FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549


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

                      For Quarter Ended September 30, 2004

                                       OR

      [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
            SECURITIES EXCHANGE ACT OF 1934

                For the Transition Period from _______ to _______

                         Commission file number 33-20432

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

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

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

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


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days.

                                Yes _x_ No _____

     The number of shares of Registrant's Common Stock, $0.0001 par value,
          outstanding as of October 31, 2004, was 122,261,219 shares.

<PAGE>

              MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES


                                      INDEX

                                                                         Page
                                                                        Number
                                                                        ------
PART  1  -  FINANCIAL INFORMATION

Item 1   Financial Statements (unaudited)

         Consolidated Balance Sheet
          - September 30, 2004                                             3

         Consolidated Statements of Operations
          - Three and nine months ended September 30, 2004 and 2003        4

         Consolidated Statements of Cash Flows
          - Nine months ended September 30, 2004 and 2003                  5

         Notes to Consolidated Financial Statements                      6 - 12


Item 2   Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                      13 - 14

Item 3   Controls and Procedures                                          15


PART II  -  OTHER INFORMATION                                           16 - 17


SIGNATURES                                                                18


                                       2

<PAGE>

PART I  - ITEM 1   FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
ASSETS                                                                          September 30, 2004
                                                                                   ------------
<S>                                                                                <C>
     Current Assets
     Cash ......................................................................   $      6,065
     Accounts receivable .......................................................            819
     Inventories ...............................................................         12,428
     Prepaid expenses ..........................................................        131,175
                                                                                   ------------
        Total Current Assets ...................................................        150,487
     Property and equipment, net of accumulated
        depreciation of $142,561 ...............................................         12,245
     Software, net of accumulated amortization of $1,002,277 ...................        505,012
     Other assets ..............................................................         24,829
                                                                                   ------------
TOTAL ASSETS ...................................................................        692,573
                                                                                   ============
LIABILITIES AND STOCKHOLDERS' EQUITY (IMPAIRMENT)
LIABILITIES
     Accounts payable and accrued expenses .....................................        318,519
     Deferred revenue ..........................................................         15,298
     Dividends payable .........................................................        446,807
     Loans and notes payable ...................................................        190,000
     Current maturities of long-term debt ......................................        133,419
     Current maturities of capitalized lease obligations .......................          2,805
                                                                                   ------------
        Total Current Liabilities ..............................................      1,106,848
     Capitalized lease obligations, less current portion .......................          3,234
                                                                                   ------------
TOTAL LIABILITIES ..............................................................      1,110,082

STOCKHOLDERS' EQUITY (IMPAIRMENT)
     Preferred Stock, $0.001 par value, non-voting, 3,000,000 shares authorized:
     2,500 shares have been designated Cumulative Preferred Stock,
     of which 1 share is issued and outstanding ................................              0
     300,000 shares have been designated Series A Convertible Preferred Stock,
     350,000 shares have been designated Series B Convertible Preferred Stock,
     120,000 shares have been designated Series C Convertible Preferred Stock,
     500,000 shares have been designated Series D Convertible Preferred Stock,
     500,000 shares have been designated Series E Convertible Preferred Stock,
     of which a combined total 203,357 shares are issued and outstanding .......            203
     Common Stock, $0.0001 par value, 200,000,000 shares authorized,
     122,061,219 shares are issued and outstanding .............................         12,206
     Additional paid-in capital ................................................     27,015,284
     Accumulated deficit .......................................................    (27,445,202)
                                                                                   ------------
TOTAL STOCKHOLDERS' EQUITY (IMPAIRMENT) ........................................       (417,509)

TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY (IMPAIRMENT) .........................................   $    692,573
                                                                                   ============
</TABLE>

                 See notes to consolidated financial statements


                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                     Three Months Ended                Nine Months Ended
                                                         September 30,                    September 30,
                                                    2004             2003            2004              2003
                                               -------------    -------------    -------------    -------------
<S>                                            <C>              <C>              <C>              <C>
Total Revenues .............................   $      17,718    $      57,540    $      82,592    $     126,099

