AMENDMENT No. 1 to
                                   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, 2006

                                       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, 2006, was 192,341,763 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, 2006                                                  3
       Consolidated Statements of Operations
         - Three and nine months ended September 30, 2006 and 2005             4
       Consolidated Statements of Cash Flows
         - Nine months ended September 30, 2006 and 2005                       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
                         September 30, 2006 (Unaudited)

<TABLE>
<S>                                                                           <C>
Assets
  Current Assets
  Cash ....................................................................   $    314,247
  Accounts receivable, net of allowance for
    doubtful accounts of $0 ...............................................          2,031
  Prepaid expenses ........................................................        227,304
                                                                              ------------
    Total Current Assets ..................................................        543,582
  Property and equipment, net of accumulated
  depreciation of $105,992 ................................................         10,187
  Software, net of accumulated amortization of $1,295,951 .................        211,340
  Deposits ................................................................            596
  Covenant not to compete, net of accumulated
  amortization of $13,750 .................................................         46,250
                                                                              ------------
    Total Assets ..........................................................        811,955
                                                                              ============
Liabilities and Stockholders' Equity (Impairment)
  Current Liabilities
  Accounts payable and accrued expenses ...................................        524,968
  Deferred revenue ........................................................        108,758
  Obligations to be settled in stock ......................................        568,000
  Derivative liabilities ..................................................        860,668
  Dividends payable .......................................................        309,493
  Loans and notes payable .................................................        467,450
  Current maturities of long-term debt ....................................        133,419
  Current maturities of capitalized lease obligations .....................            256
                                                                              ------------
    Total Current Liabilities .............................................      2,973,012
Capitalized lease obligations, less current portion .......................             --
                                                                              ------------
    Total Liabilities .....................................................      2,973,012
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 109,858 shares are issued and outstanding ...            110
  Common Stock, $0.0001 par value, 300,000,000 shares authorized;
    issued and outstanding 191,116,763 shares .............................         19,112
  Additional paid-in capital ..............................................     32,735,699
  Accumulated (deficit) ...................................................    (34,915,978)
                                                                              ------------
    Total Stockholders' Equity (Impairment) ...............................     (2,161,057)
    Total Liabilities and Equity (Impairment) .............................   $    811,955
                                                                              ============
</TABLE>

The accompanying notes are an integral part of the 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,
                                                                  ---------------------------   ---------------------------
                                                                      2006           2005           2006           2005
                                                                  ------------   ------------   ------------   ------------

<S>                                                               <C>            <C>            <C>            <C>
Total Revenues ................................................   $      9,468   $     86,027   $     41,622   $    150,860
  Cost of Goods Sold ..........................................         36,370         36,372        109,119        109,114
                                                                  ------------   ------------   ------------   ------------
Gross Profit (Loss) ...........................................        (26,902)        49,655        (67,497)        41,746
  Selling expenses ............................................         70,984         86,731        381,456        299,349
  Stock-based compensation (see below) ........................        956,948        188,392      1,478,505        312,367
  Research and development cost ...............................         34,301             --        104,830         14,618
  General and administrative expenses .........................        178,756        282,444      1,047,607      1,121,257
                                                                  ------------   ------------   ------------   ------------
Loss from Operations ..........................................     (1,267,891)      (507,912)    (3,079,895)    (1,705,845)
Other Income (Expense)
  Miscellaneous income ........................................             --          4,846             --         22,383
  Misc. non-operating expenses ................................           (356)            --         (5,356)            --
  Change in fair value -derivative liabilities ................         51,560             --         57,763             --
  Interest income .............................................             --             --             20              6
  Interest expense ............................................        (43,146)        (8,842)      (192,550)       (16,416)
                                                                  ------------   ------------   ------------   ------------
    Total Other Income (Expense) ..............................          8,058         (3,996)      (140,123)         5,973
                                                                  ------------   ------------   ------------   ------------
Loss before Provision for Income Taxes ........................     (1,259,833)      (511,908)    (3,220,018)    (1,699,872)
  Provision for income taxes ..................................             --             --         (1,000)          (630)
                                                                  ------------   ------------   ------------   ------------
Net Loss ......................................................   $ (1,259,833)  $   (511,908)  $ (3,221,018)  $ (1,700,502)
                                                                  ============   ============   ============   ============
Dividends on Preferred Stock ..................................        (12,630)       (28,380)      (527,894)       (85,139)
                                                                  ------------   ------------   ------------   ------------
Net Loss applicable to Common Shareholders ....................   $ (1,272,463)  $   (540,288)  $ (3,748,912)  $ (1,785,641)
                                                                  ============   ============   ============   ============
Net Loss per Common Share .....................................   $     (0.007)  $     (0.004)  $     (0.023)  $     (0.013)
                                                                  ============   ============   ============   ============
Weighted Average Number of
  Common Shares Outstanding ...................................    178,947,329    140,771,743    163,134,242    137,511,211
                                                                  ============   ============   ============   ============
</TABLE>

