UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549





FORM
10-Q








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




For
Quarter Ended September 30, 2010





OR





o
            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





KIWIBOX.COM,
INC.


Formerly
known as Magnitude Information Systems, Inc.


(Exact
Name of Registrant as Specified in its Charter)





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




330 West 38 St. Suite
      1602 New York, NY 10018
                
                (212) 239-8210(Address
      of Principal Executive Office)  (Zip Code)
                
                (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 xNo o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (Check
one):




Large
      accelerated filer o
            
            Accelerated
      filer o
            
            Non-accelerated
      filer o
            
            Smaller
      reporting company x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.): Yes oNo x





The number of shares of
Registrant’s Common Stock, $0.0001 par value, outstanding as of November 8,
2010, was 498,243,060 shares.


















KIWIBOX.COM,
INC.














INDEX





PageNumberPART
      1 - FINANCIAL INFORMATIONItem
      1 Financial StatementsCondensed
      Balance Sheets-
      September 30, 2010 (unaudited) and December 31, 2009
                    3Condensed
      Statements of Operations-
      Three and nine months ended September 30, 2010 and 2009
      (unaudited)
                    4Condensed
      Statements of Cash Flows-
      Nine months ended September 30, 2010 and 2009 (unaudited)
                    5 -
      6Notes
      to Condensed Financial Statements
                    7 -
      16Item
      2 Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                    17
      – 18Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
                    19Item
      4T.Controls and Procedures
                    19PART
      II - OTHER INFORMATION
                    20 -
      21Item
      1. Legal Proceedings
                    20Item
      1A. Risk Factors
                    20Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                    20Item
      3. Defaults Upon Senior Securities
                    20Item
      4T. Submission of Matters to a Vote of Security Holders
                    20Item
      5. Other information
                    20Item
      6. Exhibits
                    21SIGNATURES
                    22







2




PART
I  - Item 1   Financial Statements





KIWIBOX.COM,
INC.


CONDENSED
BALANCE SHEETS





September
      30,
                                                2010
                                              
                                              
                                              December
      31,
                                                2009(Unaudited)AssetsCurrent
      AssetsCash
                                              
                                              $
                                              20,698
                                              
                                              
                                              $
                                              2,518Accounts
      receivable, net of allowance for doubtful accounts of $0
                                              
                                              
                                              120
                                              
                                              
                                              
                                              2,000Prepaid
      expenses and other current assets
                                              
                                              
                                              52,104
                                              
                                              
                                              
                                              80,523Total
      Current Assets
                                              
                                              
                                              72,922
                                              
                                              
                                              
                                              85,041Property
      and equipment, net of accumulated depreciation of $85,955 and
      $85,841
                                              
                                              
                                              17,873
                                              
                                              
                                              
                                              18,705Website
      development costs, net of accumulated amortization of $17,570 and
      $1,813
                                              
                                              
                                              101,439
                                              
                                              
                                              
                                              19,945Other
      assets
                                              
                                              
                                              12,487
                                              
                                              
                                              
                                              17,724Total
      Assets
                                              
                                              
                                              204,721
                                              
                                              
                                              
                                              141,415Liabilities
      and Stockholders’ Equity (Impairment)Current
      LiabilitiesAccounts
      payable and accrued expenses
                                              
                                              
                                              503,147
                                              
                                              
                                              
                                              535,618Obligations
      to be settled in stock
                                              
                                              
                                              164,678
                                              
                                              
                                              
                                              132,900Dividends
      payable
                                              
                                              
                                              517,786
                                              
                                              
                                              
                                              479,339Convertible
      notes payable – related parties
                                              
                                              
                                              1,894,980
                                              
                                              
                                              
                                              990,000Liability
      for derivative conversion features – related party debt
                                              
                                              
                                              2,142,304
                                              
                                              
                                              
                                              -Loans
      and notes payable - other
                                              
                                              
                                              140,000
                                              
                                              
                                              
                                              140,000Current
      maturities of long-term debt
                                              
                                              
                                              33,529
                                              
                                              
                                              
                                              33,529Total
      Current Liabilities
                                              
                                              
                                              5,396,424
                                              
                                              
                                              
                                              2,311,386Long-term
      Debt
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Total
      Liabilities
                                              
                                              
                                              5,396,424
                                              
                                              
                                              
                                              2,311,386Stockholders’
      Equity (Impairment)Preferred Stock,
      $0.001
      par value, non-voting, 3,000,000 shares
      authorized;85,890
      and 85,890 shares issued and outstanding
                                              
                                              
                                              86
                                              
                                              
                                              
                                              86Common
      Stock, $0.0001 par value, 1,400,000,000 shares authorized;issued
      and outstanding 498,243,060 and 478,168,060 shares
                                              
                                              
                                              49,824
                                              
                                              
                                              
                                              47,817Common
      Stock subscribed
                                              
                                              
                                              -
                                              
                                              
                                              
                                              500Additional
      paid-in capital
                                              
                                              
                                              45,556,868
                                              
                                              
                                              
                                              45,519,375Stock
      subscription receivable
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (125,000
                                              )Accumulated
      (deficit)
                                              
                                              
                                              (50,798,481
                                              )
                                              
                                              
                                              (47,612,749
                                              )Total
      Stockholders’ Equity (Impairment)
                                              
                                              
                                              (5,191,703
                                              )
                                              
                                              
                                              (2,169,971
                                              )Total
      Liabilities and Equity (Impairment)
                                              
                                              $
                                              204,721
                                              
                                              
                                              $
                                              141,415





The
accompanying notes are an integral part of the condensed financial
statements.





3




KIWIBOX.COM,
INC.