     Cost of Goods Sold ....................          38,974           38,946          116,995          116,913
                                               -------------    -------------    -------------    -------------

Gross Profit ...............................         (21,256)          18,594          (34,403)           9,186

     Selling expenses ......................         126,369           96,389          356,018          390,034
     Stock-based compensation ..............         295,994          123,801          532,027          331,017
     General & administrative expenses .....         300,836          239,068        1,064,821        1,020,380
                                               -------------    -------------    -------------    -------------

Operating (Loss) ...........................        (744,455)        (440,664)      (1,987,269)      (1,732,245)

     Misc. income ..........................              --            3,745               --            3,745
     Misc. non-operating expenses ..........              --               --          (14,489)              --
     Interest expense, net .................          (9,522)         (24,462)         (18,725)         (55,657)
                                               -------------    -------------    -------------    -------------

Non-Operating (Expense) ....................          (9,522)         (20,717)         (33,214)         (51,912)
                                               -------------    -------------    -------------    -------------

Net (Loss) before taxes ....................        (753,977)        (461,381)      (2,020,483)      (1,784,157)

     Provision for income taxes ............               0                0                0                0
Net (Loss) .................................   $    (753,977)   $    (461,381)   $  (2,020,483)   $  (1,784,157)
                                               =============    =============    =============    =============

Dividends accrued on preferred stock .......          31,392           28,817          145,645           86,451
Amortized discount on convertible
     preferred stock .......................          77,971               --        1,573,433               --

Net (Loss) applicable to common shareholders   $    (863,340)   $    (490,198)   $  (3,739,561)   $  (1,870,608)
                                               =============    =============    =============    =============
Loss per Common Share ......................   $       (0.01)   $       (0.01)   $       (0.04)   $       (0.03)
                                               =============    =============    =============    =============
Weighted Average Number of
     Common Shares Outstanding .............     111,653,344       69,104,958       91,754,764       65,189,770
                                               =============    =============    =============    =============
</TABLE>

                 See notes to consolidated financial statements

                                       4
<PAGE>

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


                                                       Nine Months Ended
                                                         September 30,
                                                      2004           2003
                                                  -----------    -----------
Cash Flows from Operating Activities
     Net (loss) ...............................   $(2,020,483)   $(1,784,157)
     Adjustments to net (loss)
        Depreciation and amortization .........       124,568        134,978
        Securities issued for expenses and debt       565,060        242,562
     Decreases (increases) in Assets
        Accounts receivable ...................        35,022         (6,494)
        Miscellaneous receivables .............         1,800            429
        Inventories ...........................        14,489             30
        Prepaid expenses ......................       (54,078)      (130,136)
        Other assets ..........................        24,296             --
     Increases (decreases) in Liabilities
        Deferred revenues .....................        22,615         (5,015)
        Change in prepayments .................            --        (14,075)
        Accounts payable and accrued expenses .      (110,493)       303,308
                                                  -----------    -----------
Net Cash (Used) by Operating Activities .......    (1,397,204)    (1,258,570)

Cash Flows from Investing Activities
     Purchases of equipment and fixtures ......        (4,861)        (3,380)
                                                  -----------    -----------
Net Cash (Used) by Investing Activities .......        (4,861)        (3,380)

Cash Flows from Financing Activities
     Proceeds from loans and notes payable ....       165,000        328,469
     Repayment of loans and notes .............      (357,851)       (21,706)
     Payment of dividends .....................       (57,911)            --
     Issuance of stock options ................            --         37,525
     Issuance of common and preferred stock ...     1,560,914        912,940
                                                  -----------    -----------
Net Cash Provided by Financing Activities .....     1,310,152      1,257,228
Net (Decrease) in Cash ........................       (91,913)        (4,722)
Cash at Beginning of Period ...................        97,978          9,976
                                                  -----------    -----------
Cash at End of Period .........................   $     6,065    $     5,254
                                                  ===========    ===========



                 See notes to consolidated financial statements

                                       5
<PAGE>

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Nature of Organization

         Magnitude  Information Systems, Inc. (the "Company" or "Magnitude") was
         incorporated as a Delaware corporation on April 19, 1988 under the name
         Fortunistics Inc. On November 18, 1998, the Company changed its name to
         Magnitude Information Systems, Inc.