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

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


                                        4

<PAGE>

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

                                                          Nine Months Ended
                                                            September 30,
                                                      -------------------------
                                                          2006          2005
                                                      -----------   -----------
Cash Flows from Operating Activities
  Net Loss ........................................   $(3,221,018)  $(1,700,502)
  Adjustments to Reconcile Net Loss
    to Net Cash Used by Operations
    Depreciation and amortization .................       127,158       116,269
    Change in fair value - derivative liabilities .       (57,763)           --
    Accretion of beneficial conversion feature ....         8,000            --
    Loss on disposition of assets .................           356            --
    Securities issued for various expenses ........     1,299,674       363,504
    Recognition of expense - deferred compensation        178,832        88,138
    Recognition of expense - derivative liabilities       102,762            --
Decreases (Increases) in Assets
    Accounts receivable ...........................        20,267       (68,031)
    Miscellaneous receivables .....................            --        11,322
    Inventories ...................................            --            --
    Prepaid expenses ..............................      (204,518)       30,855
    Deposits ......................................        23,400            --
    Obligations to be settled in stock ............       568,000            --
  Increases (Decreases) in Liabilities
    Deferred revenues .............................        83,219        (9,686)
    Accounts payable and accrued expenses .........       150,670      (164,194)
                                                      -----------   -----------
Net Cash Used by Operating Activities .............      (920,961)   (1,332,625)
Cash Flows from Investing Activities
  Purchases of equipment and fixtures .............        (7,438)       (2,160)
                                                      -----------   -----------
Net Cash Used by Investing Activities .............        (7,438)       (2,160)
Cash Flows from Financing Activities
  Proceeds from loans and notes payable ...........       480,700        54,500
  Repayment of loans and notes ....................       (81,250)      (54,500)
  Payment of dividends ............................            --        (1,020)
  Issuance of common and preferred stock ..........       724,500     1,328,000
                                                      -----------   -----------
Net Cash Provided by Financing Activities .........     1,123,950     1,326,980
Net Decrease in Cash ..............................       195,551        (7,805)
Cash at Beginning of Period .......................       118,696        44,144
                                                      -----------   -----------
Cash at End of Period .............................   $   314,247   $    36,339
                                                      ===========   ===========

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

SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

      (a)   The Company issued 10,250,000 shares of common stock to the holder
            of 100,000 shares of Series C convertible preferred stock pursuant
            to a settlement agreement whereby in exchange against the above
            common shares, the 100,000 preferred shares were cancelled and
            $350,895 accrued unpaid dividends forfeited.


                                        5

<PAGE>

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

      (b)   Pursuant to the terms of certain private placement subscription
            agreements and in accordance with the provisions of EITF 00-19
            "Accounting for Derivative Financial Instruments Indexed to, and
            Potentially Settled in, a Company's Own Stock" the Company
            reclassified certain outstanding warrants and options as derivative
            liabilities, which are marked to fair value periodically pursuant
            EITF 00-19. We valued these options and warrants utilizing the
            Black-Scholes method of valuation as of the date of the Stock
            Purchase Agreements, resulting in a reclassification from
            stockholders' equity of $815,669. For the three and nine months
            ended September 30, 2006, we recognized $47,399 in accounting income
            based on the change in fair value of these liabilities during the
            periods.

