FORM 10-QSB/A

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                         For Quarter Ended June 30, 2004

                                       OR

              [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For the Transition Period from _______ to _______

                         Commission file number 33-20432

                       MAGNITUDE INFORMATION SYSTEMS, INC.
                       -----------------------------------
             (Exact Name of Registrant as Specified in its Charter)

                     Delaware                       75-2228828
         ---------------------------------------------------------
         (State or other Jurisdiction of          (IRS Employer
          Incorporation or Organization)       Identification No.)

                  401 State Route 24, Chester, New Jersey 07930
                  ---------------------------------------------
               (Address of Principal Executive Office) (Zip Code)

                                 (908) 879-2722
                                 --------------
               (Registrant's telephone number including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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 _____

     The number of shares of Registrant's Common Stock, $0.0001 par value,
            outstanding as of July 31, 2004, was 92,551,489 shares.

Explanatory Note

This Form 10-QSB/A is being filed for the purpose of restating the financial
statements for the quarter ended June 30, 2004 and as contained in the Company's
Form 10-QSB filed with the U.S. Securities and Exchange Commission on August 13,
2004.

As discussed in the footnote to the financial statements entitled "Restatement
of Results", the Company determined that certain warrants and options that were
in excess of authorized shares for the period from December 2003 through July
2004 required reclassification as liabilities for the period that these
instruments could not be physically settled. Such liabilities were marked to
fair value until they reverted to equity on July 10, 2004 when the Company
amended its certificate of incorporation increasing its authorized common
shares, as approved by the Company's shareholders.

<PAGE>

              MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES


                                      INDEX


                                                                           Page
                                                                          Number
                                                                          ------

PART  1  -  FINANCIAL INFORMATION

Item 1   Financial Statements (unaudited) - as restated

         Consolidated Balance Sheet
          - June 30, 2004                                                3

         Consolidated Statements of Operations
          - Three and six months ended June 30, 2004 and 2003            4

         Consolidated Statements of Cash Flows
          - Six months ended June 30, 2004 and 2003                      5

         Notes to Consolidated Financial Statements                      6 - 12


Item 2   Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                       14 - 15

Item 3   Controls and Procedures                                         16


PART II  -  OTHER INFORMATION                                            17 - 19


SIGNATURES                                                               20


                                       2
<PAGE>


PART I  - Item 1

               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                                   (Unaudited)

<TABLE>
<CAPTION>
ASSETS                                                                             June 30, 2004
                                                                                   (as restated)
                                                                                   -------------
<S>                                                                               <C>
     Current Assets
     Cash .....................................................................   $        9,927
     Accounts receivable, net of allowance for
        doubtful accounts of $212 .............................................            1,408
     Miscellaneous receivables                                                             1,800
     Inventories ..............................................................           12,428
     Prepaid expenses .........................................................          206,199
                                                                                  --------------
        Total Current Assets ..................................................          231,762
     Property and equipment, net of accumulated
        depreciation of $139,954 ..............................................           13,434
     Software, net of accumulated amortization of $963,298 ....................          543,992
     Other assets .............................................................           38,548
                                                                                  --------------
TOTAL ASSETS ..................................................................          827,736
                                                                                  ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (IMPAIRMENT)
LIABILITIES
     Accounts payable and accrued expenses ....................................          362,945
     Deferred revenue .........................................................           31,607
     Dividends payable ........................................................          472,920
     Loans and notes payable ..................................................          100,000
     Current maturities of long-term debt .....................................          133,419
     Current maturities of capitalized lease obligations ......................            2,805
     Liability for warrant and options exercise ...............................          989,331
                                                                                  --------------
        Total Current Liabilities .............................................        2,093,027
     Capitalized lease obligations, less current portion ......................            3,234
                                                                                  --------------
TOTAL LIABILITIES .............................................................        2,096,261