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

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

     Basis of Presentation

         The accompanying  unaudited consolidated financial statements have been
         prepared in accordance with generally  accepted  accounting  principles
         for interim  financial  statements  and with the  instructions  to Form
         10-QSB  and  Article 10 of  Regulation  S-X.  Accordingly,  they do not
         include all of the  information  and  disclosures  required  for annual
         financial  statements.  These  financial  statements  should be read in
         conjunction  with the  consolidated  financial  statements  and related
         footnotes  included in the  Company's  annual report on Form 10-KSB for
         the year ended  December  31,  2003 and its  quarterly  reports on Form
         10-QSB for the periods ended March 31, 2004 and June 30, 2004.

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


                                       6

<PAGE>

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

     Principles of Consolidation

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

     Inventories

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

     Depreciation and Amortization

         Property and equipment are recorded at cost. Depreciation on equipment,
         furniture  and fixtures and leasehold  improvements  is computed on the
         straight-line  method over the  estimated  useful  lives of such assets
         between 3-10 years.  Maintenance  and repairs are charged to operations
         as incurred. Software assets are capitalized at the fair value of stock
         exchanged/granted   upon   acquisition   and  are   amortized   on  the
         straight-line method on a  product-by-product  basis over the estimated
         economic life of the products which has been determined to be 10 years.

     Securities Issued for Services

         The Company accounts for stock, stock options and stock warrants issued
         for services and  compensation  by employees  under the intrinsic value
         method. For non-employees, the fair market value of the Company's stock
         on the date of stock  issuance  or  option/grant  is used.  The Company
         determined the fair market value of the  warrants/options  issued under
         the Black-Scholes Pricing Model. Effective January 1, 1996, the Company
         adopted  Statement of  Financial  Accounting  Standard  (SFAS) No. 123,
         "Accounting  for  Stock-based  Compensation".  The statement  generally
         suggests,  but  does not  require,  employee  stock-based  compensation
         transactions  to be  accounted  for  based  on the  fair  value  of the
         services rendered or the fair value of the equity  instruments  issued,
         whichever is more reliably  measurable.  As permitted by the statement,
         the  Company has  elected to  continue  to follow the  requirements  of
         Accounting  Principles  Board  Opinion  No. 25,  "Accounting  for Stock
         Issued to Employees'  for employees  under the intrinsic  value method.
         The  adoption  of SFAS No. 123 does not have a  material  impact on the
         financial statements.

     Income Taxes

         The  Company  provides  for income  taxes  based on enacted tax law and
         statutory  tax rates at which items of income and expenses are expected
         to be settled in the  Company's  income tax  return.  Certain  items of
         revenue and expense are  reported  for Federal  income tax  purposes in
         different  periods  than  for  financial  reporting  purposes,  thereby
         resulting in deferred income taxes.  Deferred taxes are also recognized
         for  operating  losses  that are  available  to offset  future  taxable
         income.  Valuation  allowances are established when necessary to reduce
         deferred tax assets to the amount expected to be realized.  The Company
         has  incurred  net  operating   losses  for   financial-reporting   and
         tax-reporting purposes.  Accordingly,  for Federal and state income tax
         purposes,  the benefit for income  taxes has been offset  entirely by a
         valuation  allowance against the related federal and state deferred tax
         asset for the year ended December 31, 2003.


                                       7
<PAGE>

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

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

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

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


GOING CONCERN

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


                                       8
<PAGE>

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

CONCENTRATIONS OF BUSINESS AND CREDIT RISK

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

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

PREPAID EXPENSES

     Prepaid Expenses at the end of the quarter  included  $25,000  representing
     the  value  of the  unamortized  portion  of  part of the  Company's  chief
     executive officer's base salary for the remainder of the current year which
     was prepaid in January 2004 in the form of convertible  preferred stock and
     warrants, in lieu of cash (see "Related Party Transactions"). Also included
     are  approximately  $83,000  representing the value of restricted stock and
     options  issued to certain  consultants  for services to be rendered in the
     near future, and approximately $23,000 prepaid rent and insurance costs.