      (c)   The Company issued 2,000,000 shares of common stock in lieu of
            $55,000 payable pursuant to a settlement agreement entered into with
            the holder of the 100,000 shares of Series C convertible preferred
            stock described in (a) above.

      (d)   The Company accrued $50,000 in finder's fees on a $500,000 capital
            raise transaction, which was offset against Additional Paid-in
            Capital.

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

                        9 Months ended
                      September 30, 2006
                      ------------------
  Interest paid ...          $15,354
  Taxes paid ......          $ 1,000


                                        6

<PAGE>

               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Nature of Organization

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

            The Company and Magnitude, Inc. are two separate legal entities
            whereby Magnitude, Inc. operates as a subsidiary of the Company.
            However, the operations of the combined entity are currently
            comprised solely of the operations of Magnitude, Inc. The 1% of
            Magnitude, Inc. not owned by the Company constitutes a minority
            interest which is valued at $0.

            The Company's primary product is an integrated suite of proprietary
            software modules marketed under the name ErgoEnterprise(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.

      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, 2005 and the quarterly reports on Form 10-QSB/A and
            10-QSB, respectively, for the quarters ended March 31, 2006 and June
            30, 2006.

            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, 2006,
            the results of operations for the three and nine months ended
            September 30, 2006 and 2005, and the cash flows for the nine months
            ended September 30, 2006 and 2005, have been included.

      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.

      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.


                                        7

<PAGE>

               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

      Evaluation of Long Lived Assets

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

      Securities Issued for Services

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

      Reclassification of certain securities under EITF 00-19

            Pursuant to Emerging Issues Task Force (EITF) Issue 00-19, if a
            company has more than one contract subject to this Issue, and
            partial reclassification is required, there may be different methods
            that could be used to determine which contracts, or portions of
            contracts, should be reclassified. The Company's method for
            reclassification of such contracts is reclassification of contracts
            with the latest maturity date first. During the quarter, the company
            reclassified securities with a fair value totaling $815,669. The
            changes in fair value for all contracts previously reclassified
            during the 2006 amounted in total to a credit of $47,399.

      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 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.


                                        8

<PAGE>

               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

      Revenue Recognition

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

      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.
            In their report for the fiscal year ended December 31, 2005, 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 additional working capital through
            equity and debt placements with private and institutional investors.

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
            $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.

4. PREPAID EXPENSES

            Prepaid Expenses at the end of the quarter included $191,510 paid in
            the form of common stock and options to four outside consultants for
            services, which amounts represent the unearned portions of such
            payments-in-kind. The remainder represents prepaid insurance costs
            and miscellaneous other expenses.

5. PROPERTY AND EQUIPMENT

      Property and equipment consist of the following at September 30, 2006:

      Equipment                       $ 43,949
      Furniture and fixtures            72,230
                                      --------
                                       116,179
      Less accumulated depreciation    105,992
                                      --------
        Total                         $ 10,187
                                      ========

Depreciation expense charged to operations was $4,254 and $7,113 in the first
nine months of 2006 and 2005, respectively. In preparation for the move of the
Company's main offices to new and less expensive premises, an inventory of all
equipment was made. Equipment with a net book value of $356 (original
capitalized value totaling $52,000) was deemed technologically obsolete and was
discarded.


                                        9

<PAGE>

               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following at September
30, 2006:

      Accounts payable            $217,357
      Accrued interest              68,343
      Accrued salaries              35,585
      Accrued commissions           22,183
      Accrued professional fees    129,500
      Accrued finder's fees         50,000
      Miscellaneous accruals         2,000
                                  --------
        Total                     $524,968
                                  ========

      Accrued commissions are due to a consultant who was retained in the
      capacity of Senior Vice President of Business Development. In accordance
      with the terms of the consulting agreement, one half of such commissions
      are payable in cash and the other half in form of restricted shares of the
      Company's common stock, valued at the market price of the Company's common
      stock on the date payment of such commissions are made. At September 30,
      2006, the price of the stock was $0.04 which would, had payment of the
      commission been made that day, require issuance of 277,288 shares.