CONDENSED
STATEMENTS OF OPERATIONS


(Unaudited)





Three
      Months Ended
                                                                  
                                                                  
                                                                  Nine
      Months EndedSeptember
      30,
                                                                  
                                                                  
                                                                  September
      30,2010
                                                                  
                                                                  
                                                                  2009
                                                                  
                                                                  
                                                                  2010
                                                                  
                                                                  
                                                                  2009Total
      Revenues
                                                                  
                                                                  $
                                                                  417
                                                                  
                                                                  
                                                                  
                                                                  14,928
                                                                  
                                                                  
                                                                  $
                                                                  1,820
                                                                  
                                                                  
                                                                  $
                                                                  53,772Cost
      of Goods Sold
                                                                  
                                                                  
                                                                  1155
                                                                  
                                                                  
                                                                  
                                                                  9,223
                                                                  
                                                                  
                                                                  
                                                                  1,940
                                                                  
                                                                  
                                                                  
                                                                  20,720Gross
      Profit (Loss)
                                                                  
                                                                  
                                                                  (738
                                                                  )
                                                                  
                                                                  
                                                                  5,705
                                                                  
                                                                  
                                                                  
                                                                  (120
                                                                  )
                                                                  
                                                                  
                                                                  33,052Selling
      expenses
                                                                  
                                                                  
                                                                  60,710
                                                                  
                                                                  
                                                                  
                                                                  10,213
                                                                  
                                                                  
                                                                  
                                                                  132,904
                                                                  
                                                                  
                                                                  
                                                                  111,778Stock-based
      compensation (see below)
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  121,929
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  121,929General
      and administrative expenses
                                                                  
                                                                  
                                                                  251,995
                                                                  
                                                                  
                                                                  
                                                                  258,212
                                                                  
                                                                  
                                                                  
                                                                  761,918
                                                                  
                                                                  
                                                                  
                                                                  1,103,988Loss
      from Operations
                                                                  
                                                                  
                                                                  (313,443
                                                                  )
                                                                  
                                                                  
                                                                  (384,649
                                                                  )
                                                                  
                                                                  
                                                                  (894,942
                                                                  )
                                                                  
                                                                  
                                                                  (1,304,643
                                                                  )Other
      Income (Expense)Miscellaneous
      income
                                                                  
                                                                  
                                                                  3,000
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  14,377
                                                                  
                                                                  
                                                                  
                                                                  -Misc.
      non-operating expenses
                                                                  
                                                                  
                                                                  (99
                                                                  )
                                                                  
                                                                  
                                                                  (450
                                                                  )
                                                                  
                                                                  
                                                                  (6,630
                                                                  )
                                                                  
                                                                  
                                                                  (450
                                                                  )Foreign
      currency transaction loss
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  (5,585
                                                                  )
                                                                  
                                                                  
                                                                  -Change
      in fair value –derivative liability
                                                                  
                                                                  
                                                                  (177,271
                                                                  )
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  (177,271
                                                                  )
                                                                  
                                                                  
                                                                  (77,806
                                                                  )Amortization
      of deferred financing cost
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  (4,000
                                                                  )Gain
      on extinguishment of debt
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  32,416
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  32,416Gain
      on disposition of assets
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  2,285
                                                                  
                                                                  
                                                                  
                                                                  -Interest
      income
                                                                  
                                                                  
                                                                  42
                                                                  
                                                                  
                                                                  
                                                                  5
                                                                  
                                                                  
                                                                  
                                                                  42
                                                                  
                                                                  
                                                                  
                                                                  5Interest
      expense-derivative conversion features
                                                                  
                                                                  
                                                                  (1,965,033
                                                                  )
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  (1,965,033
                                                                  )
                                                                  
                                                                  
                                                                  -Interest
      expense-debt
                                                                  
                                                                  
                                                                  (45,633
                                                                  )
                                                                  
                                                                  
                                                                  (32,291
                                                                  )
                                                                  
                                                                  
                                                                  (114,527
                                                                  )
                                                                  
                                                                  
                                                                  (668,101
                                                                  )Total
      Other Income (Expense)
                                                                  
                                                                  
                                                                  (2,184,994
                                                                  )
                                                                  
                                                                  
                                                                  (32,741
                                                                  )
                                                                  
                                                                  
                                                                  (2,252,342
                                                                  )
                                                                  
                                                                  
                                                                  (717,936
                                                                  )Loss
      from Operations before Provision for Income Taxes
                                                                  
                                                                  
                                                                  (2,498,437
                                                                  )
                                                                  
                                                                  
                                                                  (417,390
                                                                  )
                                                                  
                                                                  
                                                                  (3,147,284
                                                                  )
                                                                  
                                                                  
                                                                  (2,022,579
                                                                  )Provision
      for income taxes
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -Net
      Loss
                                                                  
                                                                  $
                                                                  (2,498,437
                                                                  )
                                                                  
                                                                  $
                                                                  (417,390
                                                                  )
                                                                  
                                                                  $
                                                                  (3,147,284
                                                                  )
                                                                  
                                                                  $
                                                                  (2,022,579
                                                                  )Dividends
      on Preferred Stock
                                                                  
                                                                  
                                                                  (12,816
                                                                  )
                                                                  
                                                                  
                                                                  (12,816
                                                                  )
                                                                  
                                                                  
                                                                  (38,447
                                                                  )
                                                                  
                                                                  
                                                                  (38,447
                                                                  )Net
      Loss applicable toCommon Shareholders
                                                                  
                                                                  $
                                                                  (2,511,253
                                                                  )
                                                                  
                                                                  $
                                                                  (430,205
                                                                  )
                                                                  
                                                                  $
                                                                  (3,185,731
                                                                  )
                                                                  
                                                                  $
                                                                  (2,061,026
                                                                  )Loss
      per Common Share
                                                                  
                                                                  $
                                                                  (0.005
                                                                  )
                                                                  
                                                                  $
                                                                  (
      0.001
                                                                  )
                                                                  
                                                                  $
                                                                  (0.006
                                                                  )
                                                                  
                                                                  $
                                                                  (0.005
                                                                  )Weighted
      Average Number of Common Shares Outstanding
                                                                  
                                                                  
                                                                  497,907,895
                                                                  
                                                                  
                                                                  
                                                                  448,633,886
                                                                  
                                                                  
                                                                  
                                                                  495,665,674
                                                                  
                                                                  
                                                                  
                                                                  449,301,580





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






The
accompanying notes are an integral part of the condensed financial
statements.




4




KIWIBOX.COM,
INC.