PROPERTY AND EQUIPMENT

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

              Equipment                                         $        82,575
              Furniture and fixtures                                     72,231
                                                                ---------------
                                                                        154,806

              Less accumulated depreciation                             142,561
                                                                ---------------
                                     Total                      $        12,245
                                                                ===============

Depreciation  expense  charged to operations was $7,628 in the first nine months
of 2004 and $18,039 in the first nine months of 2003.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

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

              Accounts payable                                  $       185,900
              Accrued interest                                           56,243
              Accrued commissions                                        12,678
              Accrued salaries, bonuses, vacations                       17,066
              Accrued professional fees                                  40,018
              Miscellaneous accruals                                      6,614
                                                                ---------------
                                    Total                       $       318,519
                                                                ===============


                                       9
<PAGE>

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

DEFERRED REVENUES

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

LOANS AND NOTES PAYABLE

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

<TABLE>
<CAPTION>
<S>                                                                                     <C>
         On December 4, 1996, Magnitude,  Inc. repurchased 500,000 shares of its
         common  stock and retired same  against  issuance of a promissory  note
         maturing twelve months thereafter accruing interest at 5% per annum and
         due December 4, 1998. This note is overdue at September 30, 2004 and no
         demand for payment has been made.                                              $  75,000

         At December 31, 1999 the Company had  $1,475,000  of notes  outstanding
         related to a June 1995  private  placement  offering.  During  2000 the
         holders of $1,450,000 worth of notes agreed to accept partial repayment
         of  approximately  30% of the note balances and converted the remaining
         balances into common shares or convertible  preferred shares. The total
         amount of  non-converted  notes  outstanding  at September  30, 2004 is
         $25,000.  Attempts  to locate the holder of this note,  to settle  this
         liability, have been unsuccessful.                                                25,000

         Note payable issued to an officer of the Company for a short term loan,
         payable in October 2004, carrying interest at the rate of 10% per annum
         and subject to an origination fee of $2,000.                                      50,000

         Note payable  issued to a  shareholder  of the Company for a short term
         loan, payable on demand, carrying interest at the rate of 10% per annum
         and subject to an origination fee of $2,000.                                      40,000
                                                                                        ---------
         Total                                                                          $ 190,000
                                                                                        ==========
</TABLE>


                                       10
<PAGE>

LONG TERM DEBT

       Long-term debt as of September 30, 2004, is comprised of the following:

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

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

                                                                                     ----------
             Total                                                                      133,419
             Less current maturities
                                                                                        133,419
                                                                                     ----------
             Long-term debt, net of current maturities                               $        0
                                                                                     ==========
</TABLE>

  INCOME TAXES

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

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

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

COMMITMENTS AND CONTINGENCIES

   Lease Agreement

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


                                       11
<PAGE>

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

COMMITMENTS AND CONTINGENCIES, continued


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

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

  Employment Agreements

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

RELATED PARTY TRANSACTIONS

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

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

     During the third  quarter,  five  directors  and  officers  of the  Company
     received a total 1,500,000  restricted  common shares as  remuneration  for
     services as members of the board of  directors.  One outside  director  who
     also serves as the legal and  securities  counsel of the  Company  received
     500,000  restricted  common shares as  compensation  for his commitment and
     agreement  to  continue  to invoice  the  Company  for legal  services at a
     reduced rate, in connection with legal services rendered during fiscal year
     2004.

     During the third quarter the Company's  chief  executive  officer  extended
     short term loans aggregating  $100,000 to the Company.  These loans carried
     interest at the rate of 10% per year and were subject to a loan origination
     fee of 4%.

CAPITALIZATION

     During the second quarter in 2004, a majority of our shareholders of record
     as of the close of business on May 14, 2004,  voted to amend our  Company's
     Certificate of Incorporation to increase our authorized  common shares from
     100 million shares to 200 million shares.