STOCKHOLDERS' EQUITY
     Preferred Stock, $0.001 par value, non-voting, 3,000,000 shares authorized:
     2,500 shares have been designated Cumulative Preferred Stock,
     of which 1 share is issued and outstanding ...............................                0
     300,000 shares have been designated Series A Convertible Preferred Stock,
     350,000 shares have been designated Series B Convertible Preferred Stock,
     120,000 shares have been designated Series C Convertible Preferred Stock,
     500,000 shares have been designated Series D Convertible Preferred Stock,
     500,000 shares have been designated Series E Convertible Preferred Stock,
     of which a combined total 521,582 shares are issued and outstanding ......              522
     Common Stock, $0.0001 par value, 200,000,000 shares authorized,
     83,292,141 shares are issued and outstanding .............................            8,329
     Additional paid-in capital ...............................................       25,130,446
     Accumulated deficit ......................................................      (26,407,822)
                                                                                  --------------
TOTAL STOCKHOLDERS' EQUITY ....................................................       (1,268,525)

TOTAL LIABILITIES AND EQUITY ..................................................   $      827,736
                                                                                  ==============
</TABLE>

                 See notes to consolidated financial statements


                                       3
<PAGE>


               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                         Three Months Ended            Six Months Ended
                                                              June 30,                      June 30,
                                                       2004            2003          2004           2003
                                                   (as restated)                 (as restated)
                                                   ------------   ------------   ------------   ------------
<S>                                                <C>            <C>            <C>            <C>

Total Revenues ..................................  $     20,294   $     33,107   $     64,874   $     68,559
     Cost of Goods Sold .........................        39,066         38,980         78,021         77,967
                                                   ------------   ------------   ------------   ------------
Gross Profit ....................................       (18,772)        (5,873)       (13,147)        (9,408)
     Selling expenses ...........................       111,412        139,049        229,649        293,645
     Stock-based compensation ...................        85,978         61,210        236,033        207,216
     General & administrative expenses ..........       329,935        407,616        763,985        781,312
                                                   ------------   ------------   ------------   ------------

Operating (Loss) ................................      (546,097)      (613,748)    (1,242,814)    (1,291,581)

     Misc. non-operating expenses ...............       (14,489)          --          (14,489)          --
     Change in fair value of options and warrants       465,996           --          174,041           --
     Interest expense, net ......................        (3,407)       (24,612)        (9,203)       (31,195)
                                                   ------------   ------------   ------------   ------------
Non-Operating Income (Expense) ..................       448,100        (24,612)       150,349        (31,195)
                                                   ------------   ------------   ------------   ------------

Net (Loss) before taxes .........................       (97,997)      (638,360)    (1,092,465)    (1,322,776)
     Provision for income taxes .................             0              0              0              0
Net (Loss) ......................................  $    (97,997)  $   (638,360)  $ (1,092,465)  $ (1,322,776)
                                                   ============   ============   ============   ============

Dividends accrued on preferred stock ............        56,873         28,817        114,253         57,634
Amortized discount on convertible
     preferred stock ............................       779,026           --        1,495,462           --

Net (Loss) applicable to common shareholders ....  $   (933,896)  $   (667,177)  $ (2,702,180)  $ (1,380,410)
                                                   ============   ============   ============   ============
Loss per Common Share ...........................  $      (0.01)  $      (0.01)  $      (0.03)  $      (0.02)
                                                   ============   ============   ============   ============
Weighted Average Number of
     Common Shares Outstanding ..................    81,805,474     65,661,771     79,971,031     63,232,175
                                                   ============   ============   ============   ============
</TABLE>