CONDENSED
STATEMENTS OF CASH FLOWS


(Unaudited)








Nine
      Months EndedSeptember
      30,2010
                                          
                                          
                                          2009Cash
      Flows from Operating ActivitiesNet
      Loss
                                          
                                          $
                                          (3,147,284
                                          )
                                          
                                          $
                                          (2,022,579
                                          )Adjustments
      to Reconcile Net Loss to Net Cash Used by OperationsDepreciation
      and amortization
                                          
                                          
                                          24,459
                                          
                                          
                                          
                                          45,885Change
      in fair value – derivative liabilities
                                          
                                          
                                          177,271
                                          
                                          
                                          
                                          77,806Loss
      (gain) on disposal of assets
                                          
                                          
                                          (2,285
                                          )
                                          
                                          
                                          450Intrinsic
      value of beneficial conversion rights
                                          
                                          
                                          1,965,033
                                          
                                          
                                          
                                          600,000Securities
      issued for expenses
                                          
                                          
                                          -
                                          
                                          
                                          
                                          121,929Interest
      accretion on long term debt
                                          
                                          
                                          -
                                          
                                          
                                          
                                          1,385Decreases
      (Increases) in AssetsAccounts
      receivable
                                          
                                          
                                          1,880
                                          
                                          
                                          
                                          2,008Prepaid
      expenses
                                          
                                          
                                          28,419
                                          
                                          
                                          
                                          9,300Increases
      (decreases) in LiabilitiesObligations
      to be settled in stock
                                          
                                          
                                          70,777
                                          
                                          
                                          
                                          31,847Accounts
      payable and accrued expenses
                                          
                                          
                                          132,509
                                          
                                          
                                          
                                          48,250Net
      Cash Used by Operating Activities
                                          
                                          
                                          (749,221
                                          )
                                          
                                          
                                          (1,083,719
                                          )Cash
      Flows from Investing ActivitiesOther
      assets
                                          
                                          
                                          5,237
                                          
                                          
                                          
                                          (14,500
                                          )Proceeds
      from sale of assets
                                          
                                          
                                          4,520
                                          
                                          
                                          
                                          -Cash
      outlay - website development costs
                                          
                                          
                                          (97,251
                                          )
                                          
                                          
                                          -Purchases
      of property and equipment
                                          
                                          
                                          (10,105
                                          )
                                          
                                          
                                          7,000Net
      Cash Used by Investing Activities
                                          
                                          
                                          (97,599
                                          )
                                          
                                          
                                          (21,500
                                          )Cash
      Flows from Financing ActivitiesProceeds
      from loans and notes
                                          
                                          
                                          740,000
                                          
                                          
                                          
                                          1,190,000Issuance
      of common stock
                                          
                                          
                                          125,000
                                          
                                          
                                          
                                          -Net
      Cash Provided by Financing Activities
                                          
                                          
                                          865,000
                                          
                                          
                                          
                                          1,190,000Net
      Increase (Decrease) in Cash
                                          
                                          
                                          18,180
                                          
                                          
                                          
                                          84,781Cash
      at Beginning of Period
                                          
                                          
                                          2,518
                                          
                                          
                                          
                                          5,000Cash
      at End of Period
                                          
                                          $
                                          20,698
                                          
                                          
                                          $
                                          89,781





The
accompanying notes are an integral part of the consolidated financial
statements.




5






KIWIBOX.COM,
INC.


CONDENSED
STATEMENTS OF CASH FLOWS


(Unaudited)







NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Nine
      Months Ended September 30, 2010Cashless
      exercise of warrants
                              
                              $
                              1,312Settlement
      of obligations with common stock and common stock options
                              
                              $
                              39,000Reclassification
      of accrued interest to debt principal
                              
                              $
                              164,980Nine
      Months Ended September 30, 2009Reclassification
      of derivative liabilities to Additional Paid-in capital
                              
                              $
                              3,408,618Forgiveness
      of debt by related party
                              
                              $
                              213,570Settlement
      of obligations with common stock and common stock options
                              
                              $
                              80,000














6




KIWIBOX.COM,
INC.


NOTES TO
CONDENSED FINANCIAL STATEMENTS


September
30, 2010





1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Nature of Organization





Kiwibox.Com,
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. On December 31,
2009, the Company changed its name to Kiwibox.com, Inc.





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





The
Company, Magnitude, Inc. and Kiwibox Media Inc. were separate legal entities
until December 31, 2009, with Kiwibox Media, Inc. being a wholly owned
subsidiary. On December 31, 2009, the two subsidiaries Magnitude, Inc. and
Kiwibox Media, Inc.  merged into the Company.





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.





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-Q 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-K for the year
ended December 31, 2009.





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 September 30, 2010, the results of operations for the three and nine
months ended September 30, 2010 and 2009, and the cash flows for the nine months
ended September 30, 2010 and 2009, have been included.





Principles
of Consolidation





The
consolidated financial statements for the period ended December 31, 2009 include
the accounts of Kiwibox.com, Inc. (f/k/a Magnitude Information Systems, Inc.)
and its subsidiaries Magnitude, Inc. and Kiwibox Media, Inc. All significant
inter-company balances and transactions have been eliminated.








7




KIWIBOX.COM,
INC.


NOTES TO
CONDENSED FINANCIAL STATEMENTS


September
30, 2010





SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, Continued





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, or lease term for leasehold improvements, if for a shorter
period.  Maintenance and repairs are charged to operations as
incurred.





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.





Fair
Value Measurements




The
Company adopted the provisions of ASC 820, Fair Value Measurements and
Disclosures, which is effective for fiscal years beginning after November
15, 2007, and interim periods within those fiscal years. UnderASC 820, a
framework was established for
measuring fair value in generally accepted accounting principles (GAAP), and
expands disclosures about fair value measurements. Since the number of shares
issuable under the Company’s Series G convertible preferred stock
was indeterminable during
the year ended December 31, 2008, the Company had measured the fair value of
warrants and options outstanding at December 31, 2008, which was determined to
be $3,330,812, measured using significant unobservable inputs (Level 3) under aBlack-Scholes valuation method. On
February 19, 2009, all outstanding shares of the Series G stock automatically
converted into 17,857,142 common shares, thereby removing the indeterminable
factor and giving rise to a reclassification of the entire positionof $3,408,618 into additional paid-in
capital, which included a further $77,806 loss incurred during the first quarter
2009, reported in the Statement of Operations under Other Income (Expense).The Company accounted for certain convertible debentures modified in the
three months ended September 30, 2010 as derivative liabilities required to be
bifurcated form the host contract in accordance with ASC 815-40, Contracts in Entity’s Own
Equity, as the conversion feature embedded in the convertible debentures
could result in the note principal and related accrued interest being converted
to a variable number of the Company’s common shares (see Note 12).