7. DEFERRED REVENUES

      Deferred revenues at September 30, 2006 consist of prepaid software
      maintenance and support charges which are amortized ratably over the
      remaining duration of the underlying maintenance agreements. On April 13,
      2006 the Company received a deposit of $100,000 from a client who also is
      an investor in the Company. These funds were paid pursuant to a contract
      for the purchase of a customized version of the Company's software
      products. At September 30, 2006 the contract had not been filled and the
      revenue has been deferred.

8. LOANS PAYABLE

      The Company and Magnitude, Inc. had borrowings under short term loan
      agreements with the following terms and conditions at September 30, 2006:

      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, 2006 and no demand for payment has been made.   $ 75,000

      During March 2006 a director of the Company provided for
        a cash advance, repayable on demand.                            25,000
                                                                      --------
        Total                                                         $100,000
                                                                      ========


                                       10

<PAGE>

                 MAGNITUDE INFORMATION SYSTEMS, INC. SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

9. NOTES PAYABLE

      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, 2006 is $25,000. Attempts to locate the holder of
        this note, to settle this liability, have been
        unsuccessful.                                            $ 25,000

      In June and July 2006 two shareholders loaned the
        Company $240,000 and $102,450 pursuant to which the
        Company issued promissory notes bearing interest at
        the rate of 8% per year. The notes are repayable on
        demand.                                                   342,450
                                                                 --------
               Total                                             $367,450
                                                                 ========

10. LONG-TERM DEBT

      Long-term debt as of September 30, 2006 is comprised of the following:

      Pursuant to the February 2, 1998, Agreement and Plan
        of Merger with Rolina Corporation, the Company had
        issued 155,556 shares (the "Shares") of its common
        stock to the principal of Rolina Corporation who
        currently serves as the Company's Chief Executive
        Officer and Board Chairman, and had issued a Put
        Option for such Shares at a price of $2.41 per share
        in accordance with the provisions contained therein,
        with notice for exercise eligible to be given at any
        time after February 1, 2000, and before 5:00 p.m. on
        the 90th day thereafter. This liability was converted
        into a Company obligation for $274,890 maturing March
        31, 2002 and a demand loan for $100,000 both carrying
        interest at the rate of 7% per year, subsequently
        increased to 10%, payable monthly. The demand portion
        of this note was repaid in April 2002 and the due date
        for $274,890 of the remaining balance was extended to
        July 1, 2003. Subsequently, the maturity of the unpaid
        balance was changed to a portion of $174,890 payable
        on demand, and a portion of $100,000 due and payable
        on January 2, 2005. During the first quarter of 2004,
        $175,000 was repaid and the maturity of the unpaid
        balance was changed to "due upon demand". On August 8,
        2006 the holder and the Company agreed to a one-year
        moratorium for repayment, and a provision whereby the
        holder has the option, after the twelve months have
        elapsed, to convert the outstanding principal into the
        Company's securities at rates and terms commensurate
        with the best rates and terms offered to any other
        investor during the preceding twelve months. The
        conversion feature has been accounted for as a
        derivative liability.                                    $99,890


                                       11

<PAGE>

               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

LONG-TERM DEBT continued

      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.                                    33,529
                                                                   --------
              Total                                                 133,419

                Less current maturities                             133,419
                                                                   --------
                Long-term debt, net of current maturities          $     --
                                                                   ========

11. CAPITALIZED LEASE OBLIGATIONS

      The Company leases office equipment under a non-cancelable capital lease
      agreement expiring in 2006. The capital lease obligation has been recorded
      at the present value of future minimum lease payments, discounted at an
      interest rate of 6.00%. The capitalized cost of equipment at September 30,
      2006 amounted to $257 net of accumulated depreciation of $8,252.

