing. Alternatively, we
      agreed to pay each a $50,000 bonus if the Kiwi Business has received at least
      an
      average 175,000 but less than an average 215,000 “Unique Visitors” during either
      the 10th, 11th or 12th month of the first year of the term or at least $237,000
      in gross revenues but less than $316,000 within the 12 moth period following
      the
      Closing. A “Unique Visitor” is a person who visits a Kiwibox website during any
      month during the term. For the second year of their employment agreements,
      we
      agreed to pay each a $100,000 bonus if the Kiwi Business has received no less
      than an average 550,000 Unique Visitors during either the 22nd, 23rd or 24th
      month of the second year of the term or attained $1,961,000 in gross revenues,
      or a bonus of $50,000 each if the Kiwi Business has received at least an average
      415,000 but less than an average 550,000 Unique Visitors during either the
      22nd,
      23rd or 24th month of the second year of the term or attained at least
      $1,500,000 in gross revenues but less than $1,961,000. Each Kiwibox Shareholder
      received a stock option to purchase up to 7,500,000 shares of our common stock
      at an exercise price of $.05 per share which shall vest and be exercisable
      by
      the Kiwibox Shareholders, 50% on the first anniversary date of the Closing,
      25%
      18 months after the Closing and 25% on the second anniversary of the Closing.
      Each was issued, as well, under the terms of their employment agreements, a
      performance stock option to purchase up to an additional 3,000,000 shares of
      our
      common stock, 1,500,000 of which options shall vest and be exercisable by the
      Kiwibox Shareholders after the first anniversary date of the Closing if the
      Kiwi
      Business has received no less than an average 215,000 Unique Visitors during
      either the 10th, 11th or 12 th month of
      the first year of the term or achieved $316,000 in gross revenues during the
      first year, and the balance, or 1,500,000 options shall vest and be exercisable
      by the Kiwibox Shareholders after the second anniversary date of the Closing
      if
      the Kiwi Business has received at least an average 550,000 Unique Visitors
      during either the 22nd, 23rd or 24th month of the second year of the term or
      achieved $1,961,000 in gross revenues during the second year of the agreements.
      The exercise prices for these stock options is $.05 per share.




25





Paul
      Farris - 2007. On
      October 8, 2007, we hired Paul Farris as the Director of Business Development
      for our Kiwibox.com operations and executed a two-year employment agreement
      with
      him. We pay Mr. Farris an annual base salary of $90,000 and made two stock
      option grants to him for an aggregate 1,000,000 common shares: a stock option
      grant for 500,000 shares, exercisable at $.05 per share, vesting 1/3 each on
      the
      first, second and third anniversary dates of his employment, and; a performance
      stock option for a second 500,000 shares, also exercisable at $.05 per share,
      and vesting based upon the attainment of certain business goals: on the first
      anniversary date of his employment: (i) 250,000 Performance Stock Options shall
      fully vest provided that a Kiwi website has received no less than an average
      645,000 Unique Visitors (defined below) during either the 10th, 11th  or
      12th  month
      of
      the first year of the term, or; (ii) 125,000 Performance Stock Options shall
      vest provided that the Kiwibox.com website has received no less than an average
      430,000 Unique Visitors during either the 10th, 11th or 12th  month
      of
      the first year of the term; or (iii) 62,500 Performance Stock Options shall
      vest
      provided that the Kiwibox.com website has received no less than an average
      215,000 Unique Visitors during either the 10th, 11th  or
      12th  month
      of
      the first year of the term; on the second anniversary date of his employment:
      (i) all 250,000 Performance Stock Options shall fully vest provided that a
      Kiwi
      website has received no less than an average 1,650,000 Unique Visitors during
      either the 10th, 11th or 12th  month
      of
      the second year of the term, or; (ii) 125,000 Performance Stock Options shall
      vest provided that the Kiwibox.corn website has received no less than an average
      1,100,000 Unique Visitors during either the 10th, 11th or 12th  month
      of
      the second year of the term; or (iii)
      62,500 Performance Stock Options shall vest provided that the Kiwibox.com
      website has received no less than an average 550,000 Unique Visitors during
      either the l0th, 11th or 12th  month
      of
      the second year of the term. The term "Unique Visitor" is a person who visits
      a
      Kiwibox website during the specific month identified above. The determination
      of
      the actual number of Unique Visitors visiting a Kiwibox website during any
      specific month for purposes of this section shall be calculated based upon
      "Google Analytics".




**Stock
      Options :**





No
      stock
      options were granted during 2007 pursuant to the Company’s 1997 Stock Option
      Plan and 2000 Stock Incentive Plan, to any executive officers, directors,
      employees or to any beneficial owners of more than 10 percent of any class
      of
      equity securities of the Company. In addition, there were no stock options
      or
      warrants exercised by any officer, director, employee or to any beneficial
      owners of more than 10 percent of any class of equity securities of the Company
      during 2007.





1997
      Stock Option Plan:





The
      Company’s 1997 Stock Option Plan, as filed with Information Statement pursuant
      to Section 14(c) with the Commission on July 1, 1997, and with Registration
      Statement on Form S-8 with the Commission on September 8, 1997, is hereby
      incorporated by reference.





2000
      Stock Incentive Plan:





The
      Company’s 2000 Stock Incentive Plan, as filed with the Commission as an exhibit
      to the quarterly report on Form 10-QSB for the period ended March 31, 2000,
      is
      hereby incorporated by reference.




26





Options
      Granted Outside of Stock Option Plans:





On
      August
      16, 2007, the Company closed on its acquisition of Kiwibox Media Inc. and issued
      to each of the three Kiwibox Shareholder stock options provided for under their
      employment agreements. Each Kiwibox Shareholder received a stock option to
      purchase up to 7,500,000 shares of our common stock at an exercise price of
      $.05
      per share which vests and is exercisable by the Kiwibox Shareholders, 50% on
      the
      first anniversary date of the Closing, August 16, 2008, 25% 18 months after
      the
      Closing and 25% on the second anniversary of the Closing. Each Kiwibox
      Shareholder was also issued a performance stock option to purchase up to an
      additional 3,000,000 shares of our common stock, 1,500,000 of which options
      vest
      and are exercisable following the first anniversary date of the Closing if
      the
      Kiwi Business has received no less than an average 215,000 Unique Visitors
      during either the 10th, 11th or 12 th month of
      the first year of the term or achieved $316,000 in gross revenues during the
      first year, and the balance, or 1,500,000 options vest and are exercisable
      by
      the Kiwibox Shareholders after the second anniversary date of the Closing,
      provided the Kiwi Business has received at least an average 550,000 Unique
      Visitors during either the 22nd, 23rd or 24th month of the second year of the
      term or achieved $1,961,000 in gross revenues during the second year of the
      agreements. All of these stock options are non-qualified and are exercisable
      at
      $.05 per share.


We
        gave a
        3-year stock option grant to Steven Gray, a director, to purchase 500,000
        common
        shares at the exercise price of $.15 for services rendered to the Company
        during
        2007.
 
 Pursuant
        to the terms of his employment agreement, dated October 8, 2007, we made
        two
        stock option grants to Paul Farris for an aggregate 1,000,000 common shares:
        a
        stock option grant for 500,000 shares, exercisable at $.05 per share, vesting
        1/3 each on the first, second and third anniversary dates of his employment,
        and; a performance stock option for a second 500,000 shares, also exercisable
        at
        $.05 per share, and vesting based upon the attainment of certain business
        goals:
        on the first anniversary date of his employment: (i) 250,000 Performance
        Stock
        Options shall fully vest provided that a Kiwi website has received no less
        than
        an average 645,000 Unique Visitors (defined below) during either the 10th,
        11th
        or 12th month of the first year of the term, or; (ii) 125,000 Performance
        Stock
        Options shall vest provided that the iwibox.com website has received no less
        than an average 430,000 Unique Visitors during either the 10th, 11th or 12th
        month of the first year of the term; or (iii) 62,500 Performance Stock Options
        shall vest provided that the Kiwibox.com website has received no less than
        an
        average 215,000 Unique Visitors during either the 10th, 11th or 12th month
        of
        the first year of the term; on the second anniversary date of his employment:
        (i) all 250,000 Performance Stock Options shall fully vest provided that
        a Kiwi
        website has received no less than an average 1,650,000 Unique Visitors during
        either the 10th, 11th or 12th month of the second year of the term, or; (ii)
        125,000 Performance Stock Options shall vest provided that the Kiwibox.corn
        website has received no less than an average 1,100,000 Unique Visitors during
        either the 10th, 11th or 12th month of the second year of the term; or (iii)
        62,500 Performance Stock Options shall vest provided that the Kiwibox.com
        website has received no less than an average 550,000 Unique Visitors during
        either the l0th, 11th or 12th month of the second year of the term.


**Outstanding
      Equity Awards At Fiscal Year-End Table**





The
      following table provides certain information regarding unexercised options
      to
      purchase common stock, stock options that have not vested, and equity-incentive
      plan awards outstanding at December 31, 2007, for each of the persons covered
      under our Summary Compensation Table .





Name
                and
              Principal
              Position
            
            Number
                of
              Securities
              Underlying
              Unexercised
              Options
              Exercisable
            
            Number
                of
              Securities
              Underlying
              Unexercised
              Options
              Unexercisable
            
            Equity
              Incentive
              Plan
                Awards
              No.
                of
              Underlying
              Unexercised
              Unearned
              Options
            
            Option
              Exercise
              Price
            
            Option
              Expiration
              Date
            
            No.
                of
              Shares
                or
              Units
                of
              Stock
                that
              have
                not
              vested
            
            Market
              Value
                of
              Shares
                or
              Units
                of
              Stock
                that
              have
                not
              vested
            
            Equity
              Incentive
              Awards,
              Shares,
                Units
              Or
                other
              Rights
                that
              have
                not
              vested
            
            Equity
              Incentive
                Plan Awards:
              Market
                or Payout value of Unearned Shares,Units or other rights that have
                not
                vestedEdward
                L.
              Marney,
              CEO
                and
              President
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Joerg
                H.
              Klaube,
              CFO
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Joseph
                J.
              Tomasek,
              Director
                and General
              Legal
              Counsel
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Steven
                Gray,
              Chairman
              of
                the
              Board
            
            
            500,000
              500,000
            
            
            -
              -
            
            
            -
              -
            
            $
              $
            0.15
              0.15
            
            
            1/1/09
              1/1/10
            
            
            -
              -
            
            
            -
              -
            
            
            -
              -
            
            
            -
              -Lin
                Dai
              Employee
                of Subsidiary
            
            
            0
            
            
            10,500,000
            
            
            
            
            $
            .05
            
            
            8/16/10
            
            
            10,500,000Michael
                Howard
              Employee
                of Subsidiary
            
            
            0
            
            
            10,500,000
            
            
            
            
            $
            .05
            
            
            8/16/10
            
            
            10,500,000Ivan
                Tumanov
              Employee
                of Subsidiary
            
            
            0
            
            
            10,500,000
            
            
            
            
            $
            .05
            
            
            8/16/10
            
            
            10,500,000




27




Option
      Exercises and Stock Vested Table: None





Pension
      Benefits Table: None





Nonqualified
      Deferred Compensation Table: None





Pre-requisites
      Table: None





Compensation
      of Directors:





We
      have
      not paid any compensation to any of our directors for services rendered as
      directors during fiscal years 2006 and 2007.





During
      2007, one outside director of the Company who also serves as the Company’s
      general and securities counsel, was paid an aggregate $127,000 for legal
      services.





CORPORATE
      GOVERNANCE AND CODE OF ETHICS





The
      Company has always been committed to good corporate governance. In furtherance
      of this commitment, during 2002 the Board of Directors expanded the duties
      of
      the Company’s Audit Committee by increasing the Committee's duties specifically
      to include responsibility and oversight of corporate governance matters and
      adherence to the Company’s Code of Ethics. A copy of the Corporate Code of
      Ethics and Conduct had been included as an exhibit to the Company’s report on
      Form 10-KSB for the year ended December 31, 2002.







Our
      Board
      of Directors has determined that none of its current members, Edward L. Marney,
      Joerg H. Klaube, Joseph J. Tomasek and Steven Gray, are independent in
      accordance under applicable securities laws. It is the intention, however,
      of
      the Board of Directors, to identify and appoint independent directors in the
      current fiscal year.





**Board
      Committees**





AUDIT
      COMMITTEE





The
      Company has appointed an Audit Committee in accordance with the provisions
      of
      the Sarbanes-Oxley Act of 2002. The Audit Committee is currently comprised
      of
      one director, Steven. Gray, who is a financial expert with knowledge of
      financial statements, generally accepted accounting principles and accounting
      procedures and disclosure rules. Mr. Gray is not “independent” as defined in
      Section10A-3(b)(1)(iv)(A) of the Securities Exchange Act. Our Board of Directors
      intends to appoint additional independent members to this Audit
      Committee.




28





**COMPENSATION
      AND NOMINATING COMMITTEES**





Our
      board
      of directors intends to appoint such persons and form such committees as are
      required to meet the corporate governance requirements imposed by the national
      securities exchanges. Therefore, we intend that a majority of our directors
      will
      eventually be independent directors. Additionally, our board of directors is
      expected to appoint a nominating committee and a compensation committee, and
      to
      adopt charters relative to each such committee. Until further determination
      by
      the Board, the full Board of Directors will undertake the duties of the
      compensation committee and nominating committee.





**ITEM
      11:**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND** **MANAGEMENT**





The
      following table sets forth, as of March 28, 2008, the record and beneficial
      ownership of common stock of the Company by each executive officer, director
      and
      the three most highly compensated employees, all executive officers, directors
      and the three most highly compensated employees as a group, and each person
      known to the Company to own beneficially, or of record, five percent or more
      of
      the outstanding shares of the Company:


Title
                  of Class *
              
              Name
                  and Address of Beneficial Owner
              
              Amount
                  and Nature of Beneficial Ownership(1)
              
              Percent
                  of ClassCommon
              
              
              Edward
                  Marney
              
              
              -
              
              
              -Stock
              
              
              Steven
                  L. Gray
              
              
              8,272,131
              (2)
              
              2.20
              %Joerg
                  H. Klaube
              
              
              1,400,000
              
              
              0.37
              %Joseph
                  J. Tomasek
              
              
              2,847,166
              (3)
              
              0.77
              %Lin
                  Dai
              
              
              11,804,632
              (4)
              
              3.14
              %Michael
                  Howard
              
              
              7,807,155
              (5)
              
              2.10
              %Ivan
                  Tomanov
              
              
              9,638,213
              (6)
              
              2.56
              %Address
                  of all persons above: c/o the Company.All
                  Directors, Executive Officers
              
              
              41,769,297
              
              
              11.10
              %And
                  the Three Most HighlyCompensated
                  Employees
                as
                  a Group (7 persons)Steven
                  D. Rudnik
              
              
              24,
                  272,986
              
              
              6.45
              %Tell
                  Capital AG
              
              
              27,750,000
              (7)
              
              7.38
              %Zurich,
                  SwitzerlandCambridge
                  Services
              
              
              25,000,000
              (8)
              
              6.64
              %Panama
                  City, PanamaVGZ
              
              
              25,000,000
              (9)
              
              6.64
              %Zurich,
                  SwitzerlandMonarich
                  International, Inc.
              
              
              25,000,000
              (10)
              
              6.64
              %El
                  Dorado, PanamaDiscover
                  Advisory Company
              
              
              30,000,000
              (11)
              
              7.97
              %Nassau,
                  Bahamas




*
      Based
      upon 376,242,570 common shares outstanding at March 28, 2008. The Company also
      has issued and outstanding as of March 28 2008, 129,500 shares of its Senior
      Convertible Preferred Stock, with concentrations in excess of 10% for one or
      more of the holders of such stock, however, none of such shares bear any voting
      rights.