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 has determined the fair
market value of the warrants/options issued under the Black-Scholes Pricing
Model. The Company has adopted the provisions of ASC 718, “Compensation – Stock
Compensation”, which establishes accounting for equity instruments exchanged for
employee services. Under the provisions of ASC 718, 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).





Reclassification
of certain securities under ASC 815-15





Pursuant
to ASC 815-15, “Contracts in Entity’s own Equity”, 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. During the first quarter of 2009, we
reclassified a position of $3,408,618 from liabilities for derivative securities
to additional paid-in capital after the indeterminatefactor in connection with the
conversion clause of certain convertible preferred shares was
removed.







8





KIWIBOX.COM,
INC.


NOTES TO
CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010





SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, Continued





Capitalization
of Software /Website development costs




The
Company capitalizes outside-contracted development work in accordance with the
guidelines published under ASC 350-50, “Website Development
Costs”.  Under ASC 350-50, costs incurred during the planning stage
areexpensed,
whilecosts relating to software used to operate a web siteor for developing initial graphics
should beaccounted for underASC 350-50,Accounting for the
Costs of ComputerSoftware Developed
or Obtained forInternal
Use, unless a plan exists
or is being developedto
market the softwareexternally. Under ASC
350-50,internal and external costs incurred to
develop internal-use computer software during the application developmentstage should be
capitalized. Costs to develop or obtain software that allows for access or conversion
of old data bynew systems
should also be capitalized, excluding training costs.





Fees incurred for web site hosting,
which involve the payment of a specified, periodic fee to an Internet service
provider in return for
hosting the web site on its server(s) connected to the Internet, are expensed
over the period of benefit, and included in cost of sales in the accompanying
financial statements.A total of $97,251 and $21,758 was capitalized for
web-site development work during the nine months ended September 30, 2010 and
the year ended December 31, 2009, respectively. During 2009, a new software
platform was placed into service. The old capitalized cost of $64,650, including
the remaining unamortized balance from 2008 totaling $30,771 was written off as
they were deemed to be impaired.




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.





Net Loss
Per Share





Net loss
per share, in accordance with the provisions of ASC 260, “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.
Such common stock equivalents totaled 187,454,852 common shares at September 30,
2010, comprised of 151,731,315 shares issuable upon exercise of stock purchase
warrants, 8,650,000 shares issuable upon exercise of stock options, 729,537
shares exercisable upon conversion of convertible preferred shares, and
26,344,000 shares potentially issuable upon conversion of convertible debt. Such
debt and the related accrued interest, presently convertible at the option of
two holders at a price of $0.01 per share, totals $1,889,423 which would yield
188,942,300, respectively if fully exercised, however, the respective notes, all
of which were issued to these two investors, carry a stipulation whereby the
number of all shares issued pursuant to a conversion, may in the aggregate not
exceed a number that would increase the total share holdings beneficially owned
by such investor to a level above 9.99%. At the end of the quarter, this clause
limits any conversion to the aforementioned number of shares. All of the
aforementioned conversions or exercises, as the case may be, are at the option
of the holders.








9




KIWIBOX.COM,
INC.


NOTES TO
CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010





SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES, Continued




Revenue
Recognition




The
Company’s revenue is derived from advertising on the Kiwibox.Com 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.





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.






2. GOING
CONCERN





The
ability of the Company to continue its operations is dependent on increasing
sales and obtaining additional capital and financing. Our revenues during the
foreseeable future are insufficient to finance our business and we are entirely
dependent on the willingness of existing investors to continue supporting the
Company with working capital loans and equity investments, and our ability to
find new investors should the financial support from existing investors prove to
be insufficient. If we were unable to obtain a steady flow of new debt or
equity-based working capital we would be forced to cease
operations.  In their report for the fiscal year ended December 31,
2009, 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. Management’s plans are to continue seeking equity and debt
capital until cash flow from operations cover funding needs.






3.
CONCENTRATIONS OF BUSINESS AND CREDIT RISK





The
Company maintains cash balances in a financial institution which is insured by
the Federal Deposit Insurance Corporation up to $250,000.  Balances in
these accounts may, at times, exceed the federally insured limits. At September
30, 2010, cash balances in bank accounts did not exceed this limit. 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.






4.
PREPAID EXPENSES




Prepaid
Expenses at the end of the quarter consisted of $21,501 in prepaid business
insurance costs, $29,455 in prepayments on promotional supplies inventory, and
$1,148 made up of several smaller positions.






5.
PROPERTY AND EQUIPMENT




Property
      and equipment consist of the following at
                          
                          September 30,
                            2010
                          
                          
                          December 31,
                            2009Furniture
                          
                          $
                          14,322
                          
                          
                          $
                          6,646Leasehold
      Improvements
                          
                          
                          24,130
                          
                          
                          
                          24,131Equipment
                          
                          
                          65,376
                          
                          
                          
                          73,770103,828
                          
                          
                          
                          104,546Less
      accumulated depreciation
                          
                          
                          85,955
                          
                          
                          
                          85,841Total
                          
                          $
                          17,873
                          
                          
                          $
                          18,705





Depreciation
expense charged to operations was $8,702 and $25,723 in the first nine months of
2010 and  2009, respectively.




10




KIWIBOX.COM,
INC.