12. OBLIGATIONS TO BE SETTLED IN STOCK

      The Company had received payments against stock subscriptions pursuant to
      private placements where the transactions had not yet been completed at
      September 30, 2006. The subscription agreements contain provisions that
      among others call for potential penalty shares to be issued if there were
      delays in the issuance of warrants, or delays in the registration of
      underlying shares (we refer to our related filing on Form 8-K). Based on
      these provisions, the Stock Purchase Agreements do not limit the number of
      additional common shares that could be subject to issuance as a result of
      such defaults and could theoretically result in an infinite number of
      additional common shares being subject to issuance for such defaults.
      These provisions require the Company to reclassify certain outstanding
      warrants and options as derivative liabilities, which are marked to fair
      value periodically pursuant to Emerging Issues Task Force guidance EITF
      00-19 "Accounting for Derivative Financial Instruments Indexed to, and
      Potentially Settled in, A Company's Own Stock" ("EITF 00-19").

13. DERIVATIVE LIABILITIES

      We valued the options and warrants utilizing the Black-Scholes method of
      valuation as of the date of the Stock Purchase Agreements, resulting in a
      reclassification from stockholders' equity of $815,669. For the three and
      nine months ended September 30, 2006, we recognized $47,399 in accounting
      income based on the change in fair value of these liabilities during the
      periods. Also included in Derivative Liabilities is a derivative
      obligation for $92,398 related to the conversion feature and warrants
      underlying a convertible debt instrument due to a former officer (see Note
      10). We recognized $4,161 and $10,364 in accounting income based on the
      change in fair value of these liabilities during the three and nine months
      ended September 30, 2006, respectively.


                                       12

<PAGE>

               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

14. 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 expired on March 31, 2005. The Company had
      subsequently negotiated a lease renewal which extended the term of the
      lease to March 31, 2007 at a monthly rental of $10,000. The Company
      vacated the premises in October 2006 and is presently negotiating with the
      landlord for an early termination of the lease.

      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,

                2006                                       30,000
                2007                                      $30,000
                                                          -------
                        Total minimum payments            $60,000
                                                          =======

      Consulting Agreements

      During the second quarter in 2006 the Company's board of directors
      ratified a two-year consulting agreement with an outside director to
      provide specialized business advisory services and to work directly for
      the chief executive officer in connection with certain sales and marketing
      projects. The agreement provides for a compensation package which includes
      the issuance of (a) 200,000 restricted common shares and an option to
      purchase 500,000 shares at the price of $0.15/share at the beginning of
      the consultancy and again after twelve month, and (b) 150,000 restricted
      shares per month during the term.

      In August 2006 the Company entered into a one-year agreement with a firm
      specializing in technology and IP transfers, for the purpose of
      discovering potential candidate firms or products that would enhance
      Magnitude's own software products and marketing stance. Under the
      agreement, the Company issued 2,254,151 restricted common shares valued at
      $112,708 which vest at the rate of 187,846 shares per month. The agreement
      may be cancelled by either party with 30 day's notice.

      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.

15. RELATED PARTY TRANSACTIONS

      In September 2005 our officers and directors surrendered for cancellation
      4,507,709 stock options, 2,283,916 common stock purchase warrants and
      11,247,607 common shares in order to provide sufficient authorized common
      shares to accommodate a private placement offering. We replaced the
      surrendered and cancelled common shares with shares of our Series E
      preferred stock which were automatically convertible after six months into
      11,247,607 common shares, which conversion occurred during the quarter
      ended June 30, 2006. Pursuant to a settlement agreement with a former
      officer, we granted the re-issuance of 2,903,542 options and 1,583,333
      warrants that were previously cancelled (see below). We also intend to
      reissue the remaining 1,604,167 stock options and 700,583 warrants also
      surrendered for cancellation by our officers and directors with an equal
      amount of common shares underlying these securities.


                                       13

<PAGE>

               MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006

      RELATED PARTY TRANSACTIONS continued

      During March 2006, a director of the Company extended a cash advance of
      $25,000 to the Company, repayable on demand.