     During the second and third quarter in 2004, a total 323,225  shares of the
     Company's Series E Senior  Convertible  Preferred Stock,  issued during the
     fourth quarter in 2003 and the first quarter in 2004, were converted into a
     total 32,322,535 common shares.


                                       12
<PAGE>

ITEM 2.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


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

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

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


RESULTS OF OPERATIONS:

We  continue  to be  in  discussion  with  several  Fortune  1000  companies  on
potentially large contracts for the installation of our software products. These
efforts  have been  ongoing  for  several  months  and we are  optimistic  about
achieving tangible results and expect substantial revenues there-from within the
near to  mid-term  future.  In  parallel,  we are  continuing  with a program of
working with selected partners in the insurance and risk management industry for
the purpose of jointly  marketing the  Company's  products to their client base.
Here too, we expect to achieve a break-through  within the foreseeable  time. We
need to state,  however,  that in view of the absence of  meaningful  results so
far, success in both areas cannot be taken for granted.

The quarter ended September 30, 2004 yielded revenues of $17,718 compared to the
$57,540  achieved  in the third  quarter of 2003.  Revenues  for the nine months
ended September 30, 2004,  totaled $82,592,  with $126,099  recorded in 2003 for
the same period.

Gross  profits for the quarter  amounted to negative  $21,256,  as a result of a
fixed charge for  amortization  of certain  proprietary  software  assets.  Such
software  assets  underlie the Company's  products and are being  amortized on a
straight  line  over 10 years,  resulting  in a level  charge  of  approximately
$13,000 per month to  cost-of-goods-sold.  Our expense  and cost  structure  was
essentially  unchanged from prior periods,  and, after  deducting  selling - and
general  and  administrative  expenses of $723,199  which  showed a  significant
increase over the $459,258  recorded in 2003, the Company  realized an operating
loss of  $744,455,  compared  to an  operating  loss of  $440,664  in 2003.  The
increase in expenses was attributable to certain  securities  issued in non-cash
transactions for compensation and services.  Non-operating expenses consisted of
$9,522 net interest expense. The period result was a net loss of $753,977,  with
a total  loss for the first nine  months of  $2,020,483,  compared  to losses of
$461,381 and $ 1,784,157 respectively, for the same periods in 2003.

After  accounting  for dividend  accruals on outstanding  preferred  stock which
totaled  $31,392,  and an  accounting  charge to  capital  for  amortization  of
discount  for  warrants  issued in  connection  with the  placement  of  certain
convertible  stock  which  amounted  to  $77,971,  the net loss for the  quarter
applicable to common shareholders was $863,340 or $0.01 per share, compared to a
loss of $490,198 or $0.01 per share for the same quarter in the previous year.


                                       13
<PAGE>

Liquidity and Capital Resources

As shown,  the absence of meaningful  revenues forces us to rely entirely on new
capital  investments  to  finance  on-going  operations.  Such  new  investments
occurred in the form of equity placements with accredited private investors, and
resulted in the receipt of approximately $395,000 cash during the quarter.

At September  30,  2004,  the deficit in working  capital  amounted to $956,361,
compared to $871,934 at June 30, 2004. The cash flow from operations  during the
first nine months totaled approximately  negative $1,397,000 and was financed by
new equity which was obtained  through the  placement of common and  convertible
preferred stock with accredited private investors.  Details of such transactions
can be found in the  "Changes in  Securities"  section in this report and in the
Company's  reports on Form 10-QSB for the periods  ended March 31, 2004 and June
30, 2004.  The Company had filed a new  registration  statement on Form SB-2 and
amendments to previously filed registration statements on Form SB-2, to register
the  common  shares  directly  issued as well as common  shares  underlying  the
previously issued convertible  preferred stock and warrants,  in connection with
these  and prior  financing  transactions.  These  registrations  were  declared
effective by the Securities and Exchange Commission.

At the time of this  submission,  the Company had no bank debt. At September 30,
2004 our  short-term  liabilities,  aside  from  trade  payables  and  accruals,
included  certain notes  aggregating  $323,419 of which $149,890 was owed to the
chairman and chief executive officer of the Company in form of demand notes (see
also "Long Term  Debt").  Also  included are 446,807 in accrued  dividends,  the
majority of which on  outstanding  series A, C, and D  preferred  stock which in
view of the absence of surplus  funds  management  does not plan to liquidate in
the immediate future.