                 See notes to consolidated financial statements

                                       4
<PAGE>


               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                           Six Months Ended
                                                               June 30,
                                                          2004          2003
                                                     (as restated)
                                                      -----------   -----------
Cash Flows from Operating Activities
     Net (loss) ....................................  $(1,092,465)  $(1,322,776)
     Adjustments to net (loss)
       Depreciation and amortization ...............       82,982        93,456
       Changes in fair value of options and warrants     (174,041)         --
       Securities issued for expenses and debt .....      314,300       182,937
     Decreases (increases) in Assets
        Accounts receivable ........................       34,432         3,875
        Miscellaneous receivables ..................         --           1,458
        Inventories ................................       14,489            30
        Prepaid expenses ...........................     (129,101)      (87,057)
        Other assets ...............................       10,577          --
     Increases (decreases) in Liabilities
        Deferred revenues ..........................       38,925        (3,198)
        Change in prepayments ......................         --         (14,075)
        Accounts payable and accrued expenses ......      (66,069)      208,236
                                                      -----------   -----------
Net Cash (Used) by Operating Activities ............     (965,971)     (937,114)

Cash Flows from Investing Activities
     Purchases of equipment and fixtures ...........       (3,443)       (1,885)
                                                      -----------   -----------
Net Cash (Used) by Investing Activities ............       (3,443)       (1,885)

Cash Flows from Financing Activities
     Proceeds from loans and notes payable .........         --         316,763
     Repayment of loans and notes ..................     (282,851)      (16,706)
     Payment of dividends ..........................         (900)         --
     Issuance of common and preferred stock ........    1,165,114       655,148
                                                      -----------   -----------
Net Cash Provided by Financing Activities ..........      881,363       955,205
Net Increase (Decrease) in Cash ....................      (88,051)       16,206
Cash at Beginning of Period ........................       97,978         9,976
                                                      -----------   -----------
Cash at End of Period ..............................  $     9,927   $    26,182
                                                      ===========   ===========


                 See notes to consolidated financial statements

                                       5
<PAGE>


               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Nature of Organization

         Magnitude Information Systems, Inc. (the "Company" or "Magnitude") 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's primary product is an integrated suite of proprietary
         software modules marketed under the name ErgoManager(TM) which are
         designed to help individual computer users and businesses increase
         productivity and reduce the risk of potentially preventable repetitive
         stress injury (RSI). These software modules can be applied individually
         or together in a comprehensive ergonomic and early intervention program
         that seeks to modify a user's behavior by monitoring computer usage
         patterns over time and warning the user when to break a dangerous trend
         in repetitive usage of an input device, such as a keyboard or mouse.
         The product was developed to train people working on computers, monitor
         computer-use related activities and evaluate a user's risk exposure and
         propensity towards injury or loss of effectiveness in connection with
         his/her day-to-day work. Moreover, the software enables a company to
         not only address the issue of health risks involving employees and to
         minimize resulting potential liabilities, but delivers a powerful tool
         to increase overall productivity.

         On June 24, 1997, the Company extended a stock exchange offer to the
         shareholders of Magnitude, Inc., a Delaware corporation and
         manufacturer of ergonomic keyboarding systems. At the time of this
         submission, holders of 99.4% of Magnitude, Inc. common stock have
         tendered their shares. The remaining Magnitude, Inc. shareholders hold
         a minority interest which is valued at $0. The Company and Magnitude,
         Inc. remain as two separate legal entities whereby Magnitude, Inc.
         operates as a subsidiary of Magnitude Information Systems, Inc. The
         operations of the combined entity are currently comprised solely of the
         operations of Magnitude, Inc.

     Basis of Presentation

         The accompanying unaudited consolidated financial statements have been
         prepared in accordance with generally accepted accounting principles
         for interim financial statements and with the instructions to Form
         10-QSB and Article 10 of Regulation S-X. Accordingly, they do not
         include all of the information and disclosures required for annual
         financial statements. These financial statements should be read in
         conjunction with the consolidated financial statements and related
         footnotes included in the Company's annual report on Form 10-KSB for
         the year ended December 31, 2003 and its quarterly report on Form
         10-QSB for the period ended March 31, 2004.

         In the opinion of the Company's management, all adjustments (consisting
         of normal recurring accruals) necessary to present fairly the Company's
         financial position as of June 30, 2004, the results of operations for
         the three and six months ended June 30, 2004 and 2003, and the cash
         flows for the six months ended June 30, 2004 and 2003, have been
         included.