NOTES TO
CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010





6.  INTANGIBLE
ASSETS





Intangible
assets consisted of software for website development costs as
follows:





September 30,
                          2010
                        
                        
                        December 31,
                          2009Website
      development costs
                        
                        $
                        119,009
                        
                        
                        $
                        21,758Less
      accumulated amortization
                        
                        
                        17,570
                        
                        
                        
                        1,813Total
                        
                        $
                        101,439
                        
                        
                        $
                        19,945





During
2009, a new software platform developed by a third party was adapted for use by
the Company and placed into service. The developmental costs associated with
this adaptation, amounting to $21,758 were capitalized and the remaining
unamortized balance of the 2008 capitalized costs, totaling $30,771 were written
off as they were deemed to be impaired. Amortization expense for the nine months
ending Sept 30, 2010 and 2009 was $15,757 and $16,163, respectively. Additional
amortization over the next 5 years will be as follows:





Amortization
      expenseDecember
      31, 2010
                    
                    $
                    11,276December
      31, 2011
                    
                    
                    41,339December
      31, 2012
                    
                    
                    35,631December
      31, 2013
                    
                    
                    13,193December
      31, 2014
                    
                    
                    -





7.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES





Accounts
payable and accrued expenses consisted of the following at:





September 30,
                      2010
                    
                    
                    December 31,
                      2009Accounts
      payable
                    
                    $
                    247,363
                    
                    
                    $
                    208,792Accrued
      interest
                    
                    
                    116,152
                    
                    
                    
                    170,860Accrued
      payroll, payroll taxes and commissions
                    
                    
                    9,188
                    
                    
                    
                    15,331Accrued
      professional fees
                    
                    
                    130,444
                    
                    
                    
                    116,900Miscellaneous
      accruals
                    
                    
                    -
                    
                    
                    
                    23,735Total
                    
                    $
                    503,147
                    
                    
                    $
                    535,618





8.  OBLIGATIONS
TO BE SETTLED IN STOCK





Obligations
to be settled in stock consisted of the following at





September
      30,
                                        
                                        
                                        December
      31,2010
                                        
                                        
                                        2009Obligation
      for warrants granted for compensation
                                        
                                        $
                                        50,000
                                        
                                        
                                        $
                                        20,000900,000
      common shares issuable to a consultant who was a director of the company,
      for services rendered.
                                        
                                        
                                        36,000
                                        
                                        
                                        
                                        36,000200,000
      (2010) and 1,250,000 (2009) common shares, and 2,900,000 (2010) and
      2,200,000 (2009) stock options issuable to two officers of the Company
      pursuant to their respective employment Agreements
                                        
                                        
                                        60,858
                                        
                                        
                                        
                                        67,9901,800,000
      (2010) and 900,000 (2009) stock options issuable to one director who also
      serves as the Company’s general counsel
                                        
                                        
                                        17,820
                                        
                                        
                                        
                                        8,910$
                                        164,678
                                        
                                        
                                        $
                                        132,900






11


KIWIBOX.COM,
INC.
 NOTES
TO CONDENSED FINANCIALSTATEMENTS
 SEPTEMBER
30, 2010





9. LOANS
PAYABLE





The
Company (Formerly Magnitude, Inc.) had borrowings under short term loan
agreements with the following terms and conditions at September 30, 2010 and
December 31, 2009:





On
      December 4, 1996, The company (Formerly 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 as of
      September 30, 2005 and no demand for payment has been
made.
                    
                    $
                    75,000Total
                    
                    $
                    75,000






10. NOTES
PAYABLE




September
      30,
                                    
                                    
                                    December
      31,2010
                                    
                                    
                                    2009Balance
      of non-converted notes outstanding.  Attempts to locate the
      holder of this note, to settle this liability, have been
      unsuccessful.
                                    
                                    $
                                    25,000
                                    
                                    
                                    $
                                    25,000In
      January 2008 a shareholder loaned the Company $40,000 pursuant to which
      the Company issued a demand note bearing interest at the rate of 5% per
      year.
                                    
                                    
                                    40,000
                                    
                                    
                                    
                                    40,000From
      September 2008 through September 2010 two shareholders loaned the Company
      funds under the terms of the convertible notes issued, as modified in
      March 2009 and July 2010 (see Note 12).
                                    
                                    
                                    1,844,980
                                    
                                    
                                    
                                    990,000In
      September 2010, a shareholder loaned the Company $50,000 under a demand
      note at 10%.
                                    
                                    
                                    50,000
                                    
                                    
                                    
                                    -Total
                                    
                                    $
                                    1,959,980
                                    
                                    
                                    $
                                    1,055,000








12





KIWIBOX.COM,
INC.


NOTES TO
CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010








11.
LONG-TERM DEBT





Long-term
debt as of September 30, 2010 and December 31, 2009 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
                  
                  $
                  -








12.
DERIVATIVE CONVERSION FEATURES





On July 27, 2010, the Company issued
two Class A Senior Convertible Revolving Promissory Notes (“Class A Notes”), one
to Cambridge Services, Inc., in the principal amount of $683,996, consolidating
the series of loans (and related accrued interest) made to the Company since
June 26, 2009, and one to Discover Advisory Company, in the principal amount of
$1,160,984, consolidating the series of loans (and related accrued interest)
made to the Company since September 19, 2008 and including advances through
September 30, 2010. Each of these promissory notes are due on demand, accrue
interest at the rate of 10%, per annum, are convertible (including accrued
interest) at the option of each lender into Common Stock of the Company at 50%
of the averaged ten closing prices for the Company's Common Stock for the ten
(10) trading days immediately preceding the Conversion Date but in no event less
than $0.001 (the "Conversion Price"). Both promissory notes contain conversion
caps, limiting conversions under these notes to a maximum beneficial ownership
position of Company common stock to 9.99% for each lender. Each of these notes
contains Company covenants, requiring the lenders’ prior written consent in
order for the Company to merge, issue any common or preferred stock or any
convertible debt instruments, declare a stock split or dividends, increase any
compensation to its officers or directors by more than five (5%) during any
calendar year.





The
Company accounted for the conversion features underlying these convertible
debentures modified in the three months ended September 30, 2010 in accordance
with ASC 815-40, Contract in
Entity’s Own Equity, as the conversion feature embedded in the
convertible debentures could result in the note principal and related accrued
interest being converted to a variable number of the Company’s common shares.
The Company determined the value of the derivate conversion features at the
commitment date to be $1,965,033 utilizing a Black-Scholes valuation model. The
fair value of the derivative conversion features was determined to be $2,142,304
at September 30, 2010. The change in fair value of the liability for the
conversion feature resulted in a cost of $177,271 for the three and nine months
ended September 30, 2010, which is included in Other Income (Expense) in the
accompanying financial statements.