(1)
              For
                  purposes of this table, a person or group of persons is deemed
                  to have
                  “beneficial ownership” of any shares of Common Stock which such person has
                  the right to acquire within 60 days of March 28 2008. For purposes
                  of
                  computing the percentage of outstanding shares of Common Stock
                  held by
                  each person or group of persons named above, any security which
                  such
                  person or persons has or have the right to acquire within such
                  date is
                  deemed to be outstanding but is not deemed to be outstanding for
                  the
                  purpose of computing the percentage ownership of any other person.
                  Except
                  as indicated in the footnote to this table and pursuant to applicable
                  community property laws, the Company believes based on information
                  supplied by such persons, that the persons named in this table
                  have sole
                  voting and investment power with respect to all shares of Common
                  Stock
                  which they beneficially own.




29




(2)
            Includes
                options for 1,000,000 shares.




(3)
            Includes
                warrants for 333,333 shares.




(4)
            Does
                not include his portion of approximately 30,000,000 shares due to
                the
                three Kiwibox Shareholders for late
                penalties.




(5)
            Does
                not include his portion of approximately 30,000,000 shares due to
                the
                three Kiwibox Shareholders for late
                penalties.




(6)
            Does
                not include his portion of approximately 30,000,000 shares due to
                the
                three Kiwibox Shareholders for late
                penalties.




(7)
            Includes
                2,750,000 warrants owned by Ulrich Schuerch who has investment and
                voting
                control of Tell Capital AG, and 12,500,000 5-yearWarrants,
                exercisable at $.07 per Warrant.




(8)
            Represents
                25,000,000 5-year warrants, exercisable at $.05 per warrant and provides
                for cashless exercise; Viktor Sauter has investment and voting control
                of
                Cambridge services.




(9)
            Represents
                25,000,000 5-year warrants, exercisable at $.05 per warrant and provides
                for cashless exercise; Markus Winkler has investment and voting control
                of
                VGZ.




(10)
            Miguel
                Sanchez Lopez and Javier Rivera Fernandez have investment and voting
                control of Monarich International,
                Inc.




(11)
            Karen
                Buehler has investment and voting control of Discover Advisory
                Company.





30


**ITEM
      12:**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS**





On
      January 2, 2007, the Company and a former employee, Steven W. Jagels settled
      a
      lawsuit commenced by Mr. Jagels against the Company based upon claims which
      included breach of his employment agreement. We agreed to make a payment of
      $20,040 to Mr. Jagels and to issue 3,000,000 common shares to him by January
      7,
      2007. We also agreed to include these shares in a registration statement and
      when declared effective by the SEC, to cause a buyer to purchase these shares
      from Mr. Jagels for $75,000 prior to February 28, 2007. The
      Company facilitated this payment and the lawsuit was dismissed with
      prejudice.




In
      January 2007 we issued warrants for 3,125,000 shares, exercisable at $0.05
      per
      share, to the former president and chief executive officer, in connection with
      a
      settlement agreement reached during the fourth quarter in 2006





In
      May
      2007 the Company reached agreement with the former president and chief executive
      officer to the effect that, in return for issuance of 2,000,000 shares, he
      would
      issue a waiver with respect to the Company’s obligation for filing a
      registration statement for certain securities previously issued to him by the
      Company.





During
      2007 and 2006, one outside director of the Company who also serves as the
      Company’s general and securities counsel, was paid an aggregate $127,000 and
      $96,121, respectively, for legal services.





**ITEM
      13. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





AUDIT
      FEES





Rosenberg
      Rich Baker Berman & Company ("Rosenberg") billed us in the aggregate amount
      of $79,373 and
      $66,433 for professional services rendered for their audit of our annual
      financial statements and their reviews of the financial statements included
      in
      our Forms 10-KSB and 10-QSB for the years ended December 31, 2007 and December
      31, 2006, respectively.





AUDIT-RELATED
      FEES





Rosenberg
      did not bill us for, nor perform professional services rendered for assurance
      and related services that were reasonably related to the performance of audit
      or
      review of the Company's financial statements for the fiscal years ended December
      31, 2007 and December 31, 2006.





TAX
      FEES





Rosenberg
      billed us in the aggregate amount of $5,416 and
      $5,656 for professional services rendered for tax related services for the
      fiscal years ended December 31, 2007 and December 31, 2006,
      respectively.





ALL
      OTHER
      FEES





The
      aggregate fees billed by Rosenberg for services rendered to the Company during
      the last two fiscal years, other than as reported above, were $0 and $0,
      respectively.





**TRANSFER
      AGENT**





The
      transfer agent for the Company is Securities Transfer Corporation, located
      at
      2591 Dallas Parkway, Suite 102, Frisco, Texas 75034.




31





**ANNUAL
      REPORT**





The
      Company intends to continue its practice of furnishing annual reports to its
      shareholders containing financial statements audited by independent certified
      public accountants.





32




**ITEM
      14:**  **EXHIBITS
      AND REPORTS ON FORM 8-K**





(a)  Exhibits





The
      Exhibits that are filed with this report or that are incorporated by reference
      are set forth in the Exhibit Index attached hereto.





(b)  Reports
      on Form 8-K





On
      October 5, 2007 the Company filed a report on Form 8-K announcing the hiring
      of
      a director for business development and informing about equity
      investments.





On
      October 12, 2007 the Company filed a report on Form 8-K announcing a press
      release informing about the launch of a new website for its Kiwibox
      subsidiary.





On
      November 6, 2007 the Company filed a report on Form 8-K informing about an
      equity investment transaction.





On
      November 28, 2007 the Company filed a report on Form 8-K announcing a press
      release informing about a joint marketing project with Nintendo.





On
      December 5, 2007 the Company filed a report on Form 8-K informing about an
      amendment to the Agreement and Plan of Reorganization involving the merger
      of
      its wholly owned subsidiary Magnitude Operations Inc. with Kiwibox Media
      Inc.





On
      December 5, 2007 the Company filed a report on Form 8-K informing about an
      amendment to the Agreement and Plan of Reorganization involving the merger
      of
      its wholly owned subsidiary Magnitude Operations Inc. with Kiwibox Media
      Inc.





On
      January 4, 2008 the Company filed a report on Form 8-K informing about a further
      amendment to the Agreement and Plan of Reorganization involving the merger
      of
      its wholly owned subsidiary Magnitude Operations Inc. with Kiwibox Media Inc
      and
      the receipt of an equity investment.





On
      February 5, 2008 the Company filed a report on Form 8-K informing about the
      signing of a Standstill Agreement with the former principals of its wholly
      owned
      subsidiary Kiwibox Media Inc. and the receipt of an equity
      investment.





On
      February 21, 2008 the Company filed a report on Form 8-K informing about the
      signing of a second Standstill Agreement with the former principals of its
      wholly owned subsidiary Kiwibox Media Inc.





On
      March
      4, 2008 the Company filed a report on Form 8-K informing about a further
      amendment to the Agreement and Plan of Reorganization involving the merger
      of
      its wholly owned subsidiary Magnitude Operations Inc. with Kiwibox Media
      Inc.





On
      March
      7, 2008 the Company filed a report on Form 8-K informing about an equity
      investment transaction.




33





**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Securities Exchange Act, the
      Registrant has caused this Report to be signed on its behalf by the undersigned,
      thereunto duly authorized.




MAGNITUDE
                INFORMATION SYSTEMS, INC.By: 
/s/
              Edward L. Marney
            
            
            Date:April
              14, 2008Edward
                L. Marney
              President
                  and Chief Executive Officer
                (Principal
                  Executive Officer),
                Director


By: 
/s/
              Joerg H. Klaube
            
            
            Date:April
              14, 2008Joerg
                    H. Klaube
                  Secretary,
                    Chief Financial Officer
                  (Principal
                    Financial Officer)
                  Director




In
      accordance with the requirements of the Securities Exchange Act, this Report
      has
      been signed below by the following persons on behalf of the Registrant and
      in
      the capacities and on the dates indicated.





Name
            
            
            Date/s/
              Steven L.
              Gray
            
            
            April
              14, 2008Steven
                L. Gray, Chairman of the Board/s/ Joseph J. Tomasek
            
            
            April 14, 2008Joseph
              J. Tomasek, Director




34




EXHIBIT
      INDEX





(3)
                (i)
            
            Articles
                of Incorporation and Amendments thereto, incorporated herein by reference
                to Exhibits of previous filings with the Commission.(3)
                (ii)
            
            Bylaws
                of the Company, incorporated herein by reference to Exhibits of previous
                filings with the Commission.




10.1*
            
            Resignation
                Agreement dated July 21, 1999, between J. Swon and B. Deichl and
                the
                Company, incorporated herein by reference to the Exhibit of Form
                S-8 filed
                with the Commission on August 3, 1999.10.2*
            
            Resignation
                Agreement dated January 28, 2000, between M. Martin and the Company,
                incorporated herein by reference to the Exhibit of Form S-8 filed
                with the
                Commission on January 31, 2000.10.3*
            
            Employment
                Agreement, dated April 15, 1996 between the Company and Joerg Klaube,
                incorporated herein by reference and previously filed as an Exhibit
                to the
                Company's Form 10-KSB for the fiscal year ended December 31, 1997
                with the
                Commission.10.4*
            
            Employment
                Agreement, dated July 1, 1999 between the Company and John C.
                Duncan.10.5*
            
            Termination
                Agreement, dated as of August 1, 2001, by and between the Company
                and
                Torneaux Fund, Ltd.10.6*
            
            Contract
                by and between Lockheed Martin and the Company, dated December 21,
                2000.10.7*
            
            Employment
                Agreement, dated April 15, 2002 between the Company and Steven D.
                Rudnik.10.8*
            
            Employment
                Agreement, dated February 15, 2002 between the Company and Mark
                Fuller.10.9*
            
            Employment
                Agreement, dated April 15, 2002 between the Company and Joerg
                Klaube.10.10*
            
            Employment
                Agreement, dated April 15, 200 between the Company and Steven
                Jagels10.11*
                *
            
            Brokerage
                Placement Assistance Agreement, Dated January 2, 2004, between the
                Company
                and vFinance Investments, Inc.10.12
                *
            
            Consulting
                Agreement, dated December 1, 2003, by and between the Company and
                Alan
                Cohen.10.13
                *
            
            Consulting
                Agreement, dated February 12, 2003, by and between Jackson-Hewitt
                Investment Services, Inc. and the
                Company.




35




10.14
                *
            
            Consulting
                Agreement, dated September 25, 2003, by and Between James W. Morton
                and
                the Company.10.15
                *
            
            Consulting
                Agreement, dated September 15, 2003, by and between Premium Strategy
                Partners AG and the Company.10.16
                *
            
            Consulting
                Agreement, dated September 25, 2003, by and between Ulrich Schuerch
                and
                the Company.10.17
                *
            
            Consulting
                Agreement, dated December 1, 2003, by and between Murray Zaroff and
                the
                Company.10.18
                *
            
            Consulting
                Agreement, dated November 28, 2003, by and between The Research Works
                Inc.
                and the Company.10.19
                *
            
            Stock
                Purchase Agreement, dated August 18, 2006, by and between 33 Group,
                LLC
                and the Company.10.20
                *
            
            Stock
                Purchase Agreement, dated August 18, 2006, by and between Azzurri
                Group,
                LLC and the Company.10.21
                *
            
            Form
                of Company Warrant to be issued in connection with the Stock Purchase
                Agreements, Exhibits 10.19 and 10.20, respectively.10.22
                *
            
            Settlement
                Agreement, dated August 8, 2006, between the Company and Steven D.
                Rudnik.10.23
                *
            
            Settlement
                Agreement, dated December 13, 2006, between the Company and Steven
                D.
                Rudnik.10.24
                *
            
            Settlement
                Agreement, dated January 2, 2007, between the Company And Steven
                W.
                Jagels.10.25*
            
            Copy
                of Agreement and Plan of Reorganization, Dated February 19, 2007,
                between
                the Company, Kiwibox Media, Inc. and the Kiwibox Shareholders, and
                Form of
                Employment Agreement for the Three Kiwibox Shareholders,10.26*
            
            Preliminary
                Employment Agreement with Paul Farris10.27*
            
            Commitment
                from Tell Capital AG, dated July 26, 2007 and effective August 2,
                200710.27*
            
            Amendment
                No. 3 to Agreement and Plan of Reorganization, dated July 31, 2007
                and
                Effective August 2, 200710.28*
            
            Preliminary
                Employment Agreement with Paul Farris, Dated September 19,
                200710.29*
            
            Amendment
                No. 4 to Agreement and Plan of Reorganization, dated as of December
                3,
                2007.10.30*
            
            Amendment
                No. 5 to Agreement and Plan of Reorganization, dated as of December
                31,
                2007.




36




10.31*
            
            Standstill
                Letter Agreement, dated as of January 30, 2008.10.32*
            
            Standstill
                Letter Agreement, dated as of February 11, 2008.10.33*
            
            Amendment
                No. 6 to Agreement and Plan of Reorganization, dated as of February
                28,
                2008.21.
            
            Subsidiaries
                of the Company:(i)
                Magnitude, Inc. and Kiwibox Media, Inc. are corporations formed under
                the
                laws of the State of Delaware and and are the names under which they
                conduct business.




31.1
            
            Certification
                of Edward Marney, Chief Executive Officer, pursuant to Section 302
                of
                Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                of Joerg H. Klaube, Chief Financial Officer, pursuant to Section
                302 of
                Sarbanes-Oxley Act of 2002.32.1
            
            Certifications
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
                1350




*
            Documents
                filed as exhibits to Registrant’s current reports, quarterly reports,
                annual reports and registration statements and amendments thereto
                with the
                U.S. securities and Exchange
                Commission.




OTHER
      DOCUMENTS INCORPORATED HEREIN BY REFERENCE





(a)
            The
                Company’s Quarterly Reports on Form 10-QSB for the periods ended March 31,
                2007, June 30, 2007, and September 30,
                2007.





(b)
            All
                other reports filed by the Company pursuant to Section 13(a) or 15(d)
                of
                the Exchange Act since the Company’s fiscal year ended December 31,
                2006





37




Magnitude
      Information Systems, Inc. and Subsidiaries





Consolidated
      Financial Statements





December
      31, 2007




38




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Index
      to the Consolidated Financial Statements**


**December
      31, 2007**


PageReport
                  of Independent Registered Public Accounting Firm
              
              
              F-2Financial
                  StatementsConsolidated
                  Balance Sheet
              
              
              F-3Consolidated
                  Statements of Operations
              
              
              F-4Consolidated
                  Statements of Stockholders Equity (Deficit)
              
              
              F-5-F-6Consolidated
                  Statements of Cash Flows
              
              
              F-7-F-9Notes
                  to the Consolidated Financial Statements
              
              
              F-10-F-33




F-1




[letterhead
        of
 Rosenberg
        Rich Baker Berman & Company
 380
        Foothill Road, Bridgewater, New Jersey]
 **Report
          of Independent Registered Public Accounting Firm**
 
 
 To
          the
          Board of Directors and Stockholders of
 Magnitude
          Information Systems, Inc. and Subsidiaries
 
 We
          have
          audited the accompanying consolidated balance sheet of Magnitude Information
          Systems, Inc. and Subsidiaries as of December 31, 2007 and the related
          consolidated statements of operations, stockholders’ equity (deficit), and cash
          flows for the years ended December 31, 2007 and 2006. These financial statements
          are the responsibility of the Company’s management. Our responsibility is to
          express an opinion on these financial statements based on our audits.
 