                                       6
<PAGE>


               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

     Principles of Consolidation

         The consolidated financial statements include the accounts of Magnitude
         Information Systems, Inc. and its subsidiary Magnitude, Inc. All
         significant inter-company balances and transactions have been
         eliminated.

     Inventories

         Inventory consists of finished goods that are stated at the lower of
         cost (determined by the first-in, first out method) or market.

     Depreciation and Amortization

         Property 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 3-10 years. Maintenance and repairs are charged to operations
         as incurred. Software assets are capitalized at the fair value of stock
         exchanged/granted upon acquisition and are amortized on the
         straight-line method on a product-by-product basis over the estimated
         economic life of the products which has been determined to be 10 years.

     Securities Issued for Services

         The Company accounts for stock, stock options and stock warrants issued
         for services and compensation by employees under the intrinsic 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, 1996, the Company
         adopted Statement of Financial Accounting Standard (SFAS) No. 123,
         "Accounting for Stock-based Compensation". The statement generally
         suggests, but does not require, employee stock-based compensation
         transactions to be accounted for based on the fair value of the
         services rendered or the fair value of the equity instruments issued,
         whichever is more reliably measurable. As permitted by the statement,
         the Company has elected to continue to follow the requirements of
         Accounting Principles Board Opinion No. 25, "Accounting for Stock
         Issued to Employees' for employees under the intrinsic value method.
         The adoption of SFAS No. 123 does not have a material impact on the
         financial statements.

     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-reporting 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, 2003.


                                       7
<PAGE>


               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004

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 97-2. Revenue is
         recognized at the time of licensing provided that the resulting
         receivable position is deemed probable of collection and is fixed or
         determinable. Revenue from software maintenance contracts is recognized
         ratably as earned. Where 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.

     Use of Estimates

         The preparation of financial statements in conformity with generally
         accepted accounting 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

     The ability of the Company to continue its operations is dependent on
     increasing sales and obtaining additional capital and financing. In their
     report for the fiscal year ended December 31, 2003, our auditors had
     expressed an opinion that, as a result of the losses incurred, there was
     substantial doubt regarding our ability to continue as a going concern. The
     accompanying financial statements do not include any adjustments that might
     be necessary if the Company were unable to continue as a going concern.
     During the last two years and the first two quarters in 2004 the Company
     has relied on the private placement of its common and preferred stock to
     fund its operations. Management's plans are to continue seeking additional
     working capital through equity and debt placements with private and
     institutional investors.


                                       8
<PAGE>


               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004

CONCENTRATIONS OF BUSINESS AND CREDIT RISK

     The Company maintains cash balances in a financial institution 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 U.S. and overseas. 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.

PREPAID EXPENSES

     The major positions in Prepaid Expenses at the end of the quarter included
     $50,000 representing the value of the unamortized portion of part of the
     Company's chief executive officer's base salary for the remainder of the
     current year which was prepaid in January 2004 in the form of convertible
     preferred stock and warrants, in lieu of cash (see "Related Party
     Transactions"). Also included were approximately $85,000 representing the
     value of restricted stock and options issued to certain consultants for
     services to be rendered in the near future, and approximately $41,000
     prepaid rent and insurance costs.

PROPERTY AND EQUIPMENT

     Property and equipment consist of the following at June 30, 2004:

              Equipment                                                 $ 81,157
              Furniture and fixtures                                      72,231
                                                                        --------
                                                                         153,388

              Less accumulated depreciation                              139,954
                                                                        --------
                                        Total                           $ 13,434
                                                                        ========

Depreciation expense charged to operations was $5,021 in the first six months of
2004 and $15,497 in the first six months of 2003.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following at June 30,
2004:

              Accounts payable                                      $    183,328

              Accrued interest                                            55,572

              Accrued commissions                                         12,678

              Accrued salaries, bonuses, vacations                        49,334

              Accrued professional fees                                   50,563

              Miscellaneous accruals                                      11,470
                                                                    ------------
                                    Total                           $    362,945
                                                                    ============


                                        9
<PAGE>


               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004

DEFERRED REVENUES

      Deferred revenues at June 30, 2004, consist of prepaid software
      maintenance and support charges which are amortized ratably over the
      remaining duration of the underlying maintenance agreements.