On March
31, 2009, certain notes held by shareholders were amended to include an option
for the holder to convert the debt into common stock at $0.01 per
share.  The intrinsic value of the beneficial conversion feature was
valued at $600,000 resulting in a  charge to interest and a credit to
additional paid-in capital in the same amount during the nine months ended
September 30, 2009. The notes were subsequently amended to include the
stipulation that the shares to be issued if the holder elected a conversion,
together with other shares held by the shareholders, may not result in an
ownership  interest exceeding 9.9%.  These notes were also
part of the modification of the conversion terms in the three months ended
September 30, 2010 noted above.




13


KIWIBOX.COM,
INC.


NOTES TO
CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010





13.
COMMITMENTS AND CONTINGENCIES





We
maintain offices for our operations at 330 W. 38th Street, New York, New York
10018, for approximately 900 square feet. This lease expires at the end of 2010
and requires minimum monthly rentals of $2,199 plus tenants’ share of
utility/cam/property tax charges which average approximately $400 per month.
During the 1st quarter
of 2010 the Company successfully negotiated with the landlord to give up a lease
of an office located at the same address consisting of approximately 500 square
feet.





In May
2010 the Company negotiated a lease of an apartment in New York City for the CEO
in order to reduce travel costs. The lease is for 12 months at $2,775 per
month.





Our total
rent expenses were $39,225 and $69,397 during the nine months ended September
30, 2010 and 2009, respectively.





During
the second quarter in 2009 we entered into an agreement with a consultant to
serve as the Company’s Chief Technology Officer. The agreement has a term of
twelve months and may be extended by mutual consent. It provides for
remuneration for services and expenses at the rate of $20,000 and 100,000
restricted shares per month, and a signing bonus of 500,000 restricted shares.
During the first quarter in 2010, the Company issued the 500,000 shares for the
signing bonus and 950,000 shares towards the accrued monthly allowance. In the
third quarter the company issued an additional 500,000 shares towards the
accrued monthly allowance.





During
the third quarter in 2009 we entered into an engagement agreement with a
consultant to assist the Company in the liaison to the Company’s shareholders
and investors, to promote the Company and its website to the public markets, and
to identify potential strategic partners, acquisition opportunities, and joint
venture partners for the Company’s social networking website business. The
agreement is deemed to have commenced on January 1, 2009 and extends through
December 31, 2011, and calls for compensation to the consultant in the form of
2,000,000 five years warrants for the purchase of common shares, exercisable at
$ 0.025 per share with a cashless exercise provision, for every six months
period during the term of the agreement, and the payment in cash of unspecified
amounts, the latter at the sole discretion of the Company.  The
agreement furthermore recognizes that the same consultant had previously
provided similar services to the Company for which he received a one-time
payment in form of 15,000,000 five years warrants, exercisable at $0.0025 per
share. The 15,000,000 warrants were exercised during the three months ended
March 31, 2010 pursuant to a cashless exercise into 13,125,000 shares of common
stock.




14




KIWIBOX.COM,
INC.


NOTES TO
CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010








14.
RELATED PARTY TRANSACTIONS





During
the nine months ended September 30, 2010 and 2009 one outside director of the
Company who also serves as the Company’s general and securities counsel, was
paid an aggregate $45,000 and $65,000, respectively, for each period for legal
services. The director also received 100,000 common stock options per month
during the three and nine months ended September 30, 2010, valued at $2,970 and
$8,910, respectively.





During
the three and nine months ended September 30, 2009 we paid our Chief Executive
Officer $12,000 and $12,000, respectively, for outside consulting services
performed.





During
the three and nine months ended September 30, 2010, we incurred an aggregate
$61,087 and $188,364, respectively, to companies controlled by the Chief
Technology Officer of the Company for website expenses and software development
($61,087 for three months and $180,779 for nine months) and Company promotional
and marketing expenses ($0 for three months and $7,585 for nine months). During
the three and nine months ended September 30, 2009 we incurred an aggregate
$6,138 and $9,141, respectively, to these companies, for server hosting
expenses.





Through
September 30, 2010, the beneficial ownership in the Company’s securities held
respectively, by Tell Capital AG of Switzerland and its principal, Ulrich
Schuerch on a consolidated basis, was approximately 10.4% and approximately 9.9%
for Discovery Advisory Company, located in the Bahamas, and Cambridge Services
Inc. of Switzerland, of the voting stock.  Both Discovery Advisory
Company and Cambridge Services Inc. are major creditors, having advanced
operating capital against issuance by the Company of convertible promissory
notes to during 2009 and 2010. During the three and nine months ended September
30, 2010, Cambridge Services, Inc. advanced an additional $220,000 and $690,000,
respectively. At September 30, 2010, $1,080,984 and $763,996 of such notes were
outstanding and owed to Discovery Advisory Company and Cambridge Services Inc,
respectively. Additionally Ulrich Schuerch advanced the Company $50,000 for
which a note was issued, this is a demand note at a rate of interest of
10%.





15.
FAIR VALUE





Some of the Company’s financial instruments are not measured
at fair value on a recurring basis but are recorded at amounts that
approximate fair value due
to their liquid or short-term nature, such as cash and cash equivalents,
receivables and payables.





Effective July 1 2009, the Company
adopted ASC 820,Fair Value
Measurements and Disclosures. This topic defines fair value for
certain financial and
nonfinancial assets and liabilities that are recorded at fair value, establishes
a framework for measuring fair value, and expands disclosures about fair value
measurements. This guidance supersedes all other accounting pronouncements that
require or permit fair value measurements.
The Company accounted for theconversion features underlying certainconvertible debentures in
accordance with ASC815-40,Contracts in
Entity’s Own
Equity, as the conversion
feature embedded in the convertible debentures could result in the note principal
and related accrued interest being converted to a variable number of the
Company’s common shares.




15




KIWIBOX.COM,
INC.


NOTES TO
CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010





15. FAIR VALUE (continued)





Effective July 1
2009, the Company adopted ASC 820-10-55-23A,Scope Application to
Certain Non-Financial Assets and Certain Non-Financial Liabilities, delaying application for non-financial
assets and non-financial liabilities as permitted. ASC 820 establishes a framework for measuring fair
value, and expands disclosures about fair value measurements. ASC 820
establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value into three levels as
follows:




Level 1—quoted prices (unadjusted) in
active markets for identical assets or liabilities that the Company has
theability to access asof the measurement date. Financial
assets and liabilities utilizing Level 1 inputs include
activeexchange-traded securities and exchange-based
derivatives.