 We
          conducted our audits in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audits to obtain reasonable assurance about whether the
          financial statements are free of material misstatement. The company is
          not
          required to have, nor were we engaged to perform, an audit of its internal
          control over financial reporting. Our audit included consideration of internal
          control over financial reporting as a basis for designing audit procedures
          that
          are appropriate in the circumstances, but not for the purpose of expressing
          an
          opinion on the effectiveness of the company’s internal control over financial
          reporting. Accordingly, we express no such opinion. An audit also includes
          examining, on a test basis, evidence supporting the amounts and disclosures
          in
          the financial statements, assessing the accounting principles used and
          significant estimates made by management, as well as evaluating the overall
          financial statement presentation. We believe that our audits provide a
          reasonable basis for our opinion.
 
 In
          our
          opinion, the financial statements referred to above present fairly, in
          all
          material respects, the consolidated financial position of Magnitude Information
          Systems, Inc. and Subsidiaries as of December 31, 2007 and the consolidated
          results of their operations and their cash flows for the years ended December
          31, 2007 and 2006, in conformity with U.S. generally accepted accounting
          principles.
 
 The
          accompanying financial statements have been prepared assuming that the
          Company
          will continue as a going concern. As discussed in the notes to the financial
          statements, the Company’s significant operating losses and significant working
          capital deficiency raise substantial doubt about its ability to continue
          as a
          going concern. The financial statements do not include any adjustments
          that
          might result from the outcome of this uncertainty.
 */s/Rosenberg
                  Rich Baker Berman & Company*Bridgewater,
                  New Jersey
                April
                  15, 2008
              Rosenberg
                  Rich Baker Berman & Company


F-2


**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Consolidated
      Balance Sheet**


**December
      31, 2007**





AssetsCurrent
                AssetsCash
            
            $
            470,148Accounts
                receivable, net of allowance for doubtful accounts of $0
            
            
            7,893Prepaid
                expenses
            
            
            12,339Total
                Current Assets
            
            
            490,380Property
                and equipment, net of accumulated depreciation of $81,965
            
            
            .20,788Deferred
                financing costs, net of accumulated amortization of
                $539,597
            
            
            35,303Goodwill
            
            
            2,663,751Other
                Assets
            
            
            11,114Total
                Assets
            
            
            3,221,336Liabilities
                and Stockholders’ Equity (Impairment)Current
                LiabilitiesAccounts
                payable and accrued expenses
            
            
            907,799Deferred
                revenues
            
            
            100,000Dividends
                payable
            
            
            376,743Obligations
                to be settled in stock
            
            
            1,622,921Loans
                and notes payable
            
            
            450,000Current
                maturities of long-term debt
            
            
            33,529Derivative
                liability for warrants and options
            
            
            2,825,920Total
                Current Liabilities
            
            
            6,316,912Commitments
                and Contingencies
            
            
            -Stockholders’
                Equity (Impairment)Preferred
                stock, $.001 par value, non-voting, 3,000,000 shares authorized;
                129,500
              shares
                issued and outstanding
            
            
            129Common
                stock, $.0001 par value, 700,000,000 shares authorized; 276,709,237
                shares
                issued
              and
                outstanding
            
            
            27,671Additional
                paid in capital
            
            
            36,739,270Loans
                receivable - stockholders
            
            
            (286,721
            )Accumulated
                (deficit)
            
            
            (39,575,925
            )Total
                Stockholders’ Equity (Impairment)
            
            
            (3,095,576
            )Total
                Liabilities and Stockholders’ Equity (Impairment)
            
            $
            3,221,336




See
      notes
      to the consolidated financial statements.




F-3




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Consolidated
      Statements of Operations**





Year
                Ended December 31,2007
            
            2006Net
                SalesSoftware
                licensing and maintenance
            
            $
            4,252
            
            $
            47,701Advertising
            
            
            25,493
            
            
            -Total
                Net Sales
            
            
            29,745
            
            
            47,701Cost
                of Goods SoldSoftware
                amortization
            
            
            -
            
            
            145,496Total
                Cost of Goods Sold
            
            
            -
            
            
            145,496Gross
                Profit (Loss)
            
            
            29,745
            
            
            (97,795
            )Research
                and development costs
            
            
            735
            
            
            75,998Stock-based
                compensation (see below)
            
            
            890,504
            
            
            1,583,075Selling,
                general and administrative expenses
            
            
            1,586,338
            
            
            1,959,999Loss
                From Operations
            
            
            (2,447,832
            )
            
            (3,716,867
            )Other
                Income (Expense)Interest
                income
            
            
            2,551
            
            
            20Interest
                expense
            
            
            (357,385
            )
            
            (326,744
            )Gain
                on extinguishment of debt
            
            
            49,678
            
            
            -Loss
                on disposition of assets
            
            
            -
            
            
            (355
            )Other
                expenses
            
            
            (156
            )
            
            (5,000
            )Amortization
                of intangible asset
            
            
            (30,000
            )
            
            -Impairment
                of software intangibles
            
            
            -
            
            
            (174,954
            )Amortization
                financing costs
            
            
            (539,597
            )
            
            -Change
                in fair value of derivative conversion feature
            
            
            -
            
            
            102,762Change
                in fair value of options and warrants
            
            
            (558,911
            )
            
            192,136Total
                Other Income (Expense)
            
            
            (1,433,820
            )
            
            (212,135
            )Loss
                Before Benefit from Income Taxes
            
            
            (3,881,652
            )
            
            (3,929,002
            )Benefit
                from Income Taxes
            
            
            -
            
            
            33,740Net
                Loss
            
            $
            (3,881,652
            )
            $
            (3,895,262
            )Dividends
                on Preferred Shares
            
            $
            (53,481
            )
            $
            (578,464
            )Net
                Loss Applicable to Common Shareholders, basic and diluted
            
            $
            (3,935,133
            )
            $
            (4,473,726
            )Net
                Loss Per Common Share, basic and diluted
            
            
            (0.02
            )
            
            (0.03
            )Weighted
                Average of Common Shares Outstanding
            
            
            243,609,819
            
            
            170,692,731




All
      of
      the stock-based compensation relates to selling, general and administrative
      expenses.




See
      notes
      to the consolidated financial statements.





F-4


**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Consolidated
      Statement of Stockholders’ Equity (Deficit)**


**Year
      Ended December 31, 2006**


TotalConvertible
              
              Cumulative
              
              
              
              
              
              Additional
              
              
              
              
              
              Stockholders’Preferred
                  Shares
              
              Preferred
                  Shares
              
              Common
                  Stock
              
              Paid
                  in
              
              Accumulated
              
              Deferred
              
              EquityShares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Deficit
              
              Compensation
              
              (Deficit)Balances,
                  January 1, 2006
              
              
              322,333
              
              $
              322
              
              
              1
              
              $
              -
              
              
              140,606,672
              
              $
              14,061
              
              $
              30,516,359
              
              $
              (31,167,065
              )
              $
              (28,058
              )
              $
              (664,381
              )Issuance
                  of convertible preferred stock pursuant to private equity
                  placements
              
              
              24,583
              
              
              25
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              138,475
              
              
              -
              
              
              -
              
              
              138,500Issuance
                  of common stock and warrants pursuant to private equity
                  placements
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              39,000,000
              
              
              3,900
              
              
              1,076,500
              
              
              -
              
              
              -
              
              
              1,080,000Conversion
                  of convertible preferred stock into common stock
              
              
              (137,059
              )
              
              (137
              )
              
              -
              
              
              -
              
              
              13,705,940
              
              
              1,371
              
              
              (1,234
              )
              
              -
              
              
              -
              
              
              -Issuance
                  of common stock pursuant to settlement agreements for redemption
                  of
                  preferred stock and accr. dividends with former officer
              
              
              (100,000
              )
              
              (100
              )
              
              -
              
              
              -
              
              
              10,250,000
              
              
              1,025
              
              
              818,975
              
              
              (469,005
              )
              
              -
              
              
              350,895Issuance
                  of equity securities pursuant to severance arrangement with former
                  officer
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              6,000,000
              
              
              600
              
              
              567,077
              
              
              
              
              
              
              
              
              567,677Issuance
                  of common stock in connection with the conversion of a promissory
                  note and
                  settlement of certain other liabilities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              8,442,500
              
              
              844
              
              
              183,096
              
              
              -
              
              
              -
              
              
              183,940Issuance
                  of common stock for services performed
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              6,230,360
              
              
              623
              
              
              467,273
              
              
              -
              
              
              -
              
              
              467,896Issuance
                  of options and warrants for services performed
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              545,345
              
              
              -
              
              
              -
              
              
              545,345Amortization
                  of discount on preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              18,895
              
              
              (18,895
              )
              
              -
              
              
              -Reclassification
                  of warrants and options from equity to liabilities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,315,085
              )
              
              -
              
              
              -
              
              
              (1,315,085
              )Recognition
                  of beneficial conversion feature on convertible debt
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              97,497
              
              
              
              
              
              
              
              
              97,497Dividends
                  on conv. preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (90,565
              )
              
              -
              
              
              (90,565
              )Recognition
                  of expense on deferred compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              28,058
              
              
              28,058Net
                  loss, year ended December 31, 2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,895,262
              )
              
              -
              
              
              (3,895,262
              )Balances,
                  December 31, 2006
              
              
              109,857
              
              $
              110
              
              
              1
              
              $
              -
              
              
              224,235,472
              
              $
              22,424
              
              $
              33,112,773
              
              $
              (35,640,792
              )
              $
              -
              
              $
              (2,505,485
              )




See
      notes
      to the consolidated financial statements




F-5




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Consolidated
      Statement of Stockholders’ Equity (Deficit)**


**Year
      Ended December 31, 2007**


TotalConvertible
              
              Cumulative
              
              
              
              
              
              Additional
              
              
              
              Loans
              
              Stockholders’Preferred
                  Shares
              
              Preferred
                  Shares
              
              Common
                  Stock
              
              Paid
                  in
              
              Accumulated
              
              Receivable
                  -
              
              EquityShares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Deficit
              
              Stockholders
              
              (Deficit)Balances,
                  January 1, 2007
              
              
              109,857
              
              $
              110
              
              
              1
              
              $
              -
              
              
              224,235,472
              
              $
              22,424
              
              $
              33,112,773
              
              $
              (35,640,792
              )
              $
              -
              
              $
              (2,505,485
              )Issuance
                  of common stock pursuant to exercise of option
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              600,000
              
              
              60
              
              
              5,940
              
              
              -
              
              
              -
              
              
              6,000Issuance
                  of common stock for accrued sales commissions
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              143,542
              
              
              14
              
              
              5,727
              
              
              -
              
              
              -
              
              
              5,741Conversion
                  of convertible preferred stock and accrued dividends into common
                  stock
              
              
              (23,967
              )
              
              (24
              )
              
              -
              
              
              -
              
              
              2,207,658
              
              
              221
              
              
              17,710
              
              
              -
              
              
              -
              
              
              17,907Issuance
                  of common stock pursuant to severance agreements with former
                  officers
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              5,150,000
              
              
              515
              
              
              291,485
              
              
              -
              
              
              -
              
              
              292,000Issuance
                  of equity securities to former officers of Kiwibox pursuant to
                  merger
                  agreement
              
              
              43,610
              
              
              43
              
              
              
              
              
              
              
              
              30,000,000
              
              
              3,000
              
              
              1,996,957
              
              
              
              
              
              
              
              
              2,000,000Loans
                  acquired from Kiwibox in connection with merger
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (286,721
              )
              
              (286,721
              )Issuance
                  of common stock for services performed
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              3,281,250
              
              
              328
              
              
              156,608
              
              
              -
              
              
              -
              
              
              156,936Issuance
                  of common stock for interest and financing costs
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              3,802,315
              
              
              380
              
              
              194,736
              
              
              -
              
              
              -
              
              
              195,116Recognition
                  of intrinsic value of BCF on convertible debt instruments
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              152,046
              
              
              -
              
              
              -
              
              
              152,046Issuance
                  of common stock pursuant to conversion of promissory notes
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              7,289,000
              
              
              729
              
              
              363,721
              
              
              -
              
              
              -
              
              
              364,450Recognition
                  of stock-based compensation for common stock options granted to
                  employees
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              441,567
              
              
              -
              
              
              -
              
              
              441,567Dividends
                  on conv. preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (53,481
              )
              
              -
              
              
              (53,481
              )Net
                  loss, year ended December 31, 2007
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,881,652
              )
              
              -
              
              
              (3,881,652
              )Balances,
                  December 31, 2007
              
              
              129,500
              
              $
              129
              
              
              1
              
              $
              -
              
              
              276,709,237
              
              $
              27,671
              
              $
              36,739,270
              
              $
              (39,575,925
              )
              $
              (286,721
              )
              $
              (3,095,576
              )




See
      notes
      to the consolidated financial statements




F-6


**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Consolidated
      Statements of Cash Flows**





Year
                Ended December 31,2007
            
            2006Cash
                Flows From Operating ActivitiesNet
                Loss
            
            $
            (3,881,652
            )
            $
            (3,895,262
            )Adjustments
                to Reconcile Net Loss to Net Cash Used by OperationsDepreciation
                and amortization
            
            
            577,671
            
            
            173,570Securities
                issued for various expenses
            
            
            890,504
            
            
            1,555,017Recognition
                of expense - deferred compensation
            
            
            -
            
            
            28,058Recognition
                of expense - derivative conversion feature
            
            
            -
            
            
            102,762Amortization
                of debt discounts - beneficial conversion feature
            
            
            152,046
            
            
            97,497Amortization
                of debt discount - warrants issued with debt
            
            
            150,712
            
            
            67,503Loss
                on disposition of assets
            
            
            -
            
            
            356Gain
                on extinguishment of debt
            
            
            (49,678
            )
            
            -Impairment
                of software intangibles
            
            
            -
            
            
            174,954Change
                in value of derivative liabilities
            
            
            558,904
            
            
            (294,898
            )Bad
                debt provision
            
            
            66
            
            
            1,900Decreases
                (Increases) in AssetsAccounts
                receivable
            
            
            4,131
            
            
            20,332Prepaid
                expenses
            
            
            27,450
            
            
            8,897Other
                assets
            
            
            -
            
            
            23,996Increases
                (Decreases) in LiabilitiesAccounts
                payable and accrued expenses
            
            
            276,892
            
            
            171,500Deferred
                revenue
            
            
            (2,829
            )
            
            77,290Obligations
                to be settled in stock
            
            
            34,000
            
            
            97,439Net
                Cash Used by Operating Activities
            
            
            (1,261,783
            )
            
            (1,589,089
            )Cash
                Flows From Investing ActivitiesCash
                outlay - KiwiBox Media acquisition
            
            
            (508,000
            )
            
            -Purchases
                of equipment, fixtures, and software
            
            
            (13,376
            )
            
            (8,993
            )Net
                Cash Used by Investing Activities
            
            
            (521,376
            )
            
            (8,993
            )Cash
                Flows From Financing ActivitiesRepayment
                of capital lease obligations
            
            
            -
            
            
            (257
            )Proceeds
                from loans payable
            
            
            472,000
            
            
            437,450Repayment
                of loans payable
            
            
            (100,000
            )
            
            (95,000
            )Cash
                received for subscriptions
            
            
            1,800,000
            
            
            -Proceeds
                from issuance of common and preferred stock
            
            
            -
            
            
            1,218,500Net
                Cash Provided by Financing Activities
            
            
            2,172,000
            
            
            1,560,693Net
                Increase (Decrease) in Cash
            
            
            388,841
            
            
            (37,389
            )Cash
                at beginning of period
            
            
            81,307
            
            
            118,696Cash
                at end of period
            
            $
            470,148
            
            $
            81,307SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATIONInterest
                Paid
            
            $
            86
            
            $
            15,687Taxes
                Paid
            
            $
            -
            
            $
            1,000




See
      notes
      to the consolidated financial statements.