LOANS AND NOTES PAYABLE

      At June 30, 2004, Magnitude, Inc. and the Company had borrowings under
      short term loan agreements with the following terms and conditions:

            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 June 30, 2004 and
            no demand for payment has been made.                    $  75,000

            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 or convertible
            preferred shares. The total amount of
            non-converted notes outstanding at June 30, 2004
            is $25,000. Attempts to locate the holder of
            this note, to settle this liability, have been
            unsuccessful.                                              25,000
                                                                    ---------
            Total                                                   $ 100,000
                                                                    =========


                                       10
<PAGE>

LONG TERM DEBT

           Long-term debt as of June 30, 2004, is comprised
           of the following:
            Pursuant to the February 2, 1998, Agreement and
            Plan of Merger with Rolina Corporation, the
            Company had issued 155,556 shares (the "Shares")
            of its common stock to the principal of Rolina
            Corporation who currently serves as the Company's
            Chief Executive Officer and Board Chairman, and
            had issued a Put Option for such Shares at a
            price of $2.41 per share in accordance with the
            provisions contained therein, with notice for
            exercise eligible to be given at any time after
            February 1, 2000, and before 5:00 p.m. on the
            90th day thereafter. This liability was converted
            into a Company obligation for $274,890 maturing
            March 31, 2002 and a demand loan for $100,000
            both carrying interest at the rate of 7% per year,
            subsequently increased to 10%, payable monthly.
            The demand portion of this note was repaid in
            April 2002 and the due date for $274,890 of the
            remaining balance was extended to July 1, 2003.
            During the first quarter of 2004, $175,000 was
            repaid and the maturity of the unpaid balance
            was changed to January 1, 2005. The obligation
            includes an option to the holder for conversion
            of the outstanding principal into shares of the
            Company's convertible preferred stock and
            warrants at the rate of $0.06 per common share
            equivalent.                                             $     99,890

            Discounted present value of a non-interest
            bearing $70,000 settlement with a former
            investor of Magnitude, Inc. to be paid in
            monthly payments commencing July 1, 1997. The
            imputed interest rate used to discount the note
            is 8% per annum. This obligation is in default.               33,529
                                                                    ------------
                Total                                                    133,419
                Less current maturities                                  133,419
                                                                    ------------
                Long-term debt, net of current maturities           $          0
                                                                    ============


  INCOME TAXES

      At December 31, 2003, the Company had net operating loss carry-forwards
      approximating $22,043,000 for federal income tax purposes which expire
      between the years 2007 and 2023 and are subject to certain annual
      limitations. At December 31, 2003, the Company has available approximately
      $4,905,000 of net operating losses to carry-forward and which may be used
      to reduce future state taxable income which expire December 31, 2010.

      The Company's total deferred tax asset and valuation allowance at December
      31, 2003 are as follows:

                Total deferred tax asset, non-current               $ 7,274,000
                Less valuation allowance                             (7,274,000)
                                                                    -----------
                Net deferred tax asset                              $        --
                                                                    ===========

COMMITMENTS AND CONTINGENCIES

   Lease Agreement
      On March 15, 2000, the Company entered into a lease agreement for office
      space which is utilized for the Company's principal offices. Such lease
      commenced April 15, 2000 and expires on March 31, 2005 and requires
      monthly payments of $6,500 from April 15, 2000 through March 31, 2002; of
      $6,695 thereafter through March 31, 2003; of $6,896 thereafter through
      March 31, 2004; and of $7,103 thereafter through March 31, 2005. In August
      2002 the Company rented additional office space at this location
      commencing September 1, 2002. The add-on rental requires monthly payments
      of $1,955 throughout the remainder of the original lease term.