Level 2—inputs other than quoted prices
included within Level 1 that are directly observable for the asset orliability or indirectly
observable through corroboration with observable market data.
Financial assets and
liabilitiesutilizing Level 2 inputs include fixed
income securities, non-exchange-based derivatives, mutual funds, and fair-valuehedges.




Level 3—unobservable inputs for the asset or
liability only used when there is little, if any, market activity for theasset or liability at the
measurement date. Financial assets and liabilities utilizing Level 3 inputs
include infrequently-traded, non-exchange-based derivatives and
commingled investment funds, and are measured using present valuepricing
models.




The following table reconciles, for the
nine month period ended September 30,2010, the beginning and
endingbalances for financial instruments that
are recognized at fair value in the consolidated financial
statements:


Conversion Liability atJanuary 1,
      2010
                      
                      
                      -Value of beneficial conversion features
      of new debentures
                      
                      
                      1,965,033Change in valueof beneficial conversionfeatures during
      period
                      
                      
                      177,271Reductions in fair value due to
      principal conversions
                      
                      
                      -Conversion Liability atSeptember 30,
      2010
                      
                      $
                      2,142,304





The fair value of the conversion
features are calculated at the time of issuance and the Company records a
conversion liability for the calculated value. The Company recognizes
interest expense for therecognition of theconversion liability.







16





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





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 Kiwibox.Com, Inc., contained herein and in
the Company’s annual report for the year ended December 31, 2009 as filed on
Form 10-K. 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.








Description of
Business




Based on
the market the Company has modified its business plan to optimize New York City
membership. The result of this change is that New York City membership is up 45
percent in the third quarter in relation to the second quarter of 2010. In
continuing the efforts to increase the membership and page impressions not only
through organic growth, the company has decided to  pursue that growth
by acquisition. Therefore the Company has started investigating the social
network market for a complimentary target.





The
Company is attaching great importance to its technology development to follow up
the top social network leaders and give their users an alternative opportunity.
On the marketing side the company is still continuing its efforts in street
promotion and event organizing.





The
operating expenses, not including stock-based compensation remain at a level of
approximately $65,000 to $80,000 per month. We are currently receiving funding
at these levels from existing investors (see sections “Loans and Notes
Payable”).








Results of Operations for
the Three and Nine Months Ended September 30, 2010 Compared to the
Three  and Nine Months Ended September 30, 2009





For the
three and nine months ended September 30, 2010, total revenues amounted to $417
and $1,820, respectively, compared to $14,928 and $53,772 recorded in the same
periods in 2009.





Gross
profit (loss) for the nine months ended September 30, 2010 amounted to $(120)
after accounting for $1,940 in cost of sales.  After deducting selling
and general and administrative expenses of $312,705 and $894,822 for the three
and nine months ended September 30, 2010, compared to $390,354 and $1,337,695
recorded in the same period in 2009, the Company realized operating losses of
$313,443 and $894,942 for the three and nine months ended September 30, 2010
compared to operating losses of $384,649 and $1,304,643 in the same periods in
2009. The significant decline in operating expenses was the result of severe
cost cutting measures initiated in the course of current restructuring efforts.
In particular, outlays for salaries and consulting expenses were sharply reduced
due to cut-backs in staffing and curtailment of consultant
retentions.




17




The
quarter concluded with a net loss of $2,498,437 for the quarter and a loss of
$3,147,284 for the first nine months of 2010. After accounting for dividends
accrued on outstanding preferred stock which totaled $12,816 and $38,447,
respectively, the net loss applicable to common shareholders was $2,511,253 or
$0.005 per share and $3,185,731 or $0.006 per share for the three and nine
months ended September 30, 2010, compared to a loss of $430,205 or $0.001 per
share and $2,061,026 or $0.005 per share for the same periods in 2009. The large
portion of this loss during the third quarter was the a result of the Other
Income (Expense) of ($2,184,994) and ($2,252,342) for the three and nine months
ended September 30, 2010, respectively. These were a result of the accounting
treatment for the convertible notes held by Cambridge Services, Inc. and
Discover Advisory Company, resulting in interest expense of $1,965,033 and a
loss for the change in value of the underlying derivative conversion features of
$177,271 during the three months then ended (as explained in Note 12 and
15).







Liquidity and Capital
Resources





We have
financed our business with new debt since our cash flow is insufficient to
provide the working capital necessary to fund our operations. We received
$270,000 in cash from short-term loans from accredited private investors during
the quarter. We have an ongoing and urgent need for working capital to fund our
operations. If we are unable to continue to receive new equity investments or
obtain loans, we will not be able to fund our operations and we will be required
to close our business.





Our
deficit in working capital amounted to $5,323,502 at September 30, 2010, as
compared to $2,226,345 at December 31, 2009.  The change is primarily
attributable to the other expense incurred in the three months ended 2010 from
embedded derivatives and the receipt by the company of an aggregate $740,000 in
short term loans during 2010.  Stockholders’ equity showed an
impairment of $5,191,703 at the end of the period, compared to an impairment of
$2,169,971 at the beginning of the year. The negative cash flow from operations
during the nine months totaled $749,221 and was financed by new debt and
$125,000 in equity capital from subscriptions for “units” consisting of common
stock shares and stock purchase warrants.




We have
no bank debt and aside from trade payables and accruals, our indebtedness at
September 30, 2010 consisted of certain notes and loans aggregating $2,034,980.
The position “Obligations to be settled in stock” of $164,678 accounts for
common shares due under consulting agreements, and for services to be settled in
common stock options and warrants, where the underlying securities had not yet
been issued. Current liabilities also include $2,142,304 in embedded derivative
liabilities and $517,786 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 operations and website development and
marketing plan over the next twelve months. We expect to fund these requirements
with further investments in form of debt or equity capital and are in ongoing
discussions with existing investors to secure funding. There can be no
assurance, however, that we will be able to secure needed financing in the
future and identify a financing source or sources, and if we do, whether the
terms of such financing will be acceptable or commercially
reasonable.





Absent
the receipt of needed equity investment or loans, we will be compelled to
severely curtail operations and possibly, close our business operations.
Assuming we can receive current funds to continue to operate our businesses, we
may need additional funding for marketing and website development, absent of
which our website development, results of operations and financial condition
could be subject to material adverse consequences.