      During May 2006 the Company's board of directors ratified a consulting
      agreement with an outside director to provide specialized business
      advisory services. (see Note 13 above)

      On August 8, 2006 Steven D. Rudnik resigned from the position of Chairman
      of the Board of Directors of the Company. A settlement agreement
      stipulated among others that (a) his current employment agreement be
      terminated, (b) he resign the position of chairman, (c) he receive 6
      million restricted common shares plus cash payments totaling $60,000.00 to
      be paid in installments through November 1, 2006, and (d) that options and
      warrants for an aggregate 4,486,875 share which were previously cancelled,
      be re-issued upon the earlier recurrence of a recapitalization of our
      securities that would provide sufficient common shares to accommodate them
      or two years from the date of the agreement. The options and warrants will
      have similar terms as the original instruments (exercisable at $0.10 and
      $0.15, respectively), but with expiration dates as of three years from the
      date of re-issuance. We recognized stock-based compensation of $520,522
      for the common stock issued ($360,000 - at market value) and warrants and
      options granted ($160,522 - based on the Black-Scholes model) under the
      agreement. In his place, Steven Gray was appointed Chairman of the Board,
      and Edward Marney was named a director of the Company. On August 17, 2006
      Edward Marney vacated the position of President, however, continues to
      serve as Chief Executive Officer. Matthew Scott assumed the office of
      President of the Company.

16. REDEMPTION OF PREFERRED STOCK

      During the second quarter of 2006, the Company issued 10,250,000 shares of
      common stock to the holder of 100,000 shares of Series C convertible
      preferred stock pursuant to a settlement agreement whereby in exchange
      against the above common shares, the 100,000 preferred shares will be
      cancelled and $350,895 accrued unpaid dividends forfeited. Since the fair
      value of shares issued to the holder in settlement of the dividend
      obligation and redemption of the preferred stock held exceeded the
      carrying value of the preferred stock, the Company recorded the excess as
      a reduction in income available to common shareholders, shown in the
      Statement of Operations as preferred dividends of $469,005.

      The agreement furthermore stipulated that $60,000 would be paid in cash
      over the course of twelve months for covenants in the agreement by the
      former holder, including a covenant not to compete for a period of two
      years. This amount has been recorded as an intangible asset, amortizable
      over the term of the agreement. In August 2006 the Company and the former
      shareholder agreed to settle the then outstanding amount of $55,000 plus
      additional settlement compensation of $65,000 by issuance of 2,000,000
      restricted common shares.

17. CONTINGENCY

      On September 25, 2006, a former employee of the Company filed a complaint
      against the Company in the Superior Court, Morris County, State of New
      Jersey, stating claims based upon alleged breech of employment contract
      and seeking damages of approximately $150,000 for unpaid salary and wages
      among other claims. The Company intends to vigorously defend this lawsuit.


                                       14

<PAGE>

      Item 2.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Company management is continuing the restructuring of Magnitude's operations and
business goals. Management has implemented a multi-pronged plan that has sharply
reduced cash outflow while exploring product acquisitions, mergers or
partnership relations with potential suitable candidate enterprises.

In line with these efforts, the Company undertook staff reductions in some areas
and relocated its principal office from Chester, New Jersey to Branchburg, New
Jersey. For example, facility expense was reduced from $10,000 per month to
$1,750 per month. These measures resulted in significant reductions of operating
expenses.

Company management is in preliminary discussions with several potential
strategic partners whose businesses and products would either compliment our
current product offerings or present new product and business opportunities.
Management is also exploring the licensing of its ergonomic software products
and customer maintenance contracts to third parties.

Revenues for the quarter totaled $9,468, compared to the $86,027 achieved in the
third quarter of 2005. The nine months figures were $41,622 and $150,860 for
2006 and 2005, respectively. Period revenues were entirely derived from software
support services; no software license contracts were concluded.