                                       11
<PAGE>


               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004

COMMITMENTS AND CONTINGENCIES, continued


      Under the lease agreement, the Company is required to make future minimum
      lease payments as follows in addition to a pro-rata share of certain
      operating expenses:

          Year Ending December 31,
          ------------------------
                  2005                                              $     21,309
                                                                    ============

  Employment Agreements

      The Company has entered into employment agreements with certain key
      personnel which provide for a base salary, yearly bonuses in common stock
      and/or options of the Company and other benefits. Termination of the
      agreements may be made by either party with advance notice.

RELATED PARTY TRANSACTIONS

      In January 2004, the Company and its President and Chief Executive Officer
      agreed to convert most of his base salary for the remainder of the year
      2004 into 16,667 shares of convertible preferred stock, convertible into
      1,666,667 restricted common shares, and 833,333 warrants, exercisable
      during three years at the price of $0.15 per share, in lieu of $100,000
      cash. The Company also repaid $239,088 notes payable due to this officer.

      During the first quarter in 2004, an outside director of the Company was
      awarded a stock grant for 150,000 restricted common shares, for services
      rendered. The same director exercised an option for 250,000 restricted
      common shares at the price of $0.01 per share which option was acquired by
      him in a private transaction with an unrelated party.

RESTATEMENT OF RESULTS

      Under the provisions of EITF 00-19, the Company determined that certain
      warrants and options that were in excess of authorized shares for the
      period from December 2003 through July 2004 required reclassification as
      liabilities for the period that these instruments could not be physically
      settled. Such liabilities reverted to equity on July 10, 2004 when the
      Company amended its certificate of incorporation increasing its authorized
      common shares, as approved by the Company's shareholders.

      The reclassifications of the approximate 6,500,000 and 17,800,000 warrants
      and options that exceeded the authorized share amount during the three and
      six months ended June 30, 2004, respectively, were initially recorded as
      adjustments to stockholders' equity of $514,655 and $1,163,372,
      respectively, for the change in fair value of the contracts for the period
      such instruments were classified as equity, as applicable. The contracts
      were subsequently marked to fair value through the date of the approved
      increase in authorized shares, resulting in decreases in the Net Loss for
      the three and six months ended June 30, 2004 of $465,996 and $174,041,
      respectively. At June 30, 2004, current liabilities increased by $989,331,
      accompanied by an increase in the amount of Additional Paid-in Capital of
      $1,163,372.

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<PAGE>


Item 2.
                     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

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, 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.


Results of Operations:

Our efforts to close some of the larger sales contracts for a company-wide
deployment of our software products at several large potential clients which we
have been working on for some time now, have not met with success as of the date
of this report. We are continuing these efforts and are still optimistic about
ultimate success, however, we cannot predict when this might occur. We also
continued with a program of co-marketing the Company's products together with
selected partners in the insurance and risk management industry.

The quarter ended June 30, 2004 showed revenues of $20,294, compared to $33,107
achieved in the second quarter of 2003. Revenues for the six months ended June
30, 2004, totaled $64,874, close to the $68,559 recorded in 2003 for the same
period.

Gross profits for the quarter amounted to negative $18,772, as a result of a
fixed charge for amortization of certain proprietary software assets. Such
software assets underlie the Company's products and are being amortized on a
straight line over 10 years, resulting in a level charge of approximately
$13,000 per month to cost-of-goods-sold. Our expense and cost structure was
essentially unchanged from prior periods, and, after deducting selling - and
general and administrative expenses of $527,325 which decreased by 13% over the
$607,875 recorded in 2003, the Company realized an operating loss of $546,097,
compared to an operating loss of $613,748 in 2003. Non-operating expenses
consisted of $3,407 net interest expense and a charge of $14,489 for a valuation
allowance on certain inventories, and a profit of $465,996 attributable to the
reclassification of certain options and warrants (see note "Company Policy on
Partial Reclassification of Certain Securities under EITF 00-19. The period
result was a net loss of $97,997, with a total loss for the first six months of
$1,092,465, compared to losses of $638,360 and $ 1,322,776 respectively, for the
same periods in 2003.