18




Item 3. Quantitative and
Qualitative Disclosures about Market Risk





A smaller
reporting company is not required to provide the information required by this
Item.





Item
4T.    CONTROLS AND PROCEDURES




Evaluation
of Disclosure Controls and Procedures




The
Company’s Chief Executive Officer and Chief Financial Officer has evaluated the
effectiveness of the Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the fiscal period
ended September 30, 2010 covered by this Quarterly Report on Form 10-Q. Based
upon such evaluation, the Chief Executive Officer and Chief Financial Officer
has concluded that, as of the end of such period, the Company’s disclosure
controls and procedures were not effective as required under Rules 13a-15(e) and
15d-15(e) under the Exchange Act.




As of
September 30, 2010, management assessed, with the participation of the Chief
Executive Officer and Chief Financial Officer, the effectiveness of our internal
control over financial reporting based on the criteria set forth in Internal
Control – Integrated Framework for effective internal control over financial
reporting established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO") and SEC guidance on conducting such
assessments.  Based on that evaluation, they concluded that, during
the period covered by this report, such internal controls and procedures were
not effective as more fully described below.  Based on management’s
assessment over financial reporting, management believes as of September 30,
2010, the Company’s internal control over financial reporting was not effective
due to the following deficiencies:





1. The
Company’s control environment did not have adequate segregation of duties and
lacked adequate accounting resources to address non routine and complex
transactions and financial reporting matters on a timely basis.





2. The
Company had only a part time chief financial officer performing all accounting
related duties on site, presenting the risk that the reporting of these non
routine and complex transactions during the preparation of our future financial
statements and disclosures may not be accomplished in a timely
manner.





Company
management believes that notwithstanding the above identified deficiencies that
constitute our material weakness, that the financial statements fairly present,
in all material respects, the Company’s consolidated balance sheets as of
September 30, 2010 and 2009 and the related statements of operations,
stockholders’ equity, and cash flows for the quarters ended September 30, 2010
and 2009, in conformity with generally accepted accounting
principles.





Management’s Remediation
Initiatives




In an
effort to remediate the identified material weaknesses and other deficiencies
and enhance our internal controls, we have initiated, or plan to initiate, the
following series of measures:





- On May
1, 2010, we hired our Comptroller, an experienced certified public accountant,
to be our Chief Financial Officer;





- We will
supplement, where necessary, existing resources with additional qualified third
party consultants;





- We will
institute more stringent approval process for financial transactions,
and





- We will
perform additional procedures and analysis for significant transactions as a
mitigating control in the control environment due to segregation of duties
issues.





Changes
in Internal Controls over Financial Reporting




Other
than as stated above, during the quarter ended September 30, 2010, there
have been no changes in the Company’s internal control over financial reporting
that have materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.





19








PART  II  -  OTHER
INFORMATION





Item
      1
            LEGAL
      PROCEEDINGS





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





Item
      1A.
            RISK
      FACTORS





A smaller
reporting company is not required to provide the information required by this
Item.





Item
      2
            UNREGISTERED SALES OF
      EQUITY SECURITIES AND USE OF
PROCEEDS




a)
            Issuance
      of unregistered securities





During
the first nine months of 2010 the Company issued the following unregistered
securities:





(i) 5,000,000
common shares and 1,250,000 stock purchase warrants, exercisable during three
years at $0.05 per share, to two investors pursuant to private placement
subscriptions, resulting in the receipt by the Company of $125,000.
 (ii) 1,950,000
common shares to an officer of the Company pursuant to the terms of his
employment agreement (see “Commitments and Contingencies”).
 (iii) 13,125,000
common shares to a consultant pursuant to his cashless exercise of stock
purchase warrants for 15,000,000 shares (see “Commitments and
Contingencies”).





The
Company relied upon the private placement exemption from the registration
requirements of the Securities Act of 1933, as amended (the “Securities Act”),
provided by Section 4(2) thereof in connection with the issuance of the above
identified securities. The Company had a pre-existing relationships with the
recipients of above securities and no general solicitation was involved; the
certificates representing the common shares issued contained restrictive
legends, designated them as restricted securities and stating that any transfer
or other disposition of such shares can only be made in compliance with the
registration requirements of the Securities Act or pursuant to exemptions there
from.





(b)
              Not
      applicable





(c)
              None





Item
      3
            DEFAULTS UPON 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 $518,000.  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 SECURITY
      HOLDERS





-  None





Item
      5
            OTHER
      INFORMATION





-  None




20





Item
      6
            EXHIBITS AND REPORTS
      ON FORM 8-K





(a)
              Exhibits





Exhibit No.
            
            Description31.01A.
            
            Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) as
      adopted pursuant toSection
      302 of the Sarbanes-Oxley Act of 2002, dated November 8,
    2010.31.02A.
            
            Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as
      adopted pursuant toSection
      302 of the Sarbanes-Oxley Act of 2002, dated November 8,
    2010.32.01A.
            
            Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, asadopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated November
      8, 2010.




(b)
            Reports
      on Form 8-K:





On May 4,
2010, the Company filed a report on Form 8-K, disclosing the resignation of the
Chief Financial Officer and appointment of a new Chief Financial Officer
..





On March
2, 2010, the Company filed a current report on Form 8-K, disclosing its receipt
of the final tranche from an accredited investor in connection with its private
placement.





On
February 19, 2010, the Company filed a current report on Form 8-K, disclosing
that that the Financial Industry Regulatory Agency (“FINRA”) approved the
Company’s corporate name change and assigned a new trading symbol to the
Company’s common stock.





On July
30, 2010, the Company filed a report on Form 8-K, advising that Rudolf Hauke
resigned as the Chief Executive Officer and as a member of the Company’s Board
of Directors and that effective as of August 1, 2010, the Company appointed
Andre Scholz to serve as Chief Executive Officer. Mr. Scholz previously served
as the Company’s Chief Technology Officer.

















21








SIGNATURES








Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report on Form 10-Q to be signed on its behalf by the
undersigned, thereunto duly authorized.







Kiwibox.Com,
      INC.Date:
      November 8, 2010
                      
                      By:
                      /s/
      Craig S. CodyCraig
      S. CodyChief
      Financial Officer


















22