Current cash reserves and net cash flow from operations expected during the near
future are  inadequate to guaranty  coverage of present and  anticipated  future
needs. Management is in discussions with several financing sources with the goal
of  obtaining  commitments  for  further  investments  in form of debt or equity
capital,  to be funded during the upcoming  quarter.  There can be no assurance,
however, that these negotiations will lead to the desired outcome.


                                       14
<PAGE>

ITEM 3.    CONTROLS AND PROCEDURES

         (a) Evaluation of Disclosure Controls and Procedures.

                   Our Chief Executive  Officer and our Chief Financial  Officer
evaluated the effectiveness of our disclosure controls and procedures as defined
in Rule 13a-15(c) and 15d-15(e)  under the  Securities  Exchange Act of 1934, as
amended  (the  "Exchange  Act"),  as of  September  30,  2004.  Based  upon that
evaluation,  the Chief Executive Officer and the Chief Financial  Officer,  have
concluded that, as of the end of the period covered by this report,  our current
disclosure  controls and  procedures  are adequate and  effective to ensure that
information  required to be  disclosed in the reports we file under the Exchange
Act is recorded, processed, summarized and reported on a timely basis.

         (b) Changes in Internal Controls.

                  There  have  been  no  significant  changes  in  our  internal
controls or in other factors that could  significantly  affect internal controls
during the period covered by this report.



                                       15
<PAGE>

PART  II  -  OTHER INFORMATION

Item 1   LEGAL PROCEEDINGS

     The Company is not a party in any legal proceedings.

Item 2   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     a)  Issuance of unregistered securities

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

         (i)      4,620,000 shares of common stock,  accompanied by warrants for
                  the purchase of 4,620,000  common shares at the price of $0.15
                  per share, to four accredited  foreign  investors  pursuant to
                  private  placement  subscriptions,  issued  in  reliance  upon
                  exemptions provided under Section 4(2), Rule 506 of Regulation
                  D and Regulation S of the Securities Act, altogether resulting
                  in the receipt by the Company of $395,800 in cash.

         (ii)     110,000  shares of common stock to a  consultant  for investor
                  relations and general business consulting services.

         (iii)    196,680  shares of common stock to three  employees in lieu of
                  cash remuneration.

         (iv)     31,822,535  shares of common stock  pursuant to the conversion
                  of  318,225  shares of Series E Senior  Convertible  Preferred
                  Stock,  in accordance  with the designation for such preferred
                  shares.

         (v)      1,500,000  shares  of  common  stock  to  five  directors  and
                  officers  of the Company as  remuneration  for  services,  and
                  500,000  shares to an outside  director who also serves as the
                  legal  and  securities   counsel  as  compensation  for  legal
                  services rendered during fiscal year 2004.

         (vi)     19,863  shares of common stock to a creditor of the Company as
                  interest on loans.


     (b) Not applicable

     (c) None



                                       16
<PAGE>

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 $424,000. 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

Item 6   EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

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

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

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

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

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

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

         (b) Reports on Form 8-K:

                  On July 1,  2004,  the  Company  filed a report  on Form  8-K,
                  informing  about a  research  project  at  Cornell  University
                  involving the study of office ergonomics.

                  On July 20,  2004,  the  Company  filed a report  on Form 8-K,
                  informing about the conclusion of a marketing and distribution
                  agreement with CSI Ergonomics of Minneapolis, MN.

                  On August 16,  2004,  the Company  filed a report on Form 8-K,
                  informing   about  the  conclusion  of  a  $1  Million  equity
                  financing transaction.


                                       17
<PAGE>

                                   SIGNATURES


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


                                        MAGNITUDE INFORMATION SYSTEMS, INC.


Date:   November 12, 2004               By: /s/  Steven D. Rudnik
                                            -------------------------
                                            Steven D. Rudnik
                                            Chairman and Chief Executive Officer



                                       18