After accounting for dividend accruals on outstanding preferred stock which
totaled $56,873, and an accounting charge to capital for amortization of
discount for warrants issued in connection with the placement of certain
convertible stock which amounted to $779,026, the net loss for the quarter
applicable to common shareholders was $933,896 or $0.01 per share, compared to a
loss of $667,177 or $0.01 per share for the same quarter in the previous year.


                                       13
<PAGE>


Liquidity and Capital Resources

The cash reserves that were built up during the first quarter, augmented by
limited subsequent new equity placements, were sufficient to finance the
Company's operations during the second quarter. Such new equity placement
transactions resulted in the receipt of approximately $280,000 cash. The
issuances of new common and convertible preferred stock during the first six
months of the year, and anticipated issuance of further shares thereafter
necessitated an increase in the authorized number of common shares, for which
the Company obtained shareholder approval in June (see "Submission of Matters to
a Vote of Securities' Holders").

At June 30, 2004, the deficit in working capital amounted to $1,861,265 of which
$989,331 was attributable to reclassifications of certain options and warrants,
compared to $1,559,854 at March 31, 2004. The cash flow from operations during
the first six months totaled approximately negative $966,000 and was financed by
new equity which was obtained through the placement of common and convertible
preferred stock with accredited private investors. Details of such transactions
can be found in the "Changes in Securities" section in this report and in the
Company's report on Form 10-QSB for the period ended March 31, 2004. In February
2004, the Company had filed a new registration statement on Form SB-2 and an
amendment to a previously filed registration statement on Form SB-2, both of
which covered common shares directly issued as well as common shares underlying
the previously issued convertible preferred stock and warrants, in connection
with these and prior financing transactions. These registrations were declared
effective by the Securities and Exchange Commission as of June 30, 2004.

At the time of this submission, the Company had no bank debt. At June 30, 2004
our short-term liabilities, aside from trade payables and accruals and the
position pertaining to reclassified options and warrants, included certain notes
aggregating $233,419 of which $99,890 was owed to the chairman and chief
executive officer of the Company in form of a demand note (see "Long Term
Debt"). Also included are 472,920 in accrued dividends, the majority of which on
outstanding series A, C, and D preferred stock which in view of the absence of
surplus funds management does not plan to liquidate in the immediate future.

Current cash reserves and net cash flow from operations expected during the near
future are inadequate when measured against present and anticipated future
needs. In order to remedy the resulting liquidity constraints and address any
"going-concern" issues, management is continuing discussions with several
financing sources with the goal of obtaining commitments for further investments
in form of debt or equity capital, to be funded during the upcoming quarter.
There can be no assurance, however, that these negotiations will lead to the
desired outcome.


                                       14
<PAGE>


Item 3.    CONTROLS AND PROCEDURES

      (a)   Evaluation of Disclosure Controls and Procedures.

      Prior to the filing date of this Quarterly Report on Form 10-QSB, our
Chief Executive Officer and our Chief Financial Officer evaluated the
effectiveness of our disclosure controls and procedures as defined in Rule
13a-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Based upon that evaluation, the Chief Executive Officer and the Chief
Financial Officer, have concluded that our current disclosure controls and
procedures are adequate and effective to ensure that information required to be
disclosed in the reports we file under the Exchange Act is recorded, processed,
summarized and reported on a timely basis.

      (b)   Changes in Internal Controls.

            There have been no significant changes in our internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of their evaluation by the Chief Executive Officer and the Chief
Financial Officer.


                                       15
<PAGE>


PART  II  -  OTHER INFORMATION

Item 1   LEGAL PROCEEDINGS

      The Company is not a party in any legal proceedings.