F-7


**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Consolidated
      Statements of Cash Flows**


**Year
      Ended December 31, 2007**





Schedule
                of non-cash investing and financing activitiesIn
                connection with the issuance of notes payable, the Company incurred
                deferred finance costs payable in common stock
            
            $
            574,900In
                connection with the redemption of the Company’s Series A and F preferred
                stock and accrued dividends, 2,207,658 common shares were
                issued
            
            $
            17,907Sales
                commissions payable in the form of 143,542 shares of common
                stock
            
            $
            12,719In
                connection with the conversion of promissory notes, 7,289,000 common
                shares were issued
            
            $
            364,450Value
                of 3,802,315 common shares issued for interest and financing
                costs
            
            $
            195,116Value
                of 43,610 preferred shares and 30,000,000 common shares issued to
                former
                principals of Kiwibox Media Inc pursuant to merger
                agreement
            
            $
            2,000,000Recognition
                of intrinsic value of beneficial conversion features on convertible
                debt,
                credited to additional paid-in capital
            
            $
            152,046





See
      notes
      to the consolidated financial statements




F-8


**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Consolidated
      Statements of Cash Flows**


**Year
      Ended December 31, 2006**





Schedule
                of non-cash investing and financing activitiesIn
                connection with the settlement of certain liabilities stemming from
                prior
                agreements with a consultant and two former officers of the Company,
                and
                the conversion of a promissory note for $99,890, 8,442,500 common
                shares
                were issued
            
            $
            183,940In
                connection with the redemption of the Company’s Series C preferred stock
                and accrued dividends, 10,250,000 common shares were
                issued
            
            $
            819,900Value
                of options and warrants reclassified during the year from equity
                to
                liabilities
            
            $
            1,315,085Recognition
                of beneficial conversion feature on convertible debt
                instruments
            
            $
            97,497




See
      notes
      to the consolidated financial statements.




F-9




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**





SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





Nature
      of
      Organization




Magnitude
      Information Systems, Inc. (the “Company”) was incorporated as a Delaware
      corporation on April 19, 1988 under the name Fortunistics, Inc. On November
      18,
      1998, the Company changed its name to Magnitude Information Systems, Inc. The
      Company owns substantially all outstanding stock of Magnitude, inc., its
      operating subsidiary. The 1% of Magnitude, Inc. not owned by the Company
      constitutes a minority interest which is valued at $0.





On
      August
      16, 2007 the Company acquired all outstanding shares of Kiwibox Media,
      Inc.





The
      Company, Magnitude, Inc. and Kiwibox Media Inc. are separate legal entities,
      with Kiwibox Media, Inc. being a wholly owned subsidiary. The operations of
      the
      combined entity are currently comprised almost exclusively of the operations
      of
      Kiwibox Media, Inc.





Prior
      to
      the implementation of its strategic business plan in 2007, the Company’s primary
      product was an integrated suite of proprietary software modules previously
      marketed under the name ErgoEnterpriseTM. During the latter half of fiscal
      year 2006, Company management concluded that the marketplace for the Company’s
      ergonomic software products was not developing, and would not develop to the
      material extent necessary in the next 12 to 24 months, to support and sustain
      the Company’s sales efforts. Accordingly, management determined that it would be
      in the best interests of the Company and its shareholders to identify another
      business opportunity and pursue it for the benefit of our shareholders. On
      February 19, 2007, the Company, pursuant to its strategic plan to seek another
      business opportunity, signed an Agreement and Plan of Reorganization with the
      owners of a social networking website, to acquire their Kiwibox.com website
      and
      business, represented by Kiwibox Media, Inc. Pursuant to that certain Agreement
      and Plan of Reorganization, in August, 2007, Kiwibox Media, Inc. merged with
      and
      into Magnitude Operations, Inc., a wholly owned subsidiary of Magnitude
      Information Systems, Inc., in a “reverse merger” transaction. The three
      shareholders of Kiwibox Media, Inc. transferred and delivered all of the
      outstanding stock of Kiwibox Media, Inc. to Magnitude Operations, Inc. for
      cancellation **** and
      received in exchange shares of Magnitude Information Systems, Inc. at closing.
      Also at closing and as a result of the merger, the separate legal existence
      of
      Magnitude Operations, Inc. ceased and Kiwibox Media, Inc. became the surviving
      corporation of the merger and a wholly owned subsidiary of Magnitude Information
      Systems, Inc. Magnitude Information Systems, Inc. is planning to change its
      corporate name to “KiwiAge Enterprises, Inc .”





Cash
      and
      cash equivalents




The
      Company accounts for cash and other highly liquid investments with original
      maturities of three months or less as cash and cash equivalents.





Principles
      of Consolidation




The
      consolidated financial statements include the accounts of Magnitude Information
      Systems, Inc. and its wholly-owned subsidiaries Magnitude, Inc. and Kiwibox
      Media, Inc. The activities of the Company’s newly acquired subsidiary Kiwibox
      Media, Inc. are included in the financial statements for the period from August
      16, 2007 (date of acquisition) to December 31, 2007. All significant
      inter-company balances and transactions have been eliminated.





Depreciation




Property,
      plant and equipment are recorded at cost. Depreciation on equipment, furniture
      and fixtures and leasehold improvements is computed on the **** straight
      line method over the estimated useful lives of such assets between 5-10 years.
      Maintenance and repairs are charged to operations as incurred. Repairs and
      maintenance which do not extend the useful lives of the related assets are
      expensed as incurred.




F-10


**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**





SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)





Advertising
      Costs




Advertising
      costs are charged to operations when incurred. Advertising expense was $6,717
      and $387 for the years ended December 31, 2007 and 2006,
      respectively.





Evaluation
      of Long Lived Assets




Long-lived
      assets are assessed for recoverability on an ongoing basis. In evaluating the
      fair value and future benefits of long-lived assets, their carrying value would
      be reduced by the excess, if any, of the long-lived asset over management’s
      estimate of the anticipated undiscounted future net cash flows of the related
      long-lived asset.





Securities
      Issued for Services




The
      Company accounts for stock, stock options and stock warrants issued for services
      and compensation by employees under the fair value method. For non-employees,
      the fair market value of the Company’s stock on the date of stock issuance or
      option/grant is used. The Company determined the fair market value of the
      warrants/options issued under the Black-Scholes Pricing Model. Effective January
      1, 2006, the Company adopted the provisions of Statement of Financial Accounting
      Standards (SFAS) 123(R), SHARE-BASED PAYMENT, which establishes accounting
      for
      equity instruments exchanged for employee services. Under the provisions of
      SFAS
      123(R), share-based compensation cost is measured at the grant date, based
      on
      the fair value of the award, and is recognized as an expense over the employee’s
      requisite service period (generally the vesting period of the equity grant).
      Prior to January 1, 2006, the Company accounted for share-based compensation
      to
      employees in accordance with Accounting Principles Board (APB) Opinion No.
      25,
      ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations. The
      Company also followed the disclosure requirements of SFAS 123, ACCOUNTING FOR
      STOCK-BASED COMPENSATION. The Company elected to adopt the modified prospective
      transition method as provided by SFAS 123(R) and, accordingly, financial
      statement amounts for the prior periods presented in the Form 10-QSB have not
      been restated to reflect the fair value method of expensing share-based
      compensation.





Reclassification
      of certain securities under EITF 00-19




Pursuant
      to Emerging Issues Task Force (EITF) Issue 00-19, if a company has more than
      one
      contract subject to this Issue, and partial reclassification is required, there
      may be different methods that could be used to determine which contracts, or
      portions of contracts, should be reclassified. The Company’s method for
      reclassification of such contracts is reclassification of contracts with the
      latest maturity date first.





Income
      Taxes


The
        Company provides for income taxes based on enacted tax law and statutory
        tax
        rates at which items of income and expenses are expected to be settled in
        the
        Company’s income tax return. Certain items of revenue and expense are reported
        for Federal income tax purposes in different periods than for financial
        reporting purposes, thereby resulting in deferred income taxes. Deferred
        taxes
        are also recognized for operating losses that are available to offset future
        taxable income. Valuation allowances are established when necessary to reduce
        deferred tax assets to the amount expected to be realized. The Company has
        incurred net operating losses for financial- and tax-reporting purposes.
        Accordingly, for Federal and state income tax purposes, the benefit for income
        taxes has been offset entirely by a valuation allowance against the related
        federal and state deferred tax asset for the year ended December 31, 2007.




F-11


**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**





SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)





Net
      Loss
      Per Share




Net
      loss
      per share, in accordance with the provisions of Financial Accounting Standards
      Board No. 128, “Earnings Per Share,” is computed by dividing net loss by the
      weighted average number of shares of Common Stock outstanding during the period.
      Common Stock equivalents have not been included in this computation since the
      effect would be anti-dilutive.





Revenue
      Recognition




The
      Company’s revenue recognition policy for software sales is in accordance with
      Accounting Statement of Position (SOP) 97-2 “Software Revenue Recognition” and
      SOP 98-9 “Software Revenue recognition” which modifies SOP 97-2. Revenue is
      recognized at the time of licensing provided that the resulting receivable
      is
      deemed probable of collection and is fixed or determinable. Revenue from
      software maintenance contracts is recognized ratably as earned. When a sales
      contract includes multiple elements, revenues are allocated to the various
      elements based on Company-specific objective evidence of fair value, regardless
      of any separate prices for each element that may be stated within the
      contract.





The
      Company’s revenue from its KiwiBox Media, Inc. subsidiary derives from
      advertising on the KiwiBox website. Most contracts require the Company to
      deliver the customer impressions, click-throughs or new customers, or some
      combination thereof. Accordingly, advertising revenue is estimated and
      recognized for the period in which customer impressions, click through or new
      customers are delivered. Licensing or hosting revenue consists of an annual
      contract with clients to provide web-site hosting and assistance.





Goodwill
      and Intangible Assets




The
      Company accounts for its goodwill and intangible assets pursuant to SFAS No.
      142, "Goodwill and Other Intangible Assets". Under SFAS 142, intangibles with
      definite lives continue to be amortized on a straight-line basis over the lesser
      of their estimated useful lives or contractual terms. Goodwill and intangibles
      with indefinite lives are evaluated at least annually for impairment by
      comparing the asset's estimated fair value with its carrying value, based on
      cash flow methodology.





The
      Company’s intangible assets including goodwill are subject to impairment testing
      in the event of certain indicators. Impairment in the carrying value of an
      asset
      is recognized whenever anticipated future cash flows (undiscounted) from an
      asset are estimated to be less than its carrying value. The amount of the
      impairment recognized is the difference between the carrying value of the asset
      and its fair value.





Use
      of
      Estimates




The
      preparation of financial statements in conformity with generally accepted
      principles requires management to make estimates and assumptions that affect
      the
      reported amounts of assets and liabilities and disclosure of contingent assets
      and liabilities at the date of the financial statements and the reported amounts
      of revenues and expenses during the reporting period. Actual results could
      differ from those estimates.





GOING
      CONCERN


As
        shown
        in the accompanying financial statements, the Company incurred net losses
        of
        $3,881,652 and $3,895,262 during the years ended December 31, 2007 and 2006,
        respectively, and has a significant working capital deficiency. The ability
        of
        the Company to continue as a going concern is dependent on increasing sales
        and
        obtaining additional capital and financing. The financial statements do not
        include any adjustments that might be necessary if the Company is unable
        to
        continue as a going concern Management’s plans are to continue discussions with
        several potential investors to obtain additional capital in order to alleviate
        the situation.


F-12




CONCENTRATIONS
      OF BUSINESS AND CREDIT RISK





The
      Company maintains cash balances in several financial institutions which are
      insured by the Federal Deposit Insurance Corporation up to $100,000. Balances
      in
      these accounts may, at times, exceed the federally insured limits.





The
      Company provides credit in the normal course of business to customers located
      throughout the world. The Company performs ongoing credit evaluations of its
      customers and maintains allowances for doubtful accounts based on factors
      surrounding the credit risk of specific customers, historical trends, and other
      information.





F-13




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**





PROPERTY
      AND EQUIPMENT





Property
      and equipment consist of the following at December 31, 2007:





Furniture
                and fixtures
            
            $
            2,014Computer
                equipment
            
            
            74,722Office
                equipment
            
            
            26,017Total
            
            
            102,753Less:
                accumulated depreciation
            
            
            81,965$
            20,788





Depreciation
      expense charged to operations was $8,074 and $5,921 in 2007 and 2006,
      respectively.




GOODWILL





On
      August
      16, 2007, the Company completed its acquisition of 100% of the outstanding
      capital stock of KiwiBox Media, Inc. The total purchase price of $2,357,500
      was
      calculated as follows: we issued 30,000,000 restricted common shares based
      on a
      total value of $1,500,000 determined by the lower of $0.05 per share and the
      average sales price of the Company’s common stock for the ten (10) successive
      trading days immediately preceding the closing, 43,610 shares of our Series
      G
      Preferred Stock worth $500,000 (conversion value - see PREFERRED STOCK), paid
      $300,000 in cash by year-end to the three KiwiBox owners, incurred
      $492,773 in penalty costs (described below) and incurred $57,500 in direct
      acquisition-related professional fees. Based on the initial Agreement and Plan
      of Reorganization from February 2007, the Company committed to investing $3.5
      million for the operations of KiwiBox. Based on an amendment in July 2007,
      in
      the event that certain investment tranches were not made by their respective
      due
      dates, the Company agreed to issue 60,000 restricted shares to the former
      shareholders of KiwiBox for each day that the funds are in arrears. The company
      estimated the fair value of this pre-acquisition contingency as of the
      acquisition date based on the present value of the total expected liability
      at a
      discount rate of 5%, with an accreted value of $292,773 at December 31,2007.
      Pursuant to additional amendments entered into in December 2007, the Company
      agreed to pay $200,000 in cash penalties to the former shareholders of KiwiBox,
      $100,000 of which had been paid by year-end. In addition, the Company made
      advances on behalf of KiwiBox in the amount of $73,000 prior to the acquisition,
      which was eliminated in consolidation.





The
      excess of the purchase price over the net assets acquired has been recorded
      as
      Goodwill in the amount of $2,663,751 as of December 31, 2007. Management expects
      the future discounted cash flow from Kiwibox’ operations to be equal or higher
      than the carrying amount of the goodwill.




OTHER
      ASSETS





Other
      assets include deposits of $3,224 and the unamortized portion of a non-compete
      agreement with a former officer of the Company in the amount of $7,890.
      Amortization for the years ended December 31, 2007 and 2006 was $30,000 and
      $22,110, respectively.





ACCOUNTS
      PAYABLE AND ACCRUED EXPENSES





Accounts
      payable and accrued expenses consisted of the following at December 31,
      2007:





Accounts
                payable
            
            $
            489,782Accrued
                interest
            
            
            85,212Accrued
                professional and consulting fees
            
            
            133,309Finder’s
                fee payable on investment
            
            
            50,000Penalty
                payments due to KiwiBox former shareholders
            
            
            100,000Accrued
                finance costs
            
            
            22,500Accrued
                payroll and commissions
            
            
            19,466Miscellaneous
                accruals
            
            
            7,530$
            907,799





F-14





**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**




DEFERRED
      REVENUES





Deferred
      revenues at December 31, 2007 consist of a deposit received on April 13, 2006
      from a client who also is an investor in the Company. These funds were paid
      pursuant to a contract for the purchase of a customized version of the Company’s
      software products. At December 31, 2007 the contract had not been filled and
      the
      revenue has been deferred. An agreement has been reached with the client to
      convert this amount into equity on terms similar to those available to current
      investors. The amount has been converted subsequent to year end. See “Subsequent
      Events”
      below.