Gross profits for the quarter amounted to negative $26,902, including 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 $12,000 per
month to cost-of-goods-sold. After deducting selling- and general and
administrative expenses, stock-based compensation and R&D expenses of $1,240,989
which significantly exceeded the $557,567 recorded in 2005 the Company realized
a loss from operations of $1,267,891, compared to an operating loss of $507,912
in the third quarter in 2005. The increase in expenses was primarily due to
stock-based compensation and other non-cash expenditures paid for in form of
stock and/or warrants and included $520,522 and $60,000 to be paid in form of
securities and cash, respectively, to the former chief executive officer (see
Note 15). Aside from the before-mentioned, the operating expenses for the
quarter, however, compare favorably with the second quarter total of $1,076,970,
reflecting significant savings realized as a consequence of lower staffing
levels and expense reductions in other areas. Non-operating income and expenses
included $43,146 net interest expense and a credit of $51,560 for the change in
value of derivative liabilities. The period result was a net loss of $1,259,833
compared to a loss of $511,908 for the same period in 2005. The corresponding
nine months result was a net loss of $3,221,018 compared to a loss of $1,700,502
for the nine months ended September 30, 2005.

After accounting for dividend accruals on outstanding preferred stock which
totaled $12,630 the net loss for the quarter applicable to common shareholders
was $1,272,463 or $0.007 per share, compared to a loss of $540,228 or $0.004 per
share for the same quarter in the previous year, and $3,748,912 or $0.023 per
share and $1,785,641 or $0.013 per share for the nine months ended September 30,
2006 and 2005, respectively.

Liquidity and Capital Resources

In the absence of cash flow from operations, required working capital to finance
ongoing operations was supplied almost entirely from new equity capital and
issuance of short-term debt.

At September 30, 2006, the deficit in working capital amounted to $2,429,430 as
compared to $1,471,896 at June 30, 2006. Stockholders' equity showed an
impairment of $2,161,057 at the end of the quarter, compared to an impairment of
$1,134,875 at June 30, 2006. The negative cash flow from operations for the nine
months ended September 30, 2006 totaled $920,961 and was substantially financed
by new debt and equity which was obtained through private placements. The new
equity placements were consummated by issuance of common stock and warrants to
accredited private investors in the United States. Details of such transactions
can be found in the "Changes and Issuance of Securities" section of this report
and the reports on Form 10-QSB for the first and second quarters in 2006.


                                       15

<PAGE>

At the time of this submission, the Company had no bank debt. At September 30,
2006 its short-term liabilities, aside from trade payables and accruals,
consisted of certain notes and loans, details of which can be found in the Notes
to Financial Statements in this report. Current liabilities include $309,493
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.

Current cash reserves and net cash flow from operations expected during the near
future are inadequate when measured against present and anticipated future
needs, and the Company's financial situation remains precarious. In addition,
management does not expect to realize significant revenues from the sale or
licensing of its proprietary software products in the near future. In order to
remedy the current liquidity constraints and improve the market position for the
Company, management is currently investigating the feasibility of entering into
joint ventures with providers of complementary software products (see our
comments above). Concurrent with these efforts, management has embarked on a
program of severe cost containment in order to conserve as much liquidity as
possible, and is seeking to obtain additional working capital in form of debt or
equity. There can be no assurance, however, that these undertakings will lead to
the desired outcome.


                                       16

<PAGE>

Item 3. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

      As of the end of the period covered by this Form 10-QSB for the quarter
ended September 30, 2006, an evaluation was undertaken by the Company's Chief
Executive Officer and Chief Financial Officer of the effectiveness of the design
and operation of the Company's disclosure controls and procedures, as defined in
Exchange Act Rule 13(a)-14(c), and; based upon that evaluation, Company
management, including the Chief Executive Officer and the Chief Financial
Officer, has concluded that the Company's disclosure controls and procedures
were effective as of the end of the period covered by the subject Form 10-QSB
and ensured that all material information required to be disclosed in the
subject Form 10-QSB, was recorded, processed, summarized and reported as of the
end of the period covered by the subject Form 10-QSB.

      The Company maintains a system of internal controls designed to provide
reasonable assurance that: (i) the Company's transactions are properly
authorized; (ii) the Company's assets are protected against unauthorized or
improper use, and (iii) the Company's transactions are properly recorded and
reported, all to permit the preparation of complete and accurate financial
statements in conformity with generally accepted accounting principles.