Item 2   CHANGES IN SECURITIES

      a) - None

      b) - None

      c) Issuance of unregistered securities

         During the quarter ended June 30, 2004, the Company issued the
         following unregistered securities:

         (i)   2,875,000 shares of common stock, accompanied by warrants for
               the purchase of 2,875,000 common shares at the price of $0.15
               per share, to six accredited foreign investors pursuant to
               private placement subscriptions, issued in reliance upon
               exemptions provided under Section 4(2), Rule 506 of Regulation
               D and Regulation S of the Securities Act, altogether resulting
               in the receipt by the Company of approximately $284,000 in
               cash.

         (ii)  285,000 shares of common stock to a consultant for investor
               relations and general business consulting services.

         (iii) 150,000 shares of common stock in lieu of cash, for rent
               expenses.

         (iv)  500,000 shares of common stock pursuant to the conversion of
               5,000 shares of Series E Senior Convertible Preferred Stock,
               in accordance with the designation for the latter.

      (d) Not applicable


                                       16
<PAGE>


Item 3   DEFAULTS ON SENIOR SECURITIES

      The Company, as of the date of this filing, is in arrears on the payment
      of certain dividends on its Series A, C, and D Senior Convertible
      Preferred Stock. Such arrears total approximately $396,000. These
      dividends have been accrued, however, the Company's management has
      refrained from making payments at this time because of the absence of
      positive equity and/or surplus funds.

Item 4   SUBMISSION OF MATTERS TO A VOTE OF
         SECURITIES' HOLDERS

      On May 21, 2004, we filed a Schedule 14A Information Statement with the
      Securities and Exchange Commission (the "SEC") seeking the written consent
      of our shareholders of record as of the close of business on May 14, 2004,
      to amend our Company's Certificate of Incorporation to increase our
      authorized common shares from 100 million shares to 200 million shares.
      Following SEC clearance, we mailed the Information Statement to
      shareholders on June 14 2004 and we received written consents on July 10,
      2004 approving the amendment. Shareholders representing 56.82% of our
      outstanding voting shares submitted their written consents, with 56.03% of
      our outstanding voting shares casting their written consents in favor of
      the proposal, 0.72% submitted written consents against the proposal and
      0.07% of our outstanding voting securities abstained.

Item 5   OTHER INFORMATION

         -  None

Item 6   EXHIBITS AND REPORTS ON FORM 8-K

      (a)   Exhibits

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

            (3)(ii) - By-laws of the Company, incorporated herein by
            reference to Exhibits of previous filings with the Commission.

            (31.1) - Certification of Steven D. Rudnik, Chief Executive
            Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of
            2002.

            (31.2) - Certification of Joerg H. Klaube, Chief Financial
            Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of
            2002.

            (32.1) - Certification of Steven D. Rudnik, Chief Executive
            Officer, pursuant to Sections 906 of the Sarbanes-Oxley Act of
            2002, 18 U.S.C. Section 1350

            (32.2) - Certification of Joerg H. Klaube, Chief Financial
            Officer, pursuant to Sections 906 of the Sarbanes-Oxley Act of
            2002, 18 U.S.C. Section 1350

      (b)   Reports on Form 8-K:

            On May 6, 2004, the Company filed a report on Form 8-K,
            informing about the conclusion of a marketing and distribution
            agreement with a major European business consulting company.


                                       17
<PAGE>


             On June 21, 2004, the Company filed a report on Form 8-K,
             informing about the conclusion of a marketing and distribution
             agreement with a California-based distributor of ergonomic
             products and provider of related services.


                                       18
<PAGE>


                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment No. 1 to its Form 10-QSB to be signed
on its behalf by the undersigned, thereunto duly authorized.


                                       MAGNITUDE INFORMATION SYSTEMS, INC.


Date:   March 3, 2006                  By: /s/  Steven D. Rudnik
                                           -----------------------------------
                                           Steven D. Rudnik
                                           Chairman and Chief Executive Officer


                                       19