OBLIGATIONS
      TO BE SETTLED IN STOCK





Obligations
      to be settled in stock consisted of the following at December 31,
      2007:





Subscriptions
                for 36,000,000 units comprised of one common share and one warrant
                each,
                exercisable during 5 years at $0.07 /share (total subscription value
                $1,800,000, with $925,852 allocated to warrants based on relative
                fair
                values)
            
            $
            874,148Estimated
                fair value of common shares issuable to former principals of Kiwibox
                Media, Inc. pursuant to acquisition agreement
            
            
            292,773975,000
                common shares issuable to two consultants for services rendered,
                one of
                who is a director of the Company
            
            
            106,000Deferred
                financing costs
            
            
            350,000$
            1,622,921




LOANS
      PAYABLE





The
      Company and Magnitude, Inc. had borrowings under short term loan agreements
      with
      the following terms and conditions at December 31, 2007:





On
                December 4, 1996, Magnitude, Inc. repurchased 500,000 shares of its
                common
                stock and retired same against issuance of a promissory note maturing
                twelve months thereafter accruing interest at 5% per annum and due
                December 4, 1998. This note is overdue at December 31, 2007 and no
                demand
                for payment has been made.
            
            $
            75,000Total
            
            $
            75,000





F-15





**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**




NOTES
      PAYABLE





In
      June
      and July 2006 two shareholders loaned the Company $240,000 and $102,450 pursuant
      to which the Company issued promissory notes bearing interest at the rate of
      8%
      per year. The notes were repayable on demand. On October 31, 2007, the holders
      were offered the option to convert the outstanding principal balances and
      accrued interest under the notes, representing aggregate debt of $378,864,
      into
      restricted Company securities at a conversion rate equal to the Company’s
      current “unit” investment terms.





Based
      on
      the terms of this conversion option, which was also granted to the outside
      director who held a 12% note described below, the Company recognized a debt
      discount for the relative fair value of the warrants of $150,712 and the
      intrinsic value of the beneficial conversion feature of $37,706, both amortized
      to interest expense upon conversion. The conversion rate was at $.05 per unit,
      with each unit comprised of one restricted common share and one 5-year warrant,
      exercisable at $.07, resulting in the issue of 7,577,284 restricted common
      shares and an equal number of warrants to these two individuals.




At
                December 31, 1999 the Company had $1,475,000 of notes outstanding
                related
                to a June 1995 private placement offering. During 2000 the holders
                of
                $1,450,000 worth of notes agreed to accept partial repayment of
                approximately 30% of the note balances and converted the remaining
                balances into common shares orconvertible
                preferred shares. The total amount of non-converted notes outstanding
                at
                December 31, 2007 is $25,000. Attempts to locate the holder of this
                note,
                to settle this liability, have been unsuccessful.
            
            $
            25,000During
                2007, five shareholders, one of which is an outside director of the
                Company, loaned the Company an aggregate $347,000 pursuant to which
                the
                Company issued ninety-day promissory notes bearing interest at the
                rate of
                1% per month on the outstanding principal balance or 12% per year.
                The
                notes call for a loan origination fee of 10% of the principal amount
                and
                the issuance of restricted common shares at the rate of ten shares
                per
                amount loaned, both payable at maturity. At each maturity date, if
                unpaid,
                the holder was due an additional ten shares per amount outstanding
                as
                additional finance costs. At the option of the lenders, the outstanding
                principal balance, accrued interest and the origination fee may be
                converted into shares of the Company’s restricted common stock at a
                conversion rate that is the lower of $.05 per share or the investment
                rate
                utilized in any private placement consummated with the Company any
                time
                following the date of the note through maturity. During the year,
                the
                Company repaid $100,000 in notes, issued 440,000 shares for conversion
                of
                $22,000 in notes, and issued 3,074,031 shares to settle $153,702
                in
                accrued finance costs and interest. The Company recognized $50,200
                in gain
                on debt extinguishment on these transactions. Such notes total $225,000
                at
                December 31, 2007.
              
              During
                2007, an investor and shareholder of the Company extended a series
                of
                demand loans evidenced by promissory notes carrying interest at the
                rate
                of 5% per year, to the Company. Such notes total $125,000 at December
                31,
                2007.
            
            $
            350,000Total
            
            $
            375,000




LONG-TERM
      DEBT





Long-term
      debt as of December 31, 2007 is comprised of the following:





Discounted
                present value of a non-interest bearing $70,000 settlement with a
                former
                investor of Magnitude, Inc. to be paid in 24 equal monthly payments
                commencing July 1, 1997. The imputed interest rate used to discount
                the
                note is 8% per annum. This obligation is in default.
            
            
            33,529Total
            
            
            33,529Less
                current maturities
            
            
            33,529Long-term
                debt, net of current maturities
            
            $
            -




LOANS
      RECEIVABLE - STOCKHOLDERS





Loans
      Receivable - Stockholders consists of $286,721 in total loans extended by
      Kiwibox Media, Inc. to its principals during fiscal years 2001 to 2006 and
      prior
      to the acquisition by the Company .
      The
      loans bear interest at the rate of 4.58 % per year and
      are
      evidenced by promissory notes which foresee repayment over ten year period.
      The
      Company intends to negotiate a specific repayment schedule with the issuers
      through amendments to a these notes.


F-16





**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**




PREFERRED
      STOCK





Preferred
      stock is non-voting, $.001 par value per share with 3,000,000 shares authorized.





Cumulative
      Preferred Stock has 2,500 shares designated of which 1 share is issued and
      outstanding. The total Cumulative Preferred Stock at December 31, 2006 is $0
      with a liquidation price of $100,000. As of December 31, 2007, there was $9,000
      of cumulative preferred dividends in arrears representing $9,000 per cumulative
      preferred share.





Series
      A
      of the Senior Convertible Preferred Stock series which was issued in 2000 has
      300,000 shares designated, 22,000 shares issued and outstanding. The total
      outstanding Series A Senior Convertible Preferred Stock at December 31, 2007
      is
      $22 with a liquidation price of $110,000. The following is a description of
      the
      Series A convertible preferred stock:





(1)
            The
                holders of said shares of Series A Senior Preferred shall be
                entitled****to
                receive cumulative dividends at the rate of seven percent (7%) per
                annum
                during the first annual period after issuance, increasing by increments
                of
                one half of one percent for every year thereafter until the rate
                reaches
                ten percent (10%) per annum at which time it will remain at 10% payable
                semi-annually when declared by the Board of Directors, before any
                dividend
                shall be declared, set apart for, or paid upon the Common Stock of
                the
                Company. The Dividend Rate shall accrue on the Liquidation Price
                of each
                share of the Series A Senior Preferred. The dividends on the Series
                A
                Senior Preferred, payable in cash, shall be cumulative, so that if
                the
                Company fails in any fiscal year to pay such dividends on all the
                issued
                and outstanding Series A Senior Preferred, such deficiency in the
                dividends shall be fully paid, but without interest, before any dividends
                shall be paid on or set apart for the Cumulative Preferred Stock
                or the
                Common Stock.





(2)
            The
                Series A Senior Preferred shall with respect to dividend rights and
                liquidation rights rank prior to all classes and series of Common
                Stock
                and the Cumulative Preferred Stock, and on a par with the Series
                B, C and
                D Senior Convertible Preferred
                Stock.





(3)
            In
                the event of any liquidation, of the Company, whether voluntary or
                otherwise, after payment or provision for payment of the debts and
                other
                liabilities of the Company, the holders of the Series A Senior Preferred
                shall be entitled to receive, out of the remaining net assets of
                the
                Company, the amount of Five ($5.00) dollars for each share of Series
                A
                Senior Preferred (the "Liquidation Price") held of record by such
                holder,
                payable in cash or in shares of stock, securities or other consideration,
                the value of which stock, securities or other consideration shall
                be fixed
                by the Board of Directors, plus the amount of all dividends in arrears
                on
                each such share up to the date fixed for distribution, provided,
                however,
                that such remaining net assets are sufficient to cover all the before
                mentioned payments and also like payments to holders of Series B
                and C
                Senior Preferred, before any distribution shall be made to the holders
                of
                Common Stock or Cumulative Preferred Stock of the Company. In case
                such
                remaining net assets are insufficient to cover all such payments
                to
                holders of Series A, B, C and D Senior Preferred, the holders of
                these
                series shall receive payments on a pro rata
                basis.





F-17




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**





PREFERRED
      STOCK - (Continued)





(4)
            The
                Company shall have the right to redeem pro rata any or all of its
                Series A
                Senior Preferred issued and outstanding at any time, with the Board
                of
                Directors of the Company in its sole discretion deciding how many
                shares
                to redeem, provided, however, that any such shares called for redemption
                have been issued and outstanding for a minimum of three (3) years
                at the
                time of notice of redemption to the holders of such shares, by paying
                to
                the holders thereof the Liquidation Price for each share of Series
                A
                Senior Preferred held by such holder plus a "call premium" of 15%
                of the
                Liquidation Price, together with the amount of any accrued and unpaid
                dividends as may have accumulated thereon at the time of redemption
                (the
                "Redemption Price").





(5)
            Each
                share of Series A Senior Preferred shall be convertible at any time
                prior
                to the Redemption Date, at the holder’s option, into such number (the
                "Conversion Ratio") of shares of the Common Stock of the Company
                as
                arrived at by dividing the Liquidation Price by one hundred fifty
                (150)
                percent of the market price of the Common Stock of the Corporation
                ("Market Price") on the earlier of the dates such share of Series
                A Senior
                Preferred is subscribed for or issued (the "Effective Date").





During
      the year ended December 31, 2007, a holder of 7,300 shares agreed to exchange
      the preferred shares and outstanding accrued dividends of $17,906 into common
      shares at $0.10 per shares on the nominal value of both components, or 540,991
      common shares. As of December 31, 2007 there were $77,665 Series A Senior
      Convertible Preferred share dividends accrued and unpaid representing $3.53
      per
      share.





Series
      B
      of the Senior Convertible Preferred Stock series which was issued in 2000 has
      350,000 shares designated, no shares issued and outstanding. The total
      outstanding Series B Senior Convertible Preferred Stock at December 31, 2007
      is
      $0. The following is a description of the Series B Senior Convertible
      Stock:





(1)
            The
                holders of said shares of Series B Senior Preferred shall be entitled
                to
                receive cumulative dividends thereon at the rate of seven percent
                (7%) per
                annum, payable semi-annually when declared by the Board of Directors,
                before any dividend shall be declared, set apart for, or paid upon
                the
                Common Stock of the Company. The Dividend Rate shall accrue on the
                Liquidation Price of each share of the Series B Senior Preferred.
                The
                dividends on the Series B Senior Preferred, payable in cash, shall
                be
                cumulative, so that if the Company fails in any fiscal year to pay
                such
                dividends on all the issued and outstanding Series B Senior Preferred,
                such deficiency in the dividends shall be fully paid, but without
                interest, before any dividends shall be paid on or set apart for
                the
                Cumulative Preferred Stock or the Common
                Stock.





(2)
            The
                Series B Senior Preferred shall, with respect to dividend rights
                and
                liquidation rights, rank prior to all classes and series of Common
                Stock
                and the Cumulative Preferred Stock, and on a par with the Series
                A, C and
                D Senior Convertible Preferred
                Stock.





(3)
            In
                the event of any liquidation of the Company, whether voluntary or
                otherwise, after payment or providing for payment of the debts and
                other
                liabilities of the Company, the holders of the Series B Senior Preferred
                shall be entitled to receive, out of the remaining net assets of
                the
                Company, the amount of nine ($9.00) dollars for each share of Series
                B
                Senior Preferred (the "Liquidation Price") held of record by such
                holder,
                payable in cash or in shares of stock, securities or other consideration,
                the value of which stock, securities or other consideration shall
                be fixed
                by the Board of Directors, plus the amount of all dividends in arrears
                on
                each such share up to the date fixed for distribution, provided however,
                that such remaining net assets are sufficient to cover all the before
                mentioned payments and also like payments to holders of Series A
                and C
                Senior Preferred, before any distribution shall be made to the holders
                of
                Common Stock or Cumulative Preferred Stock of the Company. In case
                such
                remaining net assets are insufficient to cover all such payments
                to
                holders of Series A, B, C and D Senior Preferred, the holders of
                these
                series shall receive payments on a pro rata
                basis.





F-18




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**





PREFERRED
      STOCK - (Continued)





(4)
            The
                Company shall have the right to redeem pro rata any or all of its
                Series B
                Senior Preferred issued and outstanding at any time, with the Board
                of
                Directors of the Company in its sole discretion deciding how many
                shares
                to redeem, provided, however, that any such shares called for redemption
                have been issued and outstanding for a minimum of three (3) years
                at the
                time of notice of redemption of the holders of such shares, by paying
                to
                the holders thereof the Liquidation Price for each share of Series
                B
                Senior Preferred held by such holder plus a "call premium" of 10%
                of the
                Liquidation Price, together with the amount of any accrued and unpaid
                dividends as may have accumulated thereon at the time of redemption
                (the
                "Redemption Price").





(5)
            Each
                share of Series B Senior Preferred shall be convertible at any time
                prior
                to the Redemption Date, at the holder’s option, into shares of Common
                Stock of the Company on the basis of ten (10) shares of Common Stock
                for 1
                share of Series B Senior Preferred.





As
      of
      December 31, 2007 there were no Series B Senior Convertible Preferred share
      dividends accrued and unpaid.





Series
      C
      of the Senior Convertible Preferred Stock series which was issued in 2000 has
      120,000 shares designated. There were no shares of Series C Senior Convertible
      Preferred Stock outstanding at December 31, 2007. The following is a description
      of the Series C Senior Convertible Stock:





(1)
            The
                holders of said shares of Series C Senior Preferred shall be entitled
                to
                receive cumulative dividends thereon at the rate of seven percent
                (7%) per
                annum, payable monthly, before any dividend shall be declared, set
                apart
                for, or paid upon the Common Stock of the Company. The Dividend Rate
                shall
                accrue on the Liquidation Price (as hereinafter defined) of each
                share of
                the Series C Senior Preferred. The dividends on the Series C Senior
                Preferred, payable in cash, shall be cumulative, so that if the Company
                fails in any fiscal year to pay such dividends on all the issued
                and
                outstanding Series C Senior Preferred, such deficiency in the dividends
                shall be fully paid, but without interest, before any dividends shall
                be
                paid on or set apart for the Cumulative Preferred Stock or the Common
                Stock.





(2)
            The
                Series C Senior Preferred shall with respect to dividend rights and
                liquidation rights rank prior to all classes and series of Common
                Stock
                and the Cumulative Preferred Stock, and on a par with the Series
                A, B and
                D Senior Convertible Preferred
                Stock.