(b) Changes in Internal Control over Financial Reporting

      Since the date of the most recent evaluation of the Company's internal
controls by the Chief Executive Officer and Chief Financial Officer, there have
not been any changes in the Company's internal controls or other factors for the
period covered by the subject Form 10-QSB that materially affected or were
likely to materially affect the Company's internal control over financial
reporting.


                                       17

<PAGE>

PART II - OTHER INFORMATION

Item 1 LEGAL PROCEEDINGS

On March 21, 2005, the Company filed a patent infringement lawsuit in the United
States District Court, District of New Jersey, against Niche Software, Ltd. of
New Zealand, alleging that its software product called Workplace(TM) willfully
infringed on the Company's patent underlying its ErgoEnterprise(TM) product
line. On September 13, 2005, defendant filed an answer and counterclaim, denying
the allegations in our complaint and seeking a judgment declaring our patent to
be invalid. The Company intends to vigorously prosecute its infringement claims
against this infringer.

On September 25, 2006, a former employee of the Company filed a complaint
against the Company in the Superior Court, Morris County, State of New Jersey,
entitled, Steven W. Jagels v. Magnitude, Inc., d/b/a Magnitude Information
Systems, Inc. stating claims based upon alleged breech of employment contract
and seeking damages of approximately $150,000 for unpaid salary and wages among
other claims. The Company intends to vigorously defend this lawsuit.

Item 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

      a) Issuance of unregistered securities

            During the quarter ended September 30, 2006, the Company issued the
            following unregistered securities:

            (i)   30,000,000 shares of common stock to three accredited
                  investors who had pre-existing relationships with the Company
                  pursuant to stock purchase agreements, issued in reliance upon
                  exemptions provided under Section 4(2) of the Securities Act,
                  altogether resulting in the receipt by the Company of $600,000
                  in cash. The agreements also stipulate that the Company issue,
                  no later than March 5, 2007, 15,000,000 warrants and if not
                  issued by this date, the Company will be obligated to issue to
                  these investors additional warrants in amounts equal to 1 %,
                  or an aggregate 150,000 warrants, for each business day the
                  warrants are not delivered. In addition, the Company is
                  obligated to register the common shares issued to the
                  investors and those underlying the warrants. The Company has
                  met this filing obligation but if the registration statement
                  of which this prospectus forms a part is not declared
                  effective by the SEC on or before February 21, 2007, the
                  Company will be obligated to issue 45,000 addition shares to
                  each investor for each day thereafter the registration
                  statement has not been declared effective.

            (i)   2,254,151 shares of common stock to a consulting firm for
                  services to be rendered (see section "Consulting Agreements"
                  in Note 13).

            (ii)  2,000,000 shares of common stock in settlement of a liability
                  and additional compensation to a former preferred shareholder
                  (see Note 15).

            (iii) 6,000,000 shares of common stock to the former chief executive
                  officer of the Company pursuant to a settlement agreement (see
                  Note 14).

      (b) Not applicable


                                       18

<PAGE>

      (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 and D Senior Convertible Preferred
      Stock. Such arrears total approximately $310,000. 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

      On November 17, 2006, Matthew Scott resigned as the President and an
      employee of the Company for personal reasons. Edward Marney, the Chief
      Executive Officer of the Company, was appointed to assume the office of
      President of the Company, effective on that date.

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 Edward Marney, 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 Edward Marney, 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 August 30, 2006 the Company filed a report on Form 8-K informing
            about (a) the resignation as chairman of the board of Steven D.
            Rudnik and appointment of Steven Gray to that office; (b) the
            appointment of Matthew Scott as President of the Company; (c)
            certain restructuring measures undertaken by the Company; and (d)
            the impending consummation of private placement transactions with
            three investors.


                                       19

<PAGE>

                                   SIGNATURES

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

                                        MAGNITUDE INFORMATION SYSTEMS, INC.


Date: January 2, 2007                   By: /s/ Edward Marney
                                            ------------------------------------
                                            Edward Marney
                                            Chief Executive Officer


                                       20