(3)
            In
                the event of any liquidation of the Company, whether voluntary or
                otherwise, after payment or provision for payment of the debts and
                other
                liabilities of the Company, the holders of the Series C Senior Preferred
                shall be entitled to receive, out of the remaining net assets of
                the
                Company, the amount of nine ($9.00) dollars for each share of Series
                C
                Senior Preferred (the "Liquidation Price") held of record by such
                holder,
                payable in cash or in shares of stock, securities or other consideration,
                the value of which stock, securities or other consideration shall
                be fixed
                by the Board of Directors, plus the amount of all dividends in arrears
                on
                each such share up to the date fixed for distribution, provided,
                however,
                that such remaining net assets are sufficient to cover all the before
                mentioned payments and also like payments to holders of Series A
                and B
                Senior Preferred, before any distribution shall be made to the holders
                of
                Common Stock or Cumulative Preferred Stock of the Company. In case
                such
                remaining net assets are insufficient to cover all such payments
                to
                holders of Series A, B, C and D Senior Preferred, the holders of
                these
                series shall receive payments on a pro rata
                basis.





F-19


**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**





PREFERRED
      STOCK - (Continued)





(4)
            The
                Company shall have the right to redeem pro rata any or all of its
                Series C
                Senior Preferred issued and outstanding at any time, with the Board
                of
                Directors of the Company in its sole discretion deciding how many
                shares
                to redeem, provided, however, that any such shares called for redemption
                have been issued and outstanding for a minimum of three (3) years
                at the
                time of notice of redemption to the holders of such shares, by paying
                to
                the holders thereof the Liquidation Price for each share of Series
                C
                Senior Preferred held by such holder plus a "call premium" of 10%
                of the
                Liquidation Price together with the amount of any accrued and unpaid
                dividends as may have accumulated thereon at the time of redemption
                (the
                "Redemption Price").





(5)
            Each
                share of Series C Senior Preferred shall be convertible at any time
                prior
                to the Redemption Date, at the holder’s option, into shares of Common
                Stock of the Company on the basis of ten (10) shares of Common Stock
                for 1
                share of Series C Senior Preferred.





As
      of
      December 31, 2007 there were no Series C Senior Convertible Preferred share
      dividends accrued and unpaid.





On
      April
      10, 2006, the Company and Michael G. Martin, a former officer and director,
      entered into a Settlement and Conversion Agreement. Pursuant to the principal
      terms of this Agreement, Martin converted $900,000 of the stated value of the
      shares of 7% Series C Senior Convertible Preferred Stock and approximately
      $331,000 of accrued but unpaid dividends into 10,250,000 common shares of the
      Company. The agreement stipulated that $60,000 would be paid in cash over the
      course of twelve months for covenants in the agreement by the former holder,
      including a covenant not to compete for a period of two years. This amount
      has
      been recorded as an intangible asset, amortizable over the term of the
      agreement. In August 2006 the Company and the former shareholder agreed to
      settle the then outstanding amount of $55,000 plus additional settlement
      compensation of $65,000 by issuance of 2,000,000 restricted common
      shares.




Series
      D
      of the Senior Convertible Preferred Stock series which was issued in 2000 has
      500,000 shares designated, 63,890 shares issued and outstanding. The total
      outstanding Series D Senior Convertible Preferred Stock at December 31, 2007
      is
      $64 with a liquidation price of $575,010. The following is a description of
      the
      Series D Senior Convertible Stock:





(1)
            The
                holders of said shares of Series D Senior Preferred shall be entitled
                to
                receive cumulative dividends thereon at the rate of seven percent
                (7%) per
                annum, payable semi-annually when declared by the Board of Directors
                before any dividend shall be declared, set apart for, or paid upon
                the
                Common Stock of the Company. The Dividend Rate shall accrue on the
                Stated
                Value (the "Stated Value"), which Stated Value shall be noted on
                the
                certificate issued to the holder, of each share of the Series D Senior
                Preferred. The dividends on the Series D Senior Preferred, payable
                in
                cash, shall be cumulative, so that if the Company fails in any fiscal
                year
                to pay such dividends on all the issued and outstanding Series D
                Senior
                Preferred, such deficiency in the dividends shall be fully paid,
                but
                without interest, before any dividends shall be paid on or set apart
                for
                the Cumulative Preferred Stock or the Common
                Stock.





(2)
            The
                Series D Senior Preferred shall with respect to dividend rights and
                liquidation rights rank prior to all classes and series of Common
                Stock
                and the Cumulative Preferred Stock, and on a par with the Series
                A, B and
                C Senior Convertible Preferred
                Stock.




F-20




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**





PREFERRED
      STOCK - (Continued)





(3)
            In
                the event of any liquidation of the Company, whether voluntary or
                otherwise, after payment or provision for payment of the debts and
                other
                liabilities of the Company, the holders of the Series D Senior Preferred
                shall be entitled to receive, out of the remaining net assets of
                the
                Company, an amount equal to the Stated Value of each share of Series
                D
                Senior Preferred held of record by such holder, payable in cash or
                in
                shares of stock, securities or other consideration, the value of
                which
                stock, securities or other consideration shall be fixed by the Board
                of
                Directors, plus the amount of all dividends in arrears on each such
                share
                up to the date fixed for distribution, provided, however, that such
                remaining net assets are sufficient to cover all the before mentioned
                payments and also like payments to holders of Series A, B and C Senior
                Preferred, before any distribution shall be made to the holders of
                Common
                Stock or Cumulative Preferred Stock of the Company. In case such
                remaining
                net assets are insufficient to cover all such payments to holders
                of
                Series A, B, C and D Senior Preferred, the holders of these series
                shall
                receive payments on a pro rata
                basis.





(4)
            The
                Company shall have the right to redeem pro rata any or all of its
                Series D
                Senior Preferred issued and outstanding at anytime, with the Board
                of
                Directors of the Company in its sole discretion deciding how many
                shares
                to redeem, provided, however, that any such shares called for redemption
                have been outstanding for a minimum of three (3) years at the time
                of
                notice of redemption to the holders of such shares, by paying to
                the
                holders thereof the Stated Value for each share of Series D Senior
                Preferred held by such holder plus a "call premium" of 10% of the
                Stated
                Value, together with the amount of any accrued and unpaid dividends
                as may
                have accumulated thereon at the time of redemption (the "Redemption
                Price").





(5)
            Each
                share of Series D Senior Preferred shall be convertible at any time
                prior
                to the Redemption Date, at the holder’s option, into shares of Common
                Stock of the corporation on the basis of ten(10) shares of Common
                Stock
                for 1 share of Series D Senior Preferred.





As
      of
      December 31, 2007 there were $290,147 Series D Senior Convertible Preferred
      share dividends accrued and unpaid representing $4.54 per share.





Series
      E
      of the Senior Convertible Preferred Stock series which was issued in 2005 has
      500,000 shares designated, with no shares issued and outstanding.





(1)
            The
                holders of said shares of Series E Senior Preferred shall be entitled
                to
                receive cumulative dividends at the rate of six percent (6%) per
                annum,
                payable at the time said shares are converted into shares of common
                stock
                of the Company and when declared by the board of Directors, before
                any
                dividend shall be declared, set apart for, or paid upon the Common
                Stock
                and any other Preferred Stock of the Company. The Dividend Rate shall
                accrue on the Stated Value, which Stated Value shall be noted on
                the
                certificate issued to the holder of each share of the Series E Senior
                Preferred. The dividends on the Series E Senior Preferred, payable
                in
                cash, shall be cumulative, so that if the company fails in any fiscal
                year
                to pay such dividends on all the issued and outstanding Series E
                Senior
                Preferred, such deficiency in the dividends shall be fully paid,
                but
                without interest, before any dividends shall be paid on or set apart
                for
                any other class of Preferred Stock or the Common Stock. The holders
                of the
                currently outstanding shares of Series E Senior Convertible Stock
                have
                waived their right for dividends, consequently, no dividends have
                been
                accrued on this stock.




F-21





**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**





PREFERRED
      STOCK - (Continued)





(2)
            The
                Series E Senior Preferred shall with respect to dividend rights rank
                prior
                to all classes and series of Common Stock, Cumulative Preferred Stock,
                and
                the Series A, B, C, and D Senior Convertible Preferred Stock and,
                with
                respect to liquidation rights rank prior to all classes and series
                of
                Common Stock, the Cumulative Preferred Stock, and be on a par with
                the
                Series A, B, C and D Senior Convertible Preferred
                Stock.





(3)
            In
                the event of any liquidation, dissolution, or winding up of the affairs
                of
                the Company, whether voluntary or otherwise, after payment or provision
                for payment of the debts and other liabilities of the Company, the
                holders
                of the Series E Senior Preferred shall be entitled to receive, out
                of the
                remaining net assets of the Company, an amount equal to the Stated
                Value
                of each share of Series E Senior Preferred held of record by such
                holder,
                payable in cash or in shares of stock, securities or other consideration,
                the value of which stock, securities or other consideration shall
                be fixed
                by the Board of Directors, plus the amount of all dividends in arrears
                on
                each such share up to the date fixed for distribution, provided,
                however,
                that such remaining net assets are sufficient to cover all the before
                mentioned payments and also like payments to holders of Series A,
                B, C and
                D Senior Preferred, before any distribution shall be made to the
                holders
                of Common Stock or Cumulative Preferred Stock of the Company. In
                case such
                remaining net assets are insufficient to cover all such payments
                to
                holders of Series A, B, C, D and E Senior Preferred, the holders
                of these
                series shall receive payments on a pro rata
                basis.





(4)
            The
                holders of said shares of Series E Senior Preferred shall not be
                entitled
                to any voting rights.





(5)
            Shares
                of Series E Senior Preferred which have been issued and reacquired
                in any
                manner, including shares purchased or converted into Common Stock
                exchanged or redeemed, shall be canceled on the books of the Company
                and
                shall not be considered outstanding for any
                purpose.





(6)
            During
                such time as there exist unpaid cumulative dividends due on the Series
                E
                Senior Preferred, no reclassification of the shares of the Company
                or
                capital reorganization of the Company in any manner provided by law
                shall
                be valid unless (a) the holders of a majority of all the Series E
                Senior
                Preferred approve, and (b) provision is made for the payment of the
                aggregate unpaid cumulative dividends then in
                arrears.





(7)
            Each
                share of Series E Senior Preferred shall automatically convert, on
                the
                date six months after the date of issuance (the “Conversion Date”) which
                Conversion Date shall be noted on the certificate issued to the holder
                of
                each share of the Series E Senior Preferred, into shares of Common
                Stock
                of the Company on the basis of one hundred (100) shares of Common
                Stock
                for 1 share of Series E Senior Preferred. The holder of any shares
                of
                Series E Senior Preferred shall surrender, as soon as practicable
                on or
                after the Conversion Date, at the principal office of the Company
                or at
                such other office or agency maintained by the Company for that purpose,
                the certificate or certificates representing the shares of Series
                E Senior
                Preferred due for conversion. As promptly as practicable, and in
                any event
                within ten business days after surrender of such certificates, the
                Company
                shall deliver or cause to be delivered certificates representing
                the
                number of validly issued, fully paid and non-assessable shares of
                Common
                Stock of the Company to which such holder of Series E Senior Preferred
                so
                converted shall be entitled. Such conversion shall be deemed to have
                been
                made at the close of business on the Conversion Date, so that the
                rights
                of the holders of the Series E Senior Preferred shall thereafter
                cease
                except for the right to receive Common Stock of the Company in accordance
                herewith, and such converting holder of Series E Senior Preferred
                shall be
                treated for all purposes as having become the record holder of such
                Common
                Stock of the Company at such time.




F-22




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**





PREFERRED
      STOCK - (Continued)





(8)
            In
                the event that, prior to the conversion of the Series E Senior Preferred
                Stock by the holder thereof into Common Stock of the company, there
                shall
                occur any change in the outstanding shares of Common Stock of the
                Company
                by reason of the declaration of stock dividends, or through a
                re-capitalization resulting from stock splits or combinations, without
                the
                receipt by the Company of fair consideration therefore in the form
                of
                cash, services or property, the conversion ratio of the Series E
                Senior
                Preferred Stock into Common Stock of the Company shall be adjusted
                such
                that any holder of Series E Senior Preferred Stock converting such
                stock
                into Common Stock subsequent to such change in the outstanding shares
                of
                Common Stock of the Company be entitled to receive, upon such conversion,
                a number of shares of Common Stock of the Company representing the
                same
                percentage of common shares outstanding as presented by the shares
                that he
                would have received had he converted his Series E Senior Preferred
                Stock
                to Common Stock prior to such change in the outstanding shares of
                Common
                Stock of the Company.





During
      the year ended December 31, 2007, 16,667 Series E preferred shares were
      automatically converted into 1,666,667 common shares. As of December 31, 2007
      there were no Series E Senior Convertible Preferred share dividends
      accrued.





Series
      G
      of the Senior Convertible Preferred Stock series which was issued in 2007 has
      43,610 shares designated and issued and outstanding at December 31, 2007.





(1)
            The
                holders of said shares of Series G Senior Convertible Preferred shall
                not
                be entitled to receive dividends.





(2)
            The
                Series E Senior Preferred shall with respect to dividend rights rank
                junior to all classes and series of Common Stock, Cumulative Preferred
                Stock, and the SeriesA,
                B, C, D, E and FSenior
                Convertible Preferred Stock and, with respect to liquidation rights
                rank
                prior to all classes and series of Common Stock, the Cumulative Preferred
                Stock, and be on a par with the Series A, B, C, D, E and F Senior
                Convertible Preferred Stock.





(3)
            In
                the event of any liquidation, dissolution, or winding up of the affairs
                of
                the Company, whether voluntary or otherwise, after payment or provision
                for payment of the debts and other liabilities of the Company, the
                holders
                of the Series E Senior Preferred shall be entitled to receive, out
                of the
                remaining net assets of the Company, an amount equal to the Stated
                Value
                of $11.46526 for each share of Series G Senior Preferred held of
                record by
                such holder, payable in cash or in shares of stock, securities or
                other
                consideration, the value of which stock, securities or other consideration
                shall be fixed by the Board of Directors, plus the amount of all
                dividends
                in arrears on each such share up to the date fixed for distribution,
                provided, however, that such remaining net assets are sufficient
                to cover
                all the before mentioned payments and also like payments to holders
                of
                Series A, B, C, D, E and F Senior Preferred, before any distribution
                shall
                be made to the holders of Common Stock or Cumulative Preferred Stock
                of
                the Company. In case such remaining net assets are insufficient to
                cover
                all such payments to holders of Series A, B, C, D, E and F Senior
                Preferred, the holders of these series shall receive payments on
                a pro
                rata basis.





(4)
            The
                holders of said shares of Series G Senior Preferred shall not be
                entitled
                to any voting rights.





(5)
            Shares
                of Series G Senior Preferred which have been issued and reacquired
                in any
                manner, including shares purchased or converted into Common Stock
                exchanged or redeemed, shall be canceled on the books of the Company
                and
                shall not be considered outstanding for any
                purpose.





(6)
            No
                cumulative dividends shall be payable on Series G Senior
                Preferred.




F-23




(7)
            Upon
                the second anniversary of the Agreement and Plan of Reorganization,
                dated
                February 19, 2007, all the issued and outstanding shares of Series
                G
                Senior Preferred shall automatically convert into shares of common
                stock
                based on the “Market Price”, which shall be determined by dividing the
                conversion value of $500,000 by the average sales price of a common
                share
                for the twenty successive trading days preceding the second anniversary
                date of the agreement or a minimum of 10 million common
                shares.




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**





PREFERRED
      STOCK - (Continued)





(8)
            In
                the event that, prior to the conversion of the Series G Senior Preferred
                Stock by the holder thereof into Common Stock of the company, there
                shall
                occur any change in the outstanding shares of Common Stock of the
                Company
                by reason of the declaration of stock dividends, or through a
                re-capitalization resulting from stock splits or combinations, without
                the
                receipt by the Company of fair consideration therefore in the form
                of
                cash, services or property, the conversion ratio of the Series G
                Senior
                Preferred Stock into Common Stock of the Company shall be adjusted
                such
                that any holder of Series G Senior Preferred Stock converting such
                stock
                into Common Stock subsequent to such change in the outstanding shares
                of
                Common Stock of the Company be entitled to receive, upon such conversion,
                a number of shares of Common Stock of the Company representing the
                same
                percentage of common shares outstanding as presented by the shares
                that he
                would have received had he converted his Series G Senior Preferred
                Stock
                to Common Stock prior to such change in the outstanding shares of
                Common
                Stock of the Company.





F-24




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to the Consolidated Financial Statements**





INCOME
      TAXES





The
      income tax provision (benefit) is comprised of the following:




Year
                Ended December 31,2007
            
            2006State
                current provision (benefit)
            
            $
            -
            
            $
            (34,740
            )State
                deferred provision (benefit)
            
            
            -
            
            
            -$
            -
            
            $
            (34,740
            )





In
      1998,
      the State of New Jersey enacted legislation allowing emerging technology and/or
      biotechnology companies to sell their unused New Jersey Net Operating Loss
      (“NOL”) Carryover and Research and Development Tax Credits (“R&D Credits) to
      corporate taxpayers in New Jersey. During 2004 and 2003, the Company entered
      into an agreement under which it retained a third party broker to identify
      a
      buyer for its NOL Carryover. The total tax benefit of this transaction was
      $34,740 in 2006.





The
      Company’s total deferred tax asset and valuation allowance are as
      follows:





December
                31,2007
            
            2006Total
                deferred tax asset, noncurrent
            
            $
            11,500,000
            
            $
            11,110,000Less
                valuation allowance
            
            
            (11,500,000
            )
            
            (11,110,000
            )Net
                deferred tax asset, noncurrent
            
            $
            -
            
            $
            -





The
      differences between income tax benefits in the financial statements and the
      tax
      benefit computed at the combined state and U.S. Federal statutory rate of 40%
      are as follows:





Year
                Ended December 31,2007
            
            2006Tax
                benefit
            
            
            40
            %
            
            40
            %Valuation
                allowance
            
            
            (40
            %)
            
            (40
            %)Effective
                tax rate
            
            
            -
            
            
            -





At
      December 31, 2007, the Company has available approximately $30,970,000 of
      net
      operating losses to carry-forward and which may be used to reduce future federal
      taxable income and expire between December 31, 2011 and 2027.





At
      December 31, 2007, the Company has available approximately $17,200,000 of
      net
      operating losses to carry-forward and which may be used to reduce future state
      taxable income which expire between December 31, 2008 and 2014.





401(k)
      PLAN





The
      Company adopted the qualified Magnitude, Inc. sponsored 401(k) plan covering
      substantially all full time employees under which eligible employees may elect
      to contribute, within statutory limits, a percentage of their annual
      compensation. The Company matches up to 50% of the employee’s contribution of
      which the match may not exceed 3% of the employee’s total compensation for the
      plan year. Contributions to the plan were $6,895 and $8,895 for the years ended
      December 31, 2007 and 2006, respectively.




F-25





**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**




STOCK
      OPTION PLANS





In
      April
      1996, Magnitude, Inc. adopted its 1996 Stock Incentive Plan (“the 1996 Plan”).
      The 1996 Plan provides that certain options granted thereunder are intended
      to
      qualify as “incentive stock options” (ISO) within the meaning of Section 422A of
      the United States Internal Revenue Code of 1986, while non-qualified options
      may
      also be granted under the Plan. The initial plan and subsequent amendments
      provided for authorization of up to 480,000 shares. Pursuant to the above
      described stock exchange offer on July 2, 1997, all options under the 1996
      Plan
      were converted into shares of the Company at a rate of 3.4676 shares of
      Magnitude, Inc. to 1 share of the Company.





In
      September 1997, the Company adopted its 1997 Stock Incentive Plan (“the 1997
      Plan”). The 1997 Plan provides that certain options granted thereunder are
      intended to qualify as “incentive stock options” (ISO) within the meaning of
      Section 422A of the United States Internal Revenue Code of 1986, while
      non-qualified options may also be granted under the Plan. The initial plan
      and
      subsequent amendments provided for the grant of options for up to 1,000,000
      shares. The purchase price per share of common stock deliverable upon exercise
      of each ISO shall not be less than 100% of the fair market value of the common
      stock on the date such option is granted. If an ISO is issued to an individual
      who owns, at the time of grant, more than 10% of the total combined voting
      power
      of all classes of the Company’s common stock, the exercise price of such option
      shall be at least 110% of the fair market value of the common stock on the
      date
      of grant and the term of the option shall not exceed five years from the date
      of
      grant. The purchase price of shares subject to non-qualified stock options
      shall
      be determined by a committee established by the Board of Directors with the
      condition that such prices shall not be less than 85% of the fair market value
      of the common stock at the time of grant.





F-26




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**





STOCK
      OPTION PLANS - (Continued)





In
      May
      2000 the Company adopted its 2000 Stock Incentive Plan (“the 2000 Plan”). The
      2000 Plan provides that certain options granted thereunder are intended to
      qualify as “incentive stock options” (ISO) within the meaning of Section 422A of
      the United States Internal Revenue Code of 1986, while nonqualified options
      may
      also be granted under the Plan. The initial Plan provides for the grant of
      options for up to 5,000,000 shares. The purchase price per share of common
      stock
      deliverable upon exercise of each ISO shall not be less than 100% of the fair
      market value of the common stock on the date such option is granted. If an
      ISO
      is issued to an individual who owns, at the time of grant, more than 10% of
      the
      total combined voting power of all classes of the Company’s common stock, the
      exercise price of such option shall be at least 110% of the fair market value
      of
      the common stock on the date of the grant, and the term of the option shall
      not
      exceed five years from the date of grant. The purchase price of shares subject
      to non-qualified stock options shall be determined by a compensation committee
      established by the Board of Directors.





Qualified
                and Non-Qualified Shares Under Option Pursuant to the 1997 Plan
              December
                31,2007
            
            2006Outstanding,
                beginning of year
            
            
            -
            
            
            420,000Granted
                during the year
            
            
            -
            
            
            -Expired
                during the year
            
            
            -
            
            
            (420,000
            )Surrendered
                during the year
            
            
            -
            
            
            -Outstanding,
                end of year
            
            
            -
            
            
            -Eligible,
                end of year for exercise
            
            
            -
            
            
            -





At
      December 31, 2007 and 2006, no options were outstanding.





At
      December 31, 2007, there were 1,000,000 shares reserved for future option
      grants.




Qualified
                and Non-Qualified Shares Under Option Pursuant to the 2000 Plan
              December
                31,2007
            
            2006Outstanding,
                beginning of year
            
            
            331,500
            
            
            783,958Granted
                during the year
            
            
            -
            
            
            -Exercised
                during the year
            
            
            -
            
            
            -Surrendered
                during the year
            
            
            -
            
            
            -Expired
                during the year
            
            
            (326,500
            )
            
            (452,458
            )Outstanding,
                end of year (at a price of $0.20)
            
            
            5,000
            
            
            331,500Eligible,
                end of year for exercise (at a price of $0.20)
            
            
            5,000
            
            
            331,500





At
      December 31, 2007 and 2006 the weighted average exercise price and weighted
      average remaining contractual life is $0.20 and $0.17 per share and 8 months
      and
      4 months, respectively.





At
      December 31, 2007, there were 4,995,000 shares reserved for future option
      grants.





F-27




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**





STOCK
      OPTION PLANS - (Continued)





At
      December 31, 2007 the company has two stock-based employee compensation plans,
      which are described more fully above. The company accounts for those plans
      under
      the recognition and measurement principles of Statement
      of Financial Accounting Standards (SFAS) 123(R), *Share-Based
      Payment* , and
      related Interpretations. The Company has not granted any options under these
      plans to employees during 2007 or 2006.





The
      Company also issues options outside of the Stock Incentive Plans which are
      comprised as follows:




December
                31,2007
            
            2006Outstanding,
                beginning of year
            
            
            12,025,908
            
            
            6,226,116Granted
                during the year
            
            
            23,500,000
            
            
            6,653,542Exercised
                during the year
            
            
            (600,000
            )
            
            -Surrendered
                during the year
            
            
            -
            
            
            -Expired
                during the year
            
            
            (2,205,000
            )
            
            (853,750
            )Outstanding,
                end of year (at prices ranging from $0.01 to $1.00)
            
            
            32,720,908
            
            
            12,025,908Eligible
                for exercise, end of year (at prices ranging from $0.01 to
                $1.00)
            
            
            9,720,908
            
            
            9,122,366





At
      December 31, 2007 and 2006 the weighted average exercise price and weighted
      average remaining contractual life is $0.10 and $0.20 per share, and 2 years
      3
      months and 1 year 11 months, respectively.





During
      2007, the Company granted options for 22,500,000 shares, exercisable at $0.057
      during a three years period beginning one year after grant, to the former
      principals of Kiwibox Media, Inc. under the terms of the acquisition agreement.
      Furthermore, the Company granted options for 500,000 shares to a newly hired
      employee which options are exercisable at $0.05 during a four year period,
      and
      options for 500,000 shares under the second year of the term of a consulting
      agreement, which options are exercisable at $0.15 during a three year
      period .
      The
      options were valued utilizing the Black-Scholes valuation method, with the
      following assumptions: Expected life - 3 years, dividends - none, volatility
      -
      169%, risk-free rate - 4.15% to 4.74%. The Company recognized $441,567 in
      stock-based compensation from these options for the year ended December 31,
      2007. The total value of such options is $1,129,500 as reflected in Item 10
      above, the Summary Compensation Table.





WARRANTS





The
                Company granted common stock purchase warrants between January 2,
                2006 and
                December 31, 2007 which are comprised as
                follows:.






December
                31,2007
            
            2006Outstanding,
                beginning of year
            
            
            71,734,667
            
            
            50,886,017Granted
                during the year
            
            
            55,789,000
            
            
            32,416,666Exercised
                during the year
            
            
            -
            
            
            -Surrendered
                /cancelled during the year
            
            
            (12,500,000
            )
            
            (2,625,000
            )Expired
                during the year
            
            
            (19,159,667
            )
            
            (8,943,016
            )Outstanding,
                end of year (at prices ranging from $.05 to $.15)
            
            
            95,864,000
            
            
            71,734,667Eligible,
                end of year (at prices ranging from $.05 to $.15)
            
            
            47,364,000
            
            
            54,526,334




At
      December 31, 2007 and 2006, the weighted average exercise price and weighted
      average remaining contractual life is $0.08 and $0.11 per share and 2 year
      11
      months and 1 year 11 months, respectively.





F-28




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**





COMMITMENTS
      AND CONTINGENCIES





Lease
      Agreement





On
      September 1, 2006, the Company entered a three year lease (which can be
      terminated by either party after 12 months) for approximately 850 square feet
      of
      office space at 1250 Route 28, Suite 309, Branchburg, New Jersey. This lease
      agreement calls for a base rental payment of $1,103 per month plus
      utility/cam/property tax charges of approximately $600 per month, with nominal
      increases after years two and three .
      We also
      rent approximately 1,600 square feet of office space in New York City for our
      Kiwibox operations at 330 W. 38th Street, Suite 1602. We pay monthly rent
      of $4.189.18 under the terms of a two year lease.





The
      Company paid $34,639 and $110,079, respectively, during 2007 and 2006, for
      rent
      expense.





RELATED
      PARTY TRANSACTIONS





On
      August
      8, 2006, Steven D. Rudnik resigned from the position of Chairman of the Board
      of
      Directors of the Company. Pursuant to the principal terms of the resignation
      agreement, (a) his current employment agreement was terminated, (b) he resigned
      the position of chairman, (c) he received 6 million restricted common shares
      plus cash payments totaling $60,000.00 to be paid in installments through
      November 1, 2006, and (d) that options and warrants for an aggregate 4,486,875
      shares which were previously cancelled, be re-issued upon the earlier recurrence
      of a recapitalization of our securities that would provide sufficient common
      shares to accommodate them or two years from the date of the agreement. The
      options and warrants will have similar terms as the original instruments
      (exercisable at $0.10 and $0.15, respectively), but with expiration dates as
      of
      three years from the date of re-issuance.





During
      the fourth quarter in 2006 the Company engaged in two settlement negotiations:
      the first was with our former CEO and President, Steven D. Rudnik, pursuant
      to
      which we issued to him 13,861,875 Company securities in exchange for an
      outstanding Company note in the approximate amount of $99,890, accrued interest
      and a debt of $15,000, and; the second settlement was with our former executive,
      Steven Jagels, pursuant to which we issued to him 3,000,000 shares in exchange
      for his claims against the Company arising under his employment agreement.
      . The
      issuances of Company securities in these transactions represented violations
      of
      the private placement offering rules since it raised the issue of whether or
      not
      the publicly filed and pending registration statement acted as an advertising
      mechanism or a Company "general solicitation" of the offering of securities
      in
      these settlement transactions. If a general solicitation was found to have
      occurred, Messrs. Rudnik and Jagels would have had the legal right to rescind
      their settlement agreements during the one year period following the
      consummation of these transactions. During 2007 the Company reached agreements
      with both individuals pursuant to which Messrs. Rudnik and Jagels received
      2,000,000 and 3,150,000 shares, respectively, in settlement of any related
      claims.





On
      December 13, 2006, the Company and Steven D. Rudnik, our former President and
      Chief Executive Officer signed a second settlement agreement, pursuant to the
      principal terms of which Mr. Rudnik exchanged **** a
      Company
      promissory note due him in the principal amount of approximately $99,890, a
      $15,000 payment due him under his resignation agreement of August 8, 2006 and
      certain interest payments for a conversion option whereby the obligations could
      be converted into common stock at $0.02 per share (6,250,000 common shares
      upon
      agreement) and 3,125,000 warrants issuable upon conversion, exercisable over
      a
      three year period at an exercise price of $.05 per share. Debt discounts on
      the
      obligations were recognized for the value of the issuable warrants, which was
      determined by a Black-Scholes calculation to be $67,503, and for the intrinsic
      value of the conversion option, which was determined to have a beneficial
      conversion feature. These discounts were immediately amortized as interest
      expense due to the demand nature of the obligations. The obligations were
      converted into the common stock and warrants in December 2006. The Company
      also
      agreed to reissue previously terminated stock options and warrants on or
      before




F-29





**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**





RELATED
      PARTY TRANSACTIONS (continued)





February
      18, 2007, comprised of 1,583,333 warrants to purchase common shares at the
      exercise price of $.10 per share anytime during the three-year period,
      commencing February 18, 2007, and 2,903,542 stock options to purchase common
      shares at the exercise price of $.10 per share anytime during the three-year
      period commencing February 18, 2007. This agreement also provides Mr. Rudnik
      a
      12-month "reset" provision that entitles him to automatically benefit from
      any
      terms that are more favorable than those set forth in the agreement, including
      a
      more favorable debt conversion rate or equity investment price, that the
      Registrant grants to any party over the next 12 months.





On
      January 2, 2007, the Company and a former employee, Steven W. Jagels settled
      a
      lawsuit commenced by Mr. Jagels against the Company based upon claims which
      included breach of his employment agreement. We agreed to make a payment of
      $20,040 to Mr. Jagels and to issue 3,000,000 common shares to him by January
      7,
      2007. We also agreed to include these shares in a registration statement and
      when declared effective by the SEC, to cause a buyer to purchase these shares
      from Mr. Jagels for $75,000 prior to February 28, 2007. The Company facilitated
      this payment and the lawsuit was dismissed with prejudice.




In
      January 2007 we issued warrants for 3,125,000 shares, exercisable at $0.05
      per
      share, to the former president and chief executive officer, in connection with
      a
      settlement agreement reached during the fourth quarter in 2006





In
      May
      2007 the Company reached agreement with the former president and chief executive
      officer to the effect that, in return for issuance of 2,000,000 shares, he
      would
      issue a waiver with respect to the Company’s obligation for filing a
      registration statement for certain securities previously issued to him by the
      Company.





During
      2007 and 2006, one outside director of the Company who also serves as the
      Company’s general and securities counsel, was paid an aggregate $127,000 and
      $96,121, respectively, for legal services and is owed $288,184 at December
      31,
      2007.





F-30




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**




FAIR
      VALUE OF FINANCIAL INSTRUMENTS





Cash,
      accounts receivable, accounts payable, accrued expenses, notes payable,
      long-term debt and capitalized lease obligations:





The
      carrying amount approximates fair value because of the short term maturity
      of
      these instruments.





Limitations




Fair
      value estimates are made at a specific point in time, based on relevant
      information and information about the financial instrument. These estimates
      are
      subjective in nature and involve uncertainties and matters of significant
      judgment and therefore cannot be determined with precision. Changes in
      assumptions could significantly affect the estimates




NEW
        ACCOUNTING PRONOUNCEMENTS
 
 In
        2007,
        the Financial Accounting Standards Board (FASB) issued Statement of Financial
        Accounting Standard (SFAS) No. 141 (revised 2007) Business Combinations.
        This
        Statement replaces FASB Statement No. 141, Business Combinations. This Statement
        requires an acquirer to recognize the assets acquired, the liabilities assumed,
        and any non-controlling interest in the acquiree at the acquisition date,
        measured at their fair values as of that date, with limited exceptions specified
        in the Statement.
 
 SFAS
        No.
        141 (revised) is effective for business combinations for which the acquisition
        date is on or after the beginning of the first annual reporting period beginning
        on or after December 15, 2008. Management does not expect the implementation
        of
        this new standard to have a material impact on the Company's financial position,
        results of operations and cash flows.
 
 In
        February 2007, the Financial Accounting Standards Board (FASB) issued Statement
        of Financial Accounting Standard (SFAS) No. 159, "The Fair Value Option for
        Financial Assets and Financial Liabilities" including and amendment of FASB
        Statement No. 115 with respect to improvement of financial reporting of certain
        investments in debt and equity securities. This Statement permits entities
        to
        choose to measure many financial instruments and certain other items at fair
        value. The objective is to improve financial reporting by providing entities
        with the opportunity to mitigate volatility in reported earnings caused by
        measuring related assets and liabilities differently without having to apply
        complex hedge accounting provisions. This Statement is expected to expand
        the
        use of fair value measurement, which is consistent with the Board's long-term
        measurement objectives for accounting for financial instruments.


F-31





**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**





NEW
      ACCOUNTING PRONOUNCEMENTS (continued)





SFAS
        No.
        159 is effective as of the beginning of the Company's first fiscal year that
        begins after November 15, 2007. Management does not expect the implementation
        of
        this new standard to have a material impact on the Company's financial position,
        results of operations and cash flows.
 
 In
        September 2006, the Financial Accounting Standards Board (FASB) issued Statement
        of Financial Accounting Standard (SFAS) No. 157, Fair Value Measurements.
        SFAS
        No. 157 defines fair value, establishes a framework for measuring fair value
        in
        generally accepted accounting principles (GAAP), and expands disclosures
        about
        fair value measurements.
 
 SFAS
        No.
        157 is effective for financial statements issued for fiscal years beginning
        after November 15, 2007, and interim periods within those fiscal years.
        Management does not expect the implementation of this new standard to have
        a
        material impact on the Company's financial position, results of operations
        and
        cash flows.
 
 In
        December 2007, the Financial Accounting Standards Board (FASB) issued Statement
        of Financial Accounting Standard (SFAS) No. 160 Noncontrolling Interest in
        Consolidated Financial Statements as an amendment to ARB No. 51. This Statement
        is expected to improve the relevance, comparability and transparency of the
        financial information that a reporting entity provides in its consolidated
        financial statements by establishing accounting and reporting standards for
        the
        noncontrolling interest in a subsidiary and for the deconsolidation of a
        subsidiary. Management does not expect the implementation of this new standard
        to have a material impact on the Company's financial position, results of
        operations and cash flows.





LITIGATION





At
      the
      time of this report, the Company is not a party in any material legal
      proceedings.





MERGER
      WITH KIWIBOX MEDIA INC .





On
      August
      16, 2007, the Company closed on its acquisition of Kiwibox Media, Inc. by means
      of a reverse merger **** with
      a
      newly formed wholly-owned subsidiary of the Company. In exchange for the Kiwibox
      business, we (a) issued 30,000,000 restricted common shares and $500,000 worth
      (conversion value) of our Series G preferred stock to the three Kiwibox owners,
      and paid them $300,000 cash; (b) gave each of the three Kiwibox owners a
      two-year employment agreement that will pay them each a base salary of $150,000
      per year and 7,500,000 stock options, vesting over two years with the
      possibility of earning cash bonuses and 3,000,000 additional stock options
      each
      if certain business performance goals are reached within the two-year
      period.




Based
        upon our original Agreement and Plan of Reorganization of February 2007,
        we
        committed to invest $3.5 Million in the Kiwibox business. This commitment
        was
        based upon our communications with a Swiss based shareholder and investor
        in our
        Company, Tell Capital AG, who on July 26, 2007, sent us a commitment to invest
        $3 million of equity in our Company. Based upon Tell Capital’s commitment, we
        executed Amendment No. 3 to our original February, 2007 agreement with Kiwibox,
        committing to invest $3.5 million in various tranches, corresponding to the
        investment schedule set forth in the Tell Capital commitment, as well as
        agreeing to pay 60,000 restricted common shares for each day any of our
        scheduled investment tranches were late. Because of the delays in the receipt
        of
        the equity investments from Tell Capital, scheduled through November 1, 2007,
        our corresponding investment commitments to the Kiwibox business were also
        late.
        The continuing lateness of our investment commitments to the Kiwibox business
        resulted in further amendments to our Kiwibox agreement and required us to
        make
        a $100,000 penalty payment to the Kiwibox shareholders in 2007. The final
        modification to our original agreement, Amendment No. 6, executed on February
        28, 2008, provided that if we raised $1.5 million in equity on or before
        March
        7, 2008 and dedicated $700,000 of that amount to the Kiwibox business, made
        another penalty payment of $150,000 and delivered our corporate note in the
        principal amount of $225,000 to the Kiwibox shareholders, all rescission
        rights
        held by the Kiwibox shareholders and any further obligations to invest in
        the
        Kiwibox business would terminate. On March 7, 2008, we received $1.5 Million
        in
        subscription proceeds from investors, from which proceeds we dedicated $700,000
        to the Kiwibox business, made the $150,000 penalty payment to the Kiwibox
        shareholders and delivered to them our $225,000 corporate note. Accordingly,
        the
        Kiwibox shareholders’ rights of rescission and our obligation to invest further
        funds in the Kiwibox business terminated. We have paid the Kiwibox shareholders
        $250,000 in cash, delivered to them our $225,000 corporate note, due June
        15,
        2008, and must issue to them approximately 30,000,000 restricted common shares
        resulting from the series of delays in meeting our commitments to invest
        funds
        into the Kiwibox business. Due to these purchase price contingencies, we
        have
        not finalized the purchase price allocation as of December 31,
        2007.




F-32


**Magnitude
          Information Systems, Inc. and Subsidiaries**
 **Notes
          to Consolidated Financial Statements**
  MERGER
          WITH KIWIBOX MEDIA INC .
          (continued)
 On
          August
          16, 2007, the Company completed its acquisition of 100% of the outstanding
          capital stock of KiwiBox Media, Inc. The total purchase price as of December
          31,
          2007 of $2,850,273 was calculated as follows: we issued 30,000,000 restricted
          common shares based on a total value of $1,500,000 determined by the lower
          of
          $0.05 per share and the average sales price of the Company’s common stock for
          the ten (10) successive trading days immediately preceding the closing,
          43,610
          shares of our Series G Preferred Stock worth $500,000 (conversion value
          - see
          PREFERRED STOCK), paid $300,000 in cash by year-end to the three KiwiBox
          owners,
          incurred $492,773 in penalty costs (described below) and incurred $57,500
          in
          direct acquisition-related professional fees. Based on the initial Agreement
          and
          Plan of Reorganization from February 2007, the Company committed to investing
          $3.5 million for the operations of KiwiBox. Based on an amendment in July
          2007,
          in the event that certain investment tranches were not made by their respective
          due dates, the Company agreed to issue 60,000 restricted shares to the
          former
          shareholders of KiwiBox for each day that the funds are in arrears. The
          company
          estimated the fair value of this pre-acquisition contingency as of the
          acquisition date based on the present value of the total expected liability
          at a
          discount rate of 5%, with an accreted value of $292,773 at December 31,
          2007.
          Pursuant to additional amendments entered into in December 2007, the Company
          agreed to pay $200,000 in cash penalties to the former shareholders of
          KiwiBox,
          $100,000 of which had been paid by year-end. In addition, the Company made
          advances on behalf of KiwiBox in the amount of $73,000 prior to the acquisition,
          which was eliminated in consolidation.
 
 The
          excess of acquisition cost to date over the fair value of the net assets
          acquired from Kiwibox Media, Inc. has been capitalized as Goodwill on the
          Company’s balance sheet.
 
 The
          table
          below shows the condensed balance sheet of Kiwibox Media, Inc at the acquisition
          date:
 
 AssetsCash
                $
                200Accounts
                    Receivable
                
                12,024Fixed
                    Assets, net
                
                5,410Deposits
                
                3,224Total
                    Assets
                
                
                20,858Liabilities
                Accounts
                    Payable
                
                48,057Equity
                Common
                    stock
                
                469Additional
                    Paid-In Capital
                
                116,195Loans
                    to former principals
                
                (286,721)Retained
                    earnings
                
                142,858Total
                    Liabilities
                and
                    Equity
                $
                20,858
  The
          table
          below shows the condensed pro forma income statement of the Company including
          the operations of Kiwibox Media, Inc, as though the acquisition would have
          taken
          place at the beginning of the periods presented:
 
 The
                    Company
                  Fiscal
                    Year 2007
                
                Kiwibox
                    Media, Inc.
                  1/1/07
                    - 8/16/07
                
                Combined
                    OperationsRevenues
                
                $
                29,745
                
                
                47,737
                
                
                77,482Operating
                    Income (Loss)
                
                
                (2,447,832
                )
                
                (75,741
                )
                
                (2,523,573
                )Net
                    Income (Loss)
                
                
                (3,881,652
                )
                
                (75,741
                )
                
                (3,957,393
                )Loss
                    per Share
                
                $
                (0.02
                )
                
                n/a
                
                
                (0.02
                )
 
 The
                    Company
                  Fiscal
                    Year 2006
                
                Kiwibox
                    Media, Inc.
                  Fiscal
                    Year 2006
                
                Combined
                    OperationsRevenues
                
                $47,701
                
                107,153
                
                154,854Operating
                    Income (Loss)
                
                
                (3,716,867
                )
                
                (42,628
                )
                
                (3,759,495
                )Net
                    Income (Loss)
                
                
                (3,895,262
                )
                
                (30,325
                )
                
                (3,925,587
                )Loss
                    per Share
                
                $
                (0.03
                )
                
                n/a
                
                
                (0.03
                )
 
 The
          Company’s financial statements that form part of this report include the
          operations of the Kiwibox subsidiary for the period August 16, 2007 to
          December
          31, 2007.


F-33




**Magnitude
      Information Systems, Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


BUSINESS
        SEGMENTS
 
 The
        Company operates in only one business segment - youth targeted online social
        networks - through its dedicated proprietary internet website.
  Revenue
        is derived from subscriber and advertising
        charges for the Company’s interactive
        web
        site. Since the Company’s former
        business
        involving the sales and marketing of specialized ergonomic software did not
        contribute materially to this year’s revenues,
        the
        revenue amounts shown in the financial statements included herein are
        representative of the business of the Company as a whole as well as that
        of its
        Kiwibox subsidiary.
  While
        the direct cost attributable to the acquisition
        of the Kiwibox entity has been capitalized as Goodwill, certain expenses
        incurred in connection with this transaction, primarily in the areas of legal
        and professional services and which are estimated to be in the vicinity of
        $350,000, are of a non-recurring nature.
  SUBSEQUENT
        EVENTS
 
 On
        January 28, 2008, we received a $110,000 investment from Tell Capital AG
        and on
        March 7, 2008, an additional $1,500,000 in subscription proceeds from 10
        accredited foreign and domestic investors. We committed to issue 2,200,000
        units
        to Tell Capital AG for its investment, at the subscription price of $.05
        per
        unit, with each unit comprised of one restricted common share and one five-year
        warrant, exercisable at $.07 per share.
 
 The
        major
        investor in our stock during 2007 was Tell Capital AG and its assignees,
        who
        have invested $1,675,000 in our operations through December 31, 2007, pursuant
        to its commitment of July 26, 2007, to invest a total of $3 million on or
        before
        November 1, 2007. During this same period, Tell Capital AG indicated its
        further
        interest to invest a second $3 million of equity into our operations in early
        2008. Because Tell Capital AG’s initial $3 million investment was not timely and
        due to the fact that the total $3 million was not received, our commitments
        to
        fund the Kiwibox business were correspondingly late. On February 28, 2008,
        we
        executed Amendment No. 6 to our original Agreement and Plan of Reorganization
        with the Kiwibox shareholders. This amendment provided that if we raised
        no less
        than $1,500,000 in equity funding on or before March 7, 2008, and out of
        such
        funds, paid the Kiwibox shareholders $150,000, dedicated $700,000 to the
        Kiwibox
        business and deliveredapromissory note to the Kiwibox shareholders, we would
        have no further investment obligations into the Kiwibox business and all
        rescission rights in favor of the Kiwibox shareholders would
        terminate.
 
 On
        March
        7, 2008, the Company received $1,500,000 in equity subscriptions from 10
        domestic and foreign accredited investor, satisfying the Company’s payment and
        investment obligations contained in Amendment No. 6. However, due to the
        partial
        investment amounts actually received and the delays in our receipt of these
        funds causing the Company to be late in meeting its investment commitments
        during the period September 1, 2007 through March 7, 2008, the Company paid
        the
        Kiwibox Shareholders penalty cash payments of $250,000, delivered a Company
        promissory note for $225,000 due June 15, 2008, and owe a penalty of
        approximately 30,000,000 common shares to the Kiwibox Shareholders.
 
 In
        connection with the March 7, 2008 receipt of the $1,500,000 in subscription
        proceeds, the Company is committed to issue to the investors an aggregate
        50,000,000 restricted common shares and 50,000,000 common stock purchase
        warrants at the subscription price of $.02 per common share and $.01 per
        warrant. The warrants are exercisable anytime during their 5 year exercise
        period at the exercise price of $.05 per warrant with provisions for cashless
        exercise. The receipt of these private offering proceeds was disclosed in
        our
        current report on Form 8-K filed on March 7, 2008.
 
 On
        March
        20, 2008, two shareholder/investors converted their Company promissory notes,
        representing an aggregate indebtedness of $350,000, into an aggregate 9,333,333
        restricted common shares and an equal number of common stock purchase
        warrants.




On
      April 14, 2008, an investor agreed to convert his
      $100,000 deposit into 2,000,000 restricted common shares and 2,000,000 5-year
      warrants, exercisable at $.07 per share.